Author: Yu Xin
(This article was first published on China Business Law Journal column "Labor Law", authorised reprint)
The amended Some Provisions of the Supreme People’s Court on Evidence in Civil Procedures (“New Evidence Rules”), implemented as of 1 May 2020, provides “new methods” for companies to investigate and collect evidence on their employees’ violation of non-compete restriction, which is worthy of attention. Because the New Evidence Rules further clarified and refined some provisions, as well as the changing trend of the judiciary in the distribution of burden of proof, these methods can be more feasible in Non-compete disputes.
To require employees to sign non-compete restriction agreement is an important measure for companies to protect their commercial secrets in fierce commercial competition as well as to prevent competitors from poaching their employees maliciously. However, to recruit employees from other companies of the same business is one of the most effective means for companies to obtain talents. Therefore, in practice, some companies would assist those Personnel with non-compete obligation (“Non-compete Personnel”) through evasion, concealment, etc., in hindering the former employers’ non-compete restriction investigation, evidence collection and legal actions. A common practice is that the new employers would arrange the Non-compete Personnel to sign labour contract with a third-party company that is not in the same business and pay him/her salaries and benefits though this third-party company, but the Non-compete Personnel actually works for the new employer. In this case, it is quite hard to investigate and collect evidence on the existence of noncompliance conducts, and the cost and risk are also quite high.
The author opines that companies could focus on the following three methods:
Court investigation / court investigation order
There are mainly two ways to investigate and collect evidence through the court: one method is that the former employer applies to the court for an investigation order and then conduct investigation directly with the investigation order. The other method is that the former employer applies for direct investigation by the court. Companies could conduct investigation and collect evidence which are hard to obtain directly by themselves through the above methods.
The common types of evidence that can be requested for investigation through the above methods include but are not limited to: (1) social insurance payment records; (2) housing provident fund payment records; (3) personal income tax withholding and remitting records; (4) cooperation agreement between a third-party company and the new employer.
Applications filed by the companies should be specified with the following information basic information of the respondents such as their names, names of companies they serve, places of their residence, etc., the names or contents of the evidence to be investigated and collected, the reasons for the courts to investigate and collect evidence, the facts to be proved and clear clues of the evidence.
Due to the fact that the two methods could only be applied effectively in court hearing stage, companies need to use litigation tactics flexibly to move cases into court hearing stage as soon as possible.
Order for submitting documentary evidence
Generally speaking, some documentary evidence held by Non-compete Personnel could reflect, directly or indirectly, their violations of the non-compete obligation, such as the labour contracts of Non-compete Personnel. Non-compete Personnel may have not signed labour contracts with third-party companies, or the labour contracts may be signed after the dispute happened. This would reflect the authenticity of their labour relationship with the third-party companies. The labour contracts signed by Non-compete Personnel which record their job positions and departments, could indirectly reflect whether the Non-compete Personnel actually engaged in the same or similar work as their former job, and in turn could show whether they committed competitive behaviours or not.
Apart from labour contracts, companies could also require Non-compete Personnel to provide offer letters, phone records, WeChat or text message communication records, etc., which may also reflect whether there is violation or not.
Here again, the Companies should file applications to the courts. The applications should be specified with the following information: the names or contents of the documentary evidence to be submitted, the facts to be proved by such documentary evidence and the importance of such facts, the evidence which could prove that the Non-compete Personnel possess such documentary evidence and the reasons why they should submit such documentary evidence. In the event that the Non-compete Personnel denies possession of the documentary evidence, the court would make a comprehensive judgment regarding whether the documentary evidence is under the Non-compete Personnel’s control or not based on the fact and evidence of the case and according to laws, customs, etc.
Questioning Non-compete Personnel in court
Under the New Evidence Rules, the parties are obligated to make true and complete statements on the facts of the cases. In many non-compete restriction cases, Non-compete Personnel may choose not to appear in court hearings and have their agents to take part in the court hearings in order to avoid making statements about the facts of the cases. The agents would then delay the hearing with excuses like they are not familiar with the situations, they need to verify with their clients, etc., so as to muddle through the statement of the cases and leave things unsettled.
In such cases, the Companies could apply the courts to order Non-compete Personnel to present the court hearings, to make direct statements about the facts and to answer questions regarding the relevant facts. Companies could also further question or query Non-compete Personnel’ actual working situations and relevant details based on the facts of the cases and evidence in order to spring a leak of their concealment behaviours. Companies may even, based on Non-compete Personnel’ statements and answers, move further to apply the courts to impose penalty on the ground that the Non-compete Personnel and their agents have made false statements deliberately to hinder the courts’ hearing
New Evidence Rules have provided new methods for investigation and handling of non-compete restriction. However, companies still need to investigate in advance to obtain certain preliminary evidence and clues, in order to fully explain the reasons and obtain the court orders.
