Case Description

Zhang is the Deputy General Manager of Company A, and as a senior management member of the company, Company A has signed a non compete clause with Zhang. In 2022, Zhang resigned. Shortly after Zhang's resignation, Company A discovered that several employees of Zhang's previous work team had resigned one after another. One day, Company A accidentally saw a report from competitor Company B in an internal magazine in the industry. The accompanying pictures and interview content in the report showed that Zhang resigned and joined Company B, bringing all the R&D teams from Company A to work at Company B. Company A filed a lawsuit in anger, demanding that Zhang bear the responsibility for breach of contract. The final court found that Zhang violated the non compete obligation, but as both parties did not agree on the prohibition of solicitation obligation, they did not support the company's claim.

Lawyer Analysis

In the past, in order to protect the stability of company talent and customer resources, companies often maintained their interests through confidentiality agreements or non competition agreements. In recent years, clauses prohibiting solicitation have also frequently appeared in relevant cases.

1、 The concept of non solicitation clauses, confidentiality clauses, and non competition clauses

1. Prohibition of Solicitation Clause: It is a restrictive agreement by the unit that prohibits resigned employees from using methods such as solicitation and persuasion to cause other employees to resign and join the new company where the resigned employee is located. Simply put, this clause is an agreement to prevent departing employees from coming back and "digging into the wall".

2. Confidentiality clause: This clause stipulates that employees shall not disclose the company's trade secrets to the public after leaving the company. Simply put, it is an agreement to prevent employees from leaking information.

3. Non compete clause: refers to an employee's inability to engage in the same or similar business as their original employer for a certain period of time after resignation. Simply put, it is an agreement that prohibits employees from "switching jobs" to competitor companies.

2、 Differences between Prohibited Solicitation Clause, Confidentiality Clause, and Non compete Clause

The three restrictive agreements mentioned above have certain similarities, both of which are aimed at limiting employee behavior and preventing adverse effects on the company after employee resignation. However, there are significant differences in application.

1. Regarding whether the unit pays compensation

According to relevant regulations, if a company has agreed on a non compete clause with an employee who has confidentiality obligations, the company is required to provide economic compensation to the employee on a monthly basis during the non compete period (i.e. during the period during which the employee's employment is restricted) after the employee's labor contract is terminated or terminated. Otherwise, the employee may terminate the non compete clause and not fulfill this obligation. For the prohibition of solicitation, there is no legal requirement for units to pay economic compensation to employees.

2. Whether to pay liquidated damages for employee breach of contract

According to regulations, if an employee violates the non competition agreement, they shall pay a penalty to the unit in accordance with the agreement. For violations of the prohibition of recruitment agreement, as the Labor Contract Law does not stipulate that the unit can require employees to pay a penalty for breach of contract, even if both parties agree on a penalty for prohibition of recruitment, in practice, it usually does not receive support from the court.

3、 Legal risk prevention of solicitation behavior

Although there are no clear legal provisions prohibiting recruitment and there is no support for units to set liquidated damages for employee recruitment behavior, in practice, it is not that they are powerless to deal with employee recruitment behavior. Firstly, there must be a clear prohibition agreement between the unit and employees, otherwise the court will consider that there is no such obligation agreement between the two parties and will not support it. The unit can specify the employee's obligation to prohibit recruitment in the resignation related documents signed by the employee upon resignation (such as resignation agreements, commitment letters, etc.). Alternatively, the prohibition of solicitation obligations may be stipulated in labor contracts, non compete agreements, or confidentiality agreements. Secondly, for employees who violate the aforementioned agreement, they should avoid agreeing on a "penalty for breach of contract" and instead agree to bear the "liability for damages". Once again, it is agreed that the restriction period for prohibiting solicitation is usually six months to two years in practice, as there is no explicit legal provision. Finally, specific prohibited/restricted behaviors that prohibit solicitation are agreed upon. It should also be noted that there should be a clear distinction between non competition obligations, confidentiality obligations, and non solicitation obligations, clarifying the different behaviors constrained by these three obligations to avoid confusion, ultimately leading to the referee mistaking the non solicitation agreement as a confidentiality or non competition agreement, making it impossible for the unit to claim compensation according to the relevant provisions of the non solicitation obligation.