The Taizhou Intermediate People’s Court reportedly affirmed the lower court ruling, ordering an employee under a post-termination non-compete obligation to terminate her current employment relationship (as it was with a competitor of her former employer) and pay liquidated damages in the amount of RMB 80,000.
In this case, the employee formerly worked at a commercial bank as a finance relationship manager. The bank signed a confidentiality and non-compete agreement due to her access to confidential information concerning enterprise loans. Under the non-compete agreement, the employee would be subject to a two-year post- termination non-compete restriction during which period she would be restricted from working at any other bank or similar organizations. The bank agreed to pay non-compete compensation, the annual amount of which equalled one third of the employee’s total annual income in the last year of employment. In addition, the
non-compete agreement stipulated that in the event of a breach, the bank has the right to demand the employee to continue to perform the non-compete obligation by leaving her employment with any other bank or similar organizations. After the employee resigned, the bank started to pay her non-compete compensation. However, the employee soon joined another bank and refused the bank’s request to perform the non-compete obligation.
This case reveals that at least some courts are willing to vigorously enforce non-compete restrictions if the clauses such as the definition of competitor company, the amount of non-compete compensation and the remedy that the company can seek, are
well drafted. It is notable that the court ordered both liquidated damages and provided injunctive relief in the form of ordering the employee to terminate her current employment. In the past, courts oftentimes would only grant monetary relief in a non-compete case and take the position that they did not have the authority to order an employee to terminate her current employment. It still remains to be seen whether other courts will also be willing to order this type of injunctive relief, including preliminary injunctive relief, in non- compete cases.