At a time when competition in the Internet industry is becoming increasingly fierce, non-compete agreements, a tool originally used to protect corporate trade secrets, are gradually becoming a “tightening curse” for grassroots employees of large factories. From executives to grassroots, from core positions to ordinary operations, the scope of non-compete agreements continues to expand, and even extreme clauses such as “global restrictions” and “industry-wide bans” have appeared. This article will delve into the current situation of non-compete agreements in major Internet companies, revealing the industry chaos hidden behind them and their impact on the career development of grassroots employees.
“When I left the company, I found that the non-compete agreement signed when I joined the company was like a tightening ‘tightening curse’ – the agreement said that it was prohibited to join any ‘related industries’ such as the Internet, artificial intelligence, finance, etc., and the geographical scope was directly marked ‘global’.” Qi Fei (pseudonym), who has resigned from a major food delivery company, told the IT Times reporter about his experience of being competed, and now he only receives 30% of his monthly salary every month before leaving, and during the one-year non-compete period, he can only find employment opportunities outside the “forbidden area” delineated by the agreement.
In recent years, non-compete agreements aimed at protecting trade secrets have evolved from “targeted defense” to “indiscriminate containment”, triggering a fierce collision between workers’ rights and interests and enterprise management rights. This dilemma of choosing a career that occurs to individuals is becoming a new focus in the field of labor disputes.
A few days ago, the Daxing District People’s Court of Beijing issued a white paper on labor dispute trial work and typical cases, among which disputes involving non-compete are the most prominent.
“The competition period of large factories generally ranges from 3~24 months.” Liu Yongxiao, a lawyer at Beijing Weiheng (Suzhou) Law Firm, revealed that the terms of some enterprise agreements are very strict: according to the agreement provided by a former employee, the scope of non-compete not only covers direct competitors, but also includes “all enterprises using big data technology” and “financial institutions involved in consumption scenarios”, and liquidated damages are generally set in the range of 2~10 times annual income.
It is worth noting that enterprises have absolute initiative in the initiation of non-compete agreements: in addition to explicit standards such as rank and job confidentiality, implicit factors such as the “degree of cooperation” when employees leave their jobs and the relationship with their direct supervisors may become the “switches” that trigger non-compete restrictions. “From an enterprise perspective, the essence of a non-compete agreement is a tool to balance business protection and talent flow.” A senior HR in the industry said.
On May 1, Xiaohongshu said that it would no longer restrict the movement of individuals through competition. This time, however, no one followed.
Shackles: a potentially life-changing “competitive skynet”
Qi Fei never expected that the inconspicuous non-compete agreement would become a shackle that would restrain his career development when he resigned. “When joining, the contract was signed through the mobile phone verification code, and dozens of pages of the electronic contract could not be read at all.” It wasn’t until he received a supplemental agreement from the company upon his departure that he found out that he had been initiated by the company to initiate a non-compete notice.
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According to Qi Fei, the non-compete agreement of a major food delivery company has a certain “trigger” mechanism: if you do not receive a written notice from the company when you leave, you do not need to perform it and can leave smoothly; If a notice is received, a supplementary agreement must be signed to specify the list of prohibited enterprises and the scope of the industry. “It seems to be signed voluntarily, but in fact it is ‘choose one of the two’, and if the supplementary agreement is not signed, the company will implement the main contract at the time of entry, but the restrictions of the main contract are more vague and wider.”
This career crisis, which began with “hasty signing”, has unveiled the gray corner of the implementation of non-compete agreements in the Internet industry.
The “IT Times” reporter found that the competition period of various Internet companies varies, taking Alibaba, Tencent and other leading companies as examples, the penetration rate of non-compete agreements is high, but the implementation standards vary greatly, mostly 3~6 months, but there are takeaway, e-commerce giants have a competition period of up to 1~2 years, and the specific time limit needs to be assessed based on personal circumstances. However, the non-compete activation mechanism of many large companies is changing from “post-related confidentiality-oriented” to “comprehensive relationship evaluation”.
Zhao Qiming (pseudonym), a former employee of a major e-commerce company, revealed: “In addition to ‘hard indicators’ such as rank, job contact, and data level, the relationship with the direct leader and the degree of cooperation with the work handover may directly determine whether you are prohibited from competing or not.” ”
In the case handled by Liu Yongxiao, even “soft factors” such as the department’s turnover rate in the current quarter may determine whether employees are competed, “This is a matter of probability, such as happening to have more employees leaving the department during this period, and the company may be competed for in order to ‘kill chickens and monkeys’.” ”
The inversion of compensation standards and the cost of living has put some people who have been activated to be in an embarrassing situation. Qi Fei’s compensation is equivalent to 30% of his original salary, which can only meet his current normal meals and rent. If you choose to join a non-competitive company, you may face a salary halving, “going to a small company means a career fault, and the resume screening system of a large factory will automatically mark ‘non-first-line enterprise experience’.”
Due to the difficulty of bearing the “global restrictions”, a small number of grassroots employees are forced to switch to completely unrelated traditional industries, their salaries have shrunk significantly, and the “golden age” of Internet practitioners has been consumed.
As a result, many practitioners choose “passive gap (window period)”, or rely on part-time work and private work to transition to the competitive period.
Transformation: From executive exclusive to full coverage
The content of the non-compete agreements of leading companies is showing a “brainless” expansion.
