international employment law firm alliance L&E Global

China: It was held by Court that Agreement on Non-Competition Obligation shall be Interpreted in Favor of the Employee

The Company and the Employee entered into an employment contract and a non-competition agreement. It was prescribed in the non-competition agreement that: (1) the employee is obligated to perform non-competition for 24 months after departure from the Company; (2) the Company shall provide monthly compensation to the Employee if non-competition is performed; (3) the non-competition obligation period only starts to count when the Company sends the Non-competition Letter to the Employee; and (4) the non-competition agreement becomes effective when duly signed. The Employee was terminated by the Company after three years of service, never received the Non-competition Letter from the Company, but still performed the non-competition obligation after termination and received no compensation from the Company. The Employee filed a lawsuit against the Company to claim payment of compensation for performance of non-competition obligation. Through the judicial process, the Court eventually ruled that the Company shall compensate the Employee for performance of non-competition. The Court came to this decision based on the followings: (a) the non-competition agreement includes conflicting provisions on effectiveness of Employee’s non-competition obligation; and (b) as the non-competition agreement is prepared by the Company, the ambiguity arising from the conflicting provisions therein shall be interpreted in favor of the Employee.