Source: Jiangsu High Court
Promotion, salary increase, and the peak of life
It has always been the pursuit of people in the workplace
Job hopping has also become the choice of many professionals
But have you ever seen 19 core technicians collectively jump ship?
More coincidentally
They jumped to the same business
The new owner also made the core product of the old owner
The old owner was angry
Job hopping can be done to play me, right?
So Fury took 19 former employees to court
Brief facts of the case
Lake Electric Company is a leading enterprise in the field of vacuum cleaners in China, and handheld wireless vacuum cleaners are ace products. Since March 2019, the company's vacuum cleaner project R & D personnel, technical service personnel, production, quality management personnel, and even project managers, legal managers "unanimously" submitted their resignation, the project team a total of 19 people collectively "left" within 3 months. Soon after, the emerging peer company began selling wireless vacuum cleaners that were highly similar to the plaintiff's products on major e-commerce platforms. At this point, Lake discovered that although the 19 departing team members had signed confidentiality agreements and abided by non-compete commitments at the time of departure, they had all joined the start-up shortly after leaving.
Lake believes that it has spent a lot of costs on the cultivation of technical talents, and invested 245 million yuan in research and development costs in 2018 alone, which was apportioned to all the company's R & D team personnel, and the annual R & D expenses invested by each technician exceeded 400,000 yuan, and the company's losses were obvious; through open channel inquiries, the revenue of competitive enterprises that jumped to the staff to join the company sold online was as high as tens of millions of yuan. As a result, Lake initiated labor arbitration, and the arbitration committee ruled that the employees should continue to perform the non-compete agreement, but did not support the plaintiff's claim for liquidated damages and compensation. Lake was not satisfied, and filed 19 lawsuits with the Tiger Hill District Court with the job-hopping employee as the defendant and the competitor as the third party.
Employees argued that the scope of business of the company they joined did not coincide with that of their old owners, and that the two did not constitute a competitive relationship.
After trial, the court ascertained that the defendant had joined a Suzhou subsidiary, and that the tianjin parent company of the subsidiary was competing with the plaintiff in the same industry. Legally, the parent and subsidiary companies do belong to two independent corporate legal entities, but in this case, the production place of the Tianjin parent company is in the location of the Suzhou subsidiary, and the parent and subsidiaries also applied to the State Intellectual Property Office as a joint applicant at the end of 2018 for a vacuum cleaner related patent for "impeller and motor". Based on the above facts, the court found that the Suzhou subsidiary where the employee joined was in competition with the plaintiff company.
After trial, the court found that 14 of the 19 employees violated the non-compete obligation, and based on the amount of the non-compete compensation, the circumstances of the employee's breach of contract, the actual losses caused to the employer, the illegal benefits of the employee, and other factors, upholding the punitive nature of the employee's breach of contract, the above-mentioned employees were ordered to pay a total of more than 3.4 million yuan in liquidated damages, and continue to perform the non-compete obligation until the expiration of the contract. A further 5 employees were not required to comply with non-compete obligations due to insufficient evidence. 14 employees appealed, and the Suzhou Intermediate Court upheld the original judgment in the second instance; the plaintiff company also appealed the judgment of 5 employees who were not required to perform non-compete obligations, and then withdrew the appeal on its own. All cases are now in force.
In recent years, Suzhou has comprehensively created a better environment for innovation and entrepreneurship, strived to build a global high-end manufacturing base, and made every effort to create an "entrepreneur's paradise and an innovator's paradise". The gathering of many innovative talents has formed a regional comparative advantage, which has also become the main feature of local high-tech enterprises. The number of non-compete disputes involving electronic technology, network applications, high-end manufacturing, artificial intelligence and other enterprises and talents continues to rise, and presents new characteristics such as high-level, specialization, and collectivization of the perpetrators of infringement of trade secrets. Just as in the above series of cases, technical talents collectively circumvented the liability of non-compete restrictions, and joined the subsidiaries set up by the competition company in Suzhou as a team, and the market advantage of high-tech enterprises encountered serious challenges.
When trying such cases, the courts at both levels in Suzhou focus on the multi-level and multi-variety rights and interests of enterprises, employees and the whole society, adhere to the protection of the social public interests of innovative development and fair competition as the basis, attach importance to the return of the company's contribution to technological innovation, the reasonable maintenance of competitive advantages, and take into account the legitimate rights and interests of employees' talent flow and freedom to choose a career.
