The short answer: enforceable, but within strict legal boundaries. Unlike the US, where enforcement varies sharply by state (some states barely recognize non-competes), China applies one national rule with clear limits on scope, duration, and compensation.
Legal basis
- Article 23 of the Labor Contract Law: a non-compete clause may be agreed with employees who have confidentiality obligations, with monthly compensation during the non-compete period after termination.
- Article 24: non-competes apply only to senior managers, senior technical staff, and others with confidentiality duties; the term must not exceed two years.
Key points
- Limited to specific people: only senior staff and those with trade-secret access — not every employee.
- Two-year cap: any longer period is unenforceable.
- Monthly compensation is required: if no amount was agreed, it defaults to 30% of the employee's average monthly wage over the last 12 months (no less than the local minimum wage); if the employer fails to pay for three consecutive months for reasons attributable to it, the employee may request release.
- The scope, geography, and term must be reasonable — overly broad clauses can be struck down.
Practical tips
- Confirm in writing at departure whether the non-compete is activated, to avoid "implied waiver" disputes.
- State the compensation standard clearly in the agreement and pay on time, or the clause may fail.
Note for foreign employers
- Account for non-compete compensation separately to avoid mixing it with wages.
Drafting non-competes needs precision — protecting trade secrets without having the clause invalidated by flaws. Need compliant non-compete and confidentiality agreements? Contact CRBPO.
About CRBPO
Founded in 2003, CRBPO (中瑞岳华) is a professional HR service provider with 20+ years in the China market, offering executive search, RPO recruitment, staffing & dispatch, global EOR, tax & accounting, and monthly HR subscription — across 30+ cities — to help foreign companies run compliant, efficient operations in China.
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