In 2024, the U.S. Federal Trade Commission (FTC) introduced nationwide non-compete agreements, allowing only executives with annual salaries of more than $151,000 to retain such provisions. However, the number of employees subject to non-compete restrictions in domestic enterprises far exceeds this range.
According to the non-compete agreement posted by a blogger, the scope of restrictions not only includes direct competitors such as Alibaba, Tencent, and Byte, but also extends to “affiliated enterprises holding more than 20% of the shares”, covering dozens of companies such as Xiaohongshu and Vipshop.
The agreement of another major manufacturer even includes “short video live broadcast business”, “financial services” and “artificial intelligence research and development” into the forbidden area, “indirectly ‘blocking’ us in the whole industry.” A resigned employee complained to reporters that the company adopts the standard of “substantive competition”, even if the sub-business of the employee joins does not directly conflict with the main business of the large factory, it may still be banned, “What’s even more outrageous is the financial industry, we have never been in contact with related businesses, but we have been restricted from entering the banking and insurance industries, which almost blocked the channel for the transformation to traditional industries.” ”
“Many large companies have financial lending business, so the financial services industry is also written into non-compete agreements, but this is not reasonable.” An Internet person said that excessive restrictions are causing negative effects.
Today, the rank threshold of non-compete is sinking. For example, Alibaba used to only launch non-compete restrictions for P8/M3 and above ranks, but now P6/M1 (grassroots managers with a team of 5~10 people) has become the “hardest hit area”, and the scope of positions is also expanding: in addition to core positions such as R&D and products, it has now been extended to operations, BD (business development) and other positions.
“It is said that it is restricting core positions, but in fact, the phenomenon of grassroots employees ‘lying guns’ is widespread.” Qi Fei said frankly that the takeaway department to which he belongs is mainly responsible for the operation and management of merchants, and most of the daily contact is public data, and the company’s intranet also strictly restricts data export, screenshots, downloads and other functions, “there is almost no possibility of leaking trade secrets.”
“This is a talent monopoly.” Several former employees of large factories told reporters that they signed confidentiality agreements with the company when they joined the company, “If we leak secrets after leaving, the company can file a lawsuit to claim compensation in accordance with the law, and there is no need to use the non-compete methods of ‘blocking’ the whole network.” ”
The above-mentioned industry insiders pointed out that this is closely related to the intensification of competition in the industry, and enterprises need to maintain their own technology, and high-end talents will worry about the loss of core technology.
“At present, various industry tracks, including local life, have entered the stock game, and large factories are trying to delay the flow of talents to competitors through non-compete restrictions, forming a talent moat.” Liu Yongxiao also mentioned that in addition to high-level core positions, “it is almost difficult to determine that the loss of company profits is directly related to the change of job by an ordinary employee.”
Appeal: Enterprises should not monopolize talents
“There are also people who quietly join new companies through pseudonyms and non-payment of social security, and once they are discovered by the former company, it is difficult to avoid a lawsuit and ‘sky-high liquidated damages’.” Zhao Qiming revealed that the “investigative methods” of some large factories are pervasive, social security records, employee social media dynamics, and “monitoring” in front of office buildings have become “evidence chains”, and even there have been extreme cases of investigation companies squatting for a week to shoot “commuting tracks”.
The above-mentioned industry insiders said, “If some core positions are leaked, the liquidated damages may be far lower than the actual technical value invested by the enterprise, so it is reasonable for enterprises to trace the future mobility of core positions.”
However, for ordinary employees, the current liquidated damages clause is more oppressive, and most enterprises claim 2~3 times the annual salary before tax, and a large factory is even as high as 10 times, with an amount of up to millions of yuan. However, in judicial practice, it is extremely difficult for workers to prove that the agreement is unreasonable, and the litigation cycle is as long as 1~2 years. “Most cases can only be reduced through mediation, and the final enforcement may be about 20%~50%.” Liu Yongxiao revealed that when some senior employees change jobs, they will “pay liquidated damages” to the company, but it is difficult for grassroots employees to enjoy this treatment.
“The liquidated damages standard needs to refer to the actual value of the position to the enterprise, which is essentially a reasonable hedge against commercial risks.” The above-mentioned senior HR said.
How do workers respond in the face of strong enterprises? Liu Yongxiao gave some practical suggestions.
When signing a paper non-compete agreement, HR is required to clearly mark the “applicable position” and “restricted scope”, and the electronic contract must keep complete signing records; secondly, do due diligence before leaving, and check whether the new company is on the “non-compete blacklist” of the original unit through headhunters or maimai before changing jobs to avoid “stepping on thunder”; Finally, if the company is sued, priority should be given to collecting evidence of “non-competition between the company before and after” to promote negotiations and strive for settlement, and at the same time claim that the “proportional imbalance” between liquidated damages and compensation should be promoted and the court should be reduced.
“Non-compete agreements are supposed to protect trade secrets, not become a tool for enterprises to monopolize talent.” The above-mentioned industry insiders called on the regulator to clarify the identification standards for “confidential positions” as soon as possible to curb the industry chaos of “full competition”.
When grassroots employees are forced to struggle between “30% compensation” and “sky-high liquidated damages”, it may be time to ask: How much innovation vitality is there in an industry that needs to be maintained by restricting the flow of talents?