Through the trial of the 19 cases, the following issues were further followed by attention and reflection:
1. If an enterprise fails to pay or pay the economic compensation in full, can it be used as a reasonable defense against the employee's refusal to perform the obligations stipulated in the non-compete agreement or to be exempted from the corresponding liability for breach of contract?
In the past, there was a view that employees were liable only if the enterprise paid the non-compete economic compensation in full; when the enterprise did not pay or did not pay the compensation in full, the employee did not have the corresponding obligation. In this regard, we believe that the non-compete system is mainly established to protect the trade secrets of enterprises. The Judicial Interpretation of the Supreme Court of Justice makes it clear that only if the enterprise fails to pay economic compensation for 3 months constitutes a fundamental breach of contract, the employee has the statutory right of rescission; the monthly standard of economic compensation shall not be lower than 30% of the average wage in the 12 months before leaving employment. At the same time, the non-compete clause has a certain degree of independence, as long as the parties reach an agreement on the non-compete matters, even if the employer's unlawful termination of the labor contract and compensation do not constitute a fundamental breach of contract, it cannot produce the effect of the termination of the non-compete agreement. In other words, according to the spirit of the judicial interpretation, even if the enterprise fails to pay compensation in full accordance with the agreement, or if the agreed economic compensation is lower than the statutory standard, it does not necessarily affect the validity of the non-compete agreement.
Extending to the complex situation, on the one hand, the liquidated damages for the non-compete restriction that the parties may agree on are themselves abnormally high, and on the other hand, as far as the economic compensation payment of the enterprise is concerned, there may also be certain performance defects under the limit of the fundamental default. When these two situations are superimposed, on the basis of the excessively high agreement on the liquidated damages and the discretionary reduction, the liquidated damages can be continued to be reduced as appropriate for the defects in the performance of the enterprise, that is, through the "secondary adjustment" of the liquidated damages, the discretion of the entity can be made more accurate and fair.
2. After the employee has violated the non-compete agreement, or even has borne the corresponding liquidated damages to the enterprise, is it necessary to continue to perform the non-compete agreement?
There have also been different understandings of this issue. The judicial interpretation stipulates that "if an employee violates the non-compete agreement and pays liquidated damages to the employer, and the employer requires the employee to continue to perform the non-compete obligations in accordance with the agreement, the people's court shall support it." That is to say, according to the judicial interpretation, in the case of an employee violating the non-compete agreement, the enterprise has the right to claim that the employee pay liquidated damages and at the same time require him to continue to perform the non-compete obligation in accordance with the agreement. Liability for liquidated damages is a treatment of past breaches, while continued performance is based on compliance with the requirements made by the agreement that are still binding on the parties. Payment of liquidated damages and continued performance are two different ways of bearing liability for breach of contract, which can coexist.
It should be noted that the agreed period of non-compete shall not exceed 2 years in accordance with the law, and the excess part is invalid. In practice, if an employee violates a non-compete agreement, it often takes a long time for the employer to initiate arbitration or even litigation procedures, and it is very likely that the effective judgment will have exceeded 2 years. Therefore, there are problems with how to ensure enforcement in practice of the "requiring employees to continue to perform non-compete obligations" judgments, especially during arbitration and litigation, on the one hand, litigation is often still in a state of continuous default during the period of extinction, and the injured enterprise is still injured. On the other hand, how exactly is the judgment "continued to perform" enforced? Whether the employee is separated from the illegal self-operation behavior or terminates the labor relationship with the competing enterprises, from the current point of view, the relevant standards are still not clear enough. As for how much "continued performance" still has for the employer after the end of the entire litigation procedure, there is also room for discussion.
At the same time, it should be noted that the existence of the obligation to "continue to perform" should not affect the judgment of the amount of liquidated damages. Once an employee violates the non-compete obligation, the losses caused to the employer occur immediately and are often irreversible. Therefore, the amount of liquidated damages is reasonably determined, and the traditional practice is to consider the specific agreement between the two parties, the circumstances of the employee's breach of contract, the actual loss of the enterprise, and the legal punishment for dishonest behavior that is appropriately reflected. However, if we consider the following factors, we may make the discretion more precise: such as whether the employee's normal career development in the original enterprise is unreasonably restricted, whether the employee faces an economic crisis or a more severe employment situation when the employee violates the non-compete agreement, the proportion of the employee who has fulfilled the non-compete restriction, the subjective will and objective situation of the original enterprise's implementation of the non-compete compensation, the cost invested by the original enterprise in the special training of employees, and so on.
(Wang Cen, President of Suzhou Labor Court)
The image comes from the Internet
Contributed by: Suzhou Intermediate People's Court