Supreme People's Court Opinion on Employment Disputes Addressing Non-Competes, Business Transfer Issues, Protection of Foreign Nationals under PRC Employment Laws, and Notification of the Enterprise Union Effective February 1, 2013
Andreas Lauffs, J. Isaacs, and Joseph Deng, Baker & McKenzie China
The Fourth Opinion on employment disputes by the Supreme People's Court became effective on February 1, 2013. The main points are summarized below:
- in the absence of any agreement on compensationduring a post-termination non-compete, non-compete compensation of 30% of the average salary of the employee is due;
- employers may waive the non-compete commitment after termination only with three months' compensation payment;
- prior years of service must be recognized by operation of law in certain transfer of business situations (e.g., in intra-group transfers, certain mergers and spin-offs);
- non-PRC employees are not protected by Chinese employment laws without a valid work permit;
- notification of the enterprise union is required for unilateral terminations, though failure to notify can be rectified prior to trial.
The Supreme People's Court regularly issues guiding opinions or interpretations on general questions in the law. These opinions/interpretations are not in reaction to one specific case, but generally in response to general questions left open-ended in the statutory law and which may have come up in recurring cases. Thus, the Supreme People's Court (SPC) decides on its own when to issue such opinions and what content it will include. Technically, such opinions are not legally binding on lower courts, but provide guidance to them; in practice lower courts will generally refer to these SPC guiding opinions.