[Direct answer]You can request an appropriate reduction. Article 23 of the Labor Contract Law of the People's Republic of China stipulates that for workers who are obligated to keep confidentiality, the employer may agree on a non-compete clause with the worker in the labor contract or confidentiality agreement, and agree to provide the worker with economic compensation on a monthly basis during the non-compete period after the termination or expiration of the labor contract; if the worker violates the non-compete agreement, he/she shall pay the employer a breach of contract penalty in accordance with the agreement. If the agreed breach of contract penalty is obviously too high and disproportionate to the actual losses, the worker may request an appropriate adjustment; the court shall determine the reasonable range based on the income level, actual losses, circumstances of the breach of contract and degree of fault, generally referring to the compensation standard or actual losses.

1. Problem background and typical scenarios

After leaving the company, the employee was found to have joined a competitor. The former employer claimed hundreds of thousands or even millions of yuan in breach-of-contract penalties under the non-compete agreement, which the employee considered "exorbitant". Some employers also claimed huge losses but failed to provide evidence. Whether and how much the breach-of-contract penalties can be adjusted depends on the degree of matching between the agreed terms and the actual losses, as well as the evidence provided by both parties.

II. Key points of dispute

The disputes focus on: first, whether the penalty clause is valid; second, the adjustment standard for excessive penalties; third, the proof of losses and the circumstances of the breach of contract; fourth, whether the non-compete agreement itself is valid (such as whether compensation has been paid). The judicial tendency is to balance the protection of the employer's trade secrets and respect for the worker's freedom of choice, adjust the exorbitant penalties, and prevent the penalties from becoming a disguised punishment.

III. Professional analysis by Henglue Law Firm

First, review the validity of the agreement: The subject of the non-compete obligation should be limited to senior managers, senior technicians, and other personnel with confidentiality obligations. If the employer fails to pay economic compensation on a monthly basis, the employee may assert corresponding rights, and the continued validity of the agreement requires specific analysis. Second, basis for adjusting the penalty: The penalty should be commensurate with the actual losses, the employee's income, and the circumstances of the breach. If the penalty is obviously excessive, the employee may request a reduction. Courts typically determine a reasonable amount by referring to the compensation standards for non-compete obligations, actual losses, or potential benefits. Third, burden of proof: Employees who claim a reduced penalty should provide evidence of their income level and limited impact of the breach, while employers who claim high losses should provide evidence of actual losses, investments in protecting trade secrets, and competitive impacts. Those who fail to provide sufficient evidence may not receive full support. Fourth, consideration of the breach circumstances: Whether the employee joins a direct competitor within a short period, whether they disclose or use trade secrets, whether they continue to breach the agreement, and whether they cooperate with rectification all affect the final determination. Fifth, practical advice: Employees should pay attention to the scope of the non-compete obligation, duration, and compensation standards before signing the agreement to avoid overly broad scopes, excessive durations, or low compensation leading to disproportionately high breach costs. Employers should reasonably stipulate the scope and consequences of breach and retain evidence of losses. When handling labor disputes, our firm typically first reviews the validity of the agreement and compensation performance, then provides evidence and defenses regarding the appropriateness of the penalty to strive for a reasonable outcome. It is also important to note that non-compete obligations and confidentiality obligations are separate matters: even if an employee is not subject to a non-compete obligation, they still have a confidentiality obligation regarding trade secrets learned during employment, and breaching the confidentiality obligation may lead to tort liability. Employers should also reasonably design the scope of non-compete obligations and confidentiality obligations to avoid overly broad provisions that weaken the overall effectiveness of the agreement.

IV. Practical suggestions and legal basis

The first step is to review whether the subject, scope, duration, and compensation of the non-compete agreement are legal and reasonable. The second step is for the worker to provide evidence of income and the impact of the breach of contract if they claim to reduce the penalty. The third step is for the employer to provide evidence of actual losses and investments if they claim a high penalty. The fourth step is to comprehensively claim based on whether compensation has been paid and whether there has been any act of disclosing confidential information. Main legal basis: Articles 23 and 24 of the Labor Contract Law of the People's Republic of China (non-compete clauses and penalties), relevant provisions of the Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trials of Labor Disputes (I), and Article 585 of the Civil Code of the People's Republic of China (if the penalty is too high, the party may request an adjustment). The relevant provisions shall be based on the currently effective version, and the specific application shall be in accordance with the currently effective regulations.

5. Henglu Law Firm's Reminder

Three key points regarding non-compete clauses: If the agreed amount is excessively high, you can request a reduction, with compensation being based on actual losses; the party making the claim must provide evidence, including proof of income and losses; and before signing the contract, make sure to clarify the scope, duration, and compensation terms to avoid the cost of breaching the contract spiraling out of control. For disputes involving non-compete clauses and labor disputes, you can seek legal assistance through the following channels:Labor arbitration and work-related injury compensationWe provide a comprehensive solution for services, which involves the integration of trade secrets and intellectual property.Intellectual property protection and corporate lawFor plates, those involving contract breaches can be referred to for referenceBusiness and contract disputes in enterprisesFor inquiries about the interface between the arbitration and the trial, please refer to the relevant columnSpecial servicesTeam.

VI. Frequently Asked Questions

Q1: Can I get a lower compensation if the non-compete penalty is too high?

You can request a reasonable reduction. The court will adjust the obviously excessive penalty in light of the income, actual losses, and circumstances of the breach of contract.

Q2: What evidence is needed to support the proposal to lower the requirements?

The proof of income during and after employment, the standard of non-compete compensation, the differences between the new position and the original position, and a statement that no actual losses have occurred or the impact has been limited, are used to support the request for adjustment.

Q3: Are the costs of such disputes high?

Labor arbitration is free of charge, while litigation is charged based on the subject matter; the attorney's fee is related to the amount of the dispute and its complexity, and it is determined through negotiation.

Q4: How long will it take to resolve a non-compete dispute?

Arbitration is generally concluded within 45 days after acceptance, and the time limit may be extended for complex cases; the litigation stage typically lasts between three and six months.

Q5: If the company doesn't provide non-compete compensation, do I still have to pay the breach of contract penalty?

It depends on the circumstances. If the compensation is not paid on a monthly basis, the worker may assert corresponding rights. The validity of the agreement and the liability for breach of contract need to be analyzed in detail. On this basis, the worker may raise a defense or claim to terminate the non-compete obligation.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication guidelines in other regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Labor arbitration legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.