Termination of Labor Contract

According to the provisions of the first paragraph of Article 26 of the Labor Contract Law: A labor contract is invalid or partially invalid if it is concluded or changed by means of fraud, coercion, or taking advantage of someone's difficulties, causing the other party to enter into or change the labor contract against their true will.

According to the provisions of the first paragraph of Article 38 of the Labor Contract Law: A labor contract that is concluded or changed by means of fraud, coercion, or taking advantage of someone's difficulties, causing the other party to enter into or change the labor contract against their true will, in violation of the provisions of the first paragraph of Article 26, is invalid or partially invalid, and the labor contract may be rescinded and terminated.

If a candidate is terminated from the labor contract by the enterprise for submitting a false resume, the enterprise is not required to pay the candidate any liquidated damages or economic compensation.

《Non-Compete Agreement》

1. Non-Compete Agreement

A worker shall not take up employment with an employer who produces the same kind of products, operates the same kind of business, or has other competitive relationships within a certain period after the termination or dissolution of the labor contract. They are also prohibited from producing the same kind of competitive products or operating the same kind of business on their own. The duration of the restriction is agreed upon in advance by the parties but shall not exceed two years. The non-compete clause in the labor contract is a delayed effectiveness clause, which means it takes effect after the legal binding force of the other terms of the labor contract has ended.

In simple terms, all workers who have signed labor contracts and non-compete agreements with the company are prohibited from working for or starting a business in the same industry within two years after the termination of the labor contract. As compensation, companies generally pay the worker an economic compensation monthly over the two-year period, which is 30% of the employee's average monthly wage over twelve months. The worker is required to provide the former employer with a work report monthly during the non-compete period; failure to do so gives the former employer the right to withhold the non-compete compensation.

If an employer signs a contract with a worker that includes a non-compete agreement, there are three possible scenarios:

《Non-Compete Agreement》

2. Non-Compete Agreement

During the existence of the labor relationship or for a certain period after the labor relationship has ended, employees are restricted and prohibited from concurrently holding positions at competing businesses while serving in their current position. They are also restricted and prohibited from engaging in business activities that compete with their current employer after leaving the job. This includes not being allowed to take up positions in other businesses that produce the same kind of products or operate the same kind of businesses with competitive relationships or other interests, not being allowed to part-time or hold positions in other employing units that produce the same kind of products or operate the same kind of businesses with competitive relationships, and not being allowed to independently produce competitive products or operate competitive businesses that are similar to those of the original employer.

The non-compete clause mainly restricts directors and managers as stipulated in the Company Law, department managers, and it is not applicable to ordinary employees. Moreover, the non-compete clause primarily restricts the activities of high-level executives, shareholders, and directors during their tenure, while the non-compete restriction applies to all employees, including high-level executives, shareholders, and directors, within two years after leaving the company.

Firstly, it is important to differentiate that the non-compete prohibition is a provision in the Company Law and is a legal agreement. Violators are in breach of Company Law and are subject to legal responsibility; the non-compete restriction is an agreed contract, and violators are in breach of contract, but it is not illegal.