(4) How can a non-compete restriction become an employment restriction?
Basic facts of the case
In February 2023, the defendant Xing Moumou was hired to work as a hairstylist at the plaintiff Wuhu City Beauty Salon Co., Ltd. (hereinafter referred to as the "Hairdressing Company"), and the two parties signed a six-month Labor Service Contract and was arranged to work in a branch of the hairdressing company. After the expiration of the contract, the plaintiff and the defendant renewed the second labor contract for the period from July 30, 2023 to February 29, 2024, stipulating that the defendant "shall not work in the same industry within 3 kilometers of the store and pass on the technical and management procedures of the store within one year after the expiration of the contract", but did not stipulate the defendant's salary and remuneration. On September 16, 2023, Xing Moumou officially resigned from the hairdressing company and went to another barber shop next to a branch of the hairdressing company to work in a beauty salon. The hairdressing company believes that Xing Moumou has obviously violated the contract, resulting in the loss of a large number of customers from the company and causing huge economic losses.
On November 8, 2023, the hairdressing company applied to the Wuwei Labor and Personnel Dispute Arbitration Commission for arbitration, and on the same day, the commission issued a notice of inadmissibility. On November 14, 2023, the hairdressing company filed a lawsuit with the court: 1. Judgment that the defendant shall not engage in beauty salon work within 3 kilometers of the barber shop to which the plaintiff belongs for one year, and order the defendant to immediately stop engaging in beauty salon business in the barber shop next door to a branch; 2. Judgment that the defendant shall bear the liability for breach of contract to the plaintiff and compensate the plaintiff for economic losses of 50,000 yuan. The defendant argued that the plaintiff's claim was a non-compete restriction in the employment relationship, and according to Article 24 of the Labor Contract Law, the subject of the non-compete restriction was limited to the senior management personnel, senior technical personnel and other personnel who knew the trade secrets of the employer. At the same time, even if the agreement was valid, the plaintiff did not pay the non-compete compensation, so the rights and obligations of the parties in the agreement were not equal, which violated business ethics and morality, and the non-compete clause should be found invalid.
Adjudication Results
The court of first instance held that the main focus of the dispute between the two parties was: whether Article 5 of the contract was valid, which stated that "within one year after the expiration of the contract, Party A shall not engage in the same industry within 3 kilometers of the store and disseminate the technical and management procedures of the store, causing losses or adverse effects to the store, Party A shall pursue Party B's civil litigation liability".
In this case, the defendant worked as a hairstylist at the plaintiff's premises, and the plaintiff only provided the defendant with a working platform and working environment, and the wages obtained by the defendant were paid according to the agreed proportion through its labor income. According to the plaintiff's statement, there was no evidence to prove that it had taught its own unique technology to the defendant, and the plaintiff had no evidence to prove that it had "trained and cultivated" the defendant, and the clause actually stipulated that the non-compete clause in the employment contract was in fact a non-compete agreement, but the clause lacked a factual basis for the non-compete restriction, and in the case of a non-compete agreement, it did not also stipulate that the defendant would be given corresponding economic compensation during the non-compete period, so the non-compete clause in the contract also violated the principle of fairness. At the same time, citizens enjoy the right to work freely and enjoy the right to choose employment, and the signing of the contract is a labor contract, and there is no labor relationship between the two parties, and the non-compete restrictions agreed in the contract lack corresponding legal basis. Furthermore, the Labor Contract signed by the two parties was a standard contract prepared in advance by the plaintiff, and there was no evidence to show that the agreement on non-competition was negotiated and agreed upon by both parties, and according to Article 497 of the Civil Code, if the party providing the standard clauses unreasonably exempts or reduces its liability, increases the liability of the other party, restricts the main rights of the other party, or the party providing the standard clauses excludes the main rights of the other party, the contract clause is invalid.
In summary, the court of first instance finally rejected the plaintiff's claim against the hairdressing company.
After the first-instance verdict, the hairdressing company appealed. The court of second instance rejected the appeal and upheld the original judgment.
Legal Notice
A non-compete restriction refers to an agreement signed between an employer and an employee on an equal and voluntary basis to stipulate the relevant content of the non-compete restriction, whereby the employee shall not take up a position in the relevant occupation, produce or operate related products, or engage in relevant business within a certain scope, region and period of time after the termination or termination of the labor contract with the original employer.
As a legal rule, non-compete aims to protect the employer's trade secrets, intellectual property rights or other legitimate rights and interests, so as to maintain the fair competition order of the market economy. In practice, if an employer abuses a non-compete clause against an employee, exceeds the scope permitted by law, and infringes upon the employee's right to free employment, the court will find the agreed clause invalid in accordance with the law, so as to effectively protect the legitimate rights and interests of the employee.
Judgment of the Wet Beard