The Labor Contract Law of PRC (Labor Contract Law hereafter) was adopted and announced on June 29, 2007 during the 28th session of the Standing Committee of the National People's Congress (NPC). The law will regulate both employers and employees on the trade secret and intellectual property confidentiality related issues.

 

Clause 23rd of Chapter Two of the Labor Contract Law stipulated that employers and employees could enter into an agreement about trade secret and IP confidentiality related issues in the labor contract. Employers can include a non-competition restriction clause in the labor contract with employees who are involved in trade secrets, and should agree to a monthly compensation within the non-competition restriction period upon termination of the contract. Meanwhile, employees who violate the non-competition restriction covenant should pay penalty accordingly.

 

In order to encourage innovation and fair competition, the Labor Contract Law stipulated the non-competition restriction rule. The Law requires that such rule apply only to the high rank management and high level technology personnel, and to employees who are obliged to keep trade secret. The scope, region and duration of the non-competition restriction shall be agreed between employers and employees, and such covenant shall not violate national rules and laws. The duration that the concerned personnel are restrained from working with competitors, or set up their own businesses in the same trade, shall not be longer than two years after the termination of the current labor contract.

 

SUN Baoshu, Vice Minister of the Ministry of Labor and Social Security, pointed out that the Labor Contract Law has loosen up the restrictions on employers' legally terminating the labor contract, so as to adapt to enterprises' needs in restructuring and participating market competition.

 

It is understood that the Labor Contract Law is composed of eight chapters, covering the content of executing and changing labor contract, terminating the labor contract, collective contract, and part time employment, etc. The law will come into effect on January 1, 2008.

 

 

2007-07-06

2007-07-06