Legally Supported Bullying? Legal Consciousness on Non-compete Agreements in China

Non-competes are restrictive covenants in employment contracts that prohibit departing employees from setting out on their own in the same industry or joining competitors for a certain period. Their definition highlights the inherent conflict between the protection of employers’ legitimate business interests and fundamental employee rights, such as the right to earn a living. Recently, an increasing number of scandals have emerged involving Chinese companies’ abuse of non-compete agreements. Complaints by former employees are prevalent on current social media, citing issues such as exorbitant damage claims by the company, excessively long restriction periods, and potentially privacy-infringing detection measures, including stalking and photographing former employees’ activities without consent.

These scandals reveal an intriguing paradox. While the law on the books in China governing non-competes appears relatively clear and stringent with respect to its validity, the law in action may diverge significantly. As such, in our recent empirical study titled ‘Legally Supported Bullying? Legal Consciousness on Non-Compete Agreements in China’, forthcoming in Social & Legal Studies, we seek to uncover and explain the gaps by empirically exploring employees’ perceptions, interactions, and experiences with non-competes. Drawing on 20 semi-structured interviews and 344 supplementary screenshots of online discussions from a major Chinese social media platform, we employ the analytical framework of legal consciousness to analyse the data and derive the findings summarized below.

Law as a Formality? Signing Under Structural Asymmetry

The initial signing of a non-compete is characterized by structural asymmetry in employment relationships. Employees commonly report having no meaningful choice but to sign non-competes, often meeting formulaic lines such as ‘if you do not sign, you cannot join’, thereby effectively foreclosing any further inquiry.

This context breeds legal alienation, which manifests in two forms: voluntary and involuntary. Alienation is voluntarywhen employees view the non-competes as a ‘mere formality’ or sign to signal sincerity and compliance. Alienation is involuntary when employers provide no opportunity for consideration by accelerating the process or deliberately concealing the non-competes, for instance, by mixing all the documents together and having employees sign them along with routine onboarding paperwork. Employees hastily sign the non-competes, involuntarily complying with formalities.

Reframing the Agreement: Legal Consciousness in Anticipation of Job Hopping

When employees anticipate changing jobs, a strong ‘under the law’ consciousness emerges. Employees perceive that the law grants employers considerable discretion. This results in an overly broad scope of restraint. Employers draft the ‘competitor list which we care about most’ expansively, either by ‘basically list[ing] all the companies in the industry’ or using ‘very vague terms such as companies that provide services to them’. Furthermore, non-competes are imposed on virtually any employee, including junior staff, by exploiting the indeterminacy of the statutory category ‘other employees with confidentiality obligations’. Employees widely question the practical relevance of legal interpretations, noting that ‘the authority to define what counts as a trade secret still belongs to the company’. This leads to the critical expression that ‘labour law never protects labour’.

Law in Action: Encountering Potential Non-Compete Enforcement

In post-employment disputes, employees realize non-competes are used as substitutes for confidentiality agreements because ‘it is much harder to prove a violation of trade secrets law than to prove a breach of a non-compete’. This phase is marked by a pronounced disparity: employees often receive only the statutory minimum compensation (no less than 30 percent of the employee’s average monthly wage), yet face the threat of exorbitant liquidated damages, sometimes reaching millions of RMB. This gap severely limits career options, with employees saying that non-competes essentially serve as a low-cost legal mechanism to curtail employee mobility or force them back to the original company. In this context, employees express an ‘under the law’ consciousness, arguing that the law must raise ‘the cost for enterprises to use non-competes’.

While the majority remain immobilized, a small group of legally literate employees adopts a ‘with the law’ consciousness to seek remedies through formal complaints or litigation. Also, senior employees leverage resources in an ‘against the law’ consciousness to strategically evade enforcement. Meanwhile, due to their seniority and financial freedom, senior employees are often able to mitigate the non-competes’ effects, while junior employees face unemployment or are reluctant to be hired by non-competitors. 

Distorted Law in Action

The law in action reveals two key distortions. First, the law may become inversely correlated with its theoretical rationale: senior employees, those most likely to encounter important trade secrets, may evade non-compete restrictions or experience only limited constraints, while junior employees, those least likely to cause trade secret leakage, are the most constrained. Second, overly reliance on non-competes yields unrestrained trade secrets expansion. Employers prevent mobility without any need to prove the existence of protectable trade secrets or misappropriation, thereby conferring de facto protection over information that would otherwise fall outside the scope of trade secret law.

Implications and Conclusion

The vague legal provisions, broad judicial discretion in interpretation, and the imbalanced power dynamic make the legal rules vulnerable to manipulation by employers to ‘bully’ employees in practice. More effective legal reforms are required in China to fill the gaps.

A preprint version of the study can be accessed here.

Longxuan Zhao is an Assistant Professor at the College of Arts and Media, Tongji University.

Yang Chen is an Assistant Professor at the City University of Hong Kong School of Law.