Reasonable Boundaries and Legal Regulation of Non-Compete Agreements: Balancing Trade Secret Protection and Employees’ Freedom of Employment

Abstract

Non-compete agreements are based on the protection of trade secrets and related confidential matters, but their enforcement directly affects employees’ post-employment choices. This paper examines the historical development, regulatory structure, and practical controversies of non-compete agreements, focusing on applicable personnel, confidential matters, scope of restrictions, economic compensation, and liability for breach. The study finds that China has developed a statutory and judicial framework for non-compete agreements, but problems remain in high-tech industries, platform-based employment, and the judicial adjustment of liquidated damages. These problems include overly broad application to employees, excessive restriction of post-employment activities, and imbalance between economic compensation and liability. Improvement should focus on the correspondence among confidential matters, applicable personnel, scope of restrictions, economic compensation, and liability. Courts should refine the review of applicable personnel, require employers to explain the connection between confidential matters and restrictive terms, and develop more stable rules for compensation and liquidated damages. In this way, non-compete clauses can remain tools for protecting trade secrets rather than contractual devices that restrict employee mobility.