When livestreamer Lucy Liu landed a job running a health advice channel in April, she was eager and excited to prove herself in a rising, fast-paced sector.

As her new employer was short-handed, the 32-year-old even agreed to start work before seeing a labor contract, believing it to be merely red tape. In fact, it was a major red flag.

Two weeks later, when she was finally asked to sign the agreement, she discovered that it included a non-compete clause, often referred to as an NCC, which blocked her from joining any rival business for two years after termination of the contract.

Despite feeling uneasy, Liu put pen to paper, “because without a labor contract, I couldn’t even claim my first two weeks of wages,” she said.

After two months, she learned that the contract also stated that if she left for any reason, even during her probation period, she would owe the company 3 million yuan ($417,700) in compensation, roughly 10 times her annual salary. “That’s when it hit me — it was a trap,” she said.

Liu decided to quit the company in Hefei, capital of the eastern Anhui province, and has since sought legal advice in case her former employer takes action. Under the loose terms of the contract, “even taking a simple job like handing out leaflets on the street could be ruled as violating the NCC,” she said.

Designed to protect trade secrets and intellectual property, NCCs have long been used for high-value talent in fiercely competitive industries such as internet technology, new energy, autonomous driving, and pharmaceutical research and development, as well as some creative sectors.

However, in the past five years, the scope of these agreements in China has expanded well beyond the original purpose. They now appear in labor contracts for employees at all levels of an organization, regardless of their access to confidential or proprietary information, and are often broad or vague in their definition of “competitors.”

Experts warn that the indiscriminate use of such clauses is restricting job mobility, stifling career growth, and suppressing innovation, ultimately distorting fair competition and contributing to broader social challenges.

The scale of the issue is reflected in a surge of legal disputes, particularly in economically developed regions. In Beijing, the No. 1 Intermediate People’s Court handled 432 labor cases involving NCCs between 2020 and June this year, more than double the number from 2014 to 2019.

In response to the growing concern, the Supreme People’s Court rolled out a judicial interpretation on Aug. 1 to clarify the enforceability of NCCs and the compensation to be paid to those temporarily blocked from finding other jobs. The guidelines, which take effect in September, emphasize that the clauses must be reasonably aligned with an employee’s role and level of access to confidential information, and cannot be applied arbitrarily or excessively.

What’s confidential?

China has taken significant steps to strengthen the protection of trade secrets, an essential component of intellectual property rights protection and a key pillar of fair market competition, as the country looks to improve its overall business environment.

NCCs were introduced as part of the Labor Contract Law in 2008 to prevent employees with access to commercially sensitive information from sharing it with rival organizations, either domestic or international. Legally, these clauses are limited to senior management, senior technical personnel, and employees with obligations to confidentiality.

However, employers are increasingly taking advantage of the vague terminology around “obligations to confidentiality” to extend NCCs to a wider group of workers.

A study by researchers at Wuhan University of 454 court rulings on NCC-related disputes showed that 21% of the employees involved were senior managers or senior technical personnel, while the rest were factory workers, receptionists, cleaners, security guards, and other frontline staff.

According to a joint release from the Supreme People’s Court and the Ministry of Human Resources and Social Security, in April, a security guard surnamed Li on 3,500 yuan a month was sued by his former employer for 200,000 yuan for allegedly violating an NCC, while a chef who made cold dishes at a restaurant in Nanjing, capital of the eastern Jiangsu province, faced a similar claim of nearly 100,000 yuan.

Livestreamer Liu couldn’t see any reason why her employment contract needed a clause relating to confidentiality. “We livestreamed on an open social platform, not in a private setting,” she said, explaining that the health advice channel she operated had only about 3,000 subscribers. “Everything we said, the words we used during every livestream, were visible to everyone. It’s all open and transparent.”

Even interns are being forced into non-compete agreements. A university undergraduate who was asked to sign one on her first day as an R&D assistant at a pharmaceutical startup in Shanghai said she has since found thousands of posts and discussion threads on the lifestyle app Xiaohongshu, or RedNote, about similar experiences.

“Some people advised me not to sign unless the company could clearly justify it, but I signed it because internships are too hard to come by in the current job market,” she said. “I’m planning to switch companies soon, and I’m not sure if that might cause problems down the line.”

Closing the door

Lin Qi, 33, lasted just a few months at an internet company in Beijing before deciding to quit in May due to a toxic work environment. Only then did the business operations manager discover that an NCC was about to derail her decade-long career.

The company’s human resources department, which refused to reveal the full details of the restrictions until she was off-boarded, eventually told her that she was “barred from nearly all companies in my specialized vertical, as well as those broadly categorized under the internet industry, both in China and abroad.”

Lin, who spoke on condition of using a pseudonym, said her only option was taking a junior role in an unrelated sector, with a significantly lower income. Rather than risk a penalty of up to five times her annual wage, she decided to remain unemployed.

As part of the deal, the company will continue to pay 20% of her salary until the end of the 12 months, which just about covers her basic living costs. However, with a mortgage and her son’s school fees to pay, her family is now under financial pressure.

Although NCCs are designed to prevent secrets from leaking, Chinese corporations are also often using them to prevent talent from leaving — or even thinking about leaving.

Lin said all her former colleagues were required to sign such agreements. Whether they are triggered upon departure is entirely up to the company’s discretion.

“Various factors can influence this decision, such as the employee’s relationship with management or the timing of their resignation,” she said. “For example, if many people are leaving around the same time, the company may choose to enforce the agreement as a warning to others and to discourage further departures.”

Fresh graduates and early-career workers are particularly vulnerable, as they lack the leverage or resources to challenge such restrictions, according to Cui Can, a lawyer who specializes in labor disputes in Chengdu, capital of the southwestern Sichuan province.

“Most of my clients are born after 1995, with the youngest born in 2001,” Cui told Sixth Tone.

He recalled one young man born to a low-income rural family in northwestern China who had paid his way through university with student loans before joining an internet company as a junior programmer in 2022. When he switched jobs last year, his former employer sued him for nearly 1 million yuan, claiming that he violated his NCC.

“Now, he’s struggling to explain to his father how — after two years at what seemed like a promising job — he may end up in deep debt,” Cui said, adding that his client developed severe depression, affecting his life and work. “This case is still under appeal, and he said if the ruling is enforced, he’ll return to his hometown, become a defaulter, and just give up.”

As the judicial process can take up to two years, workers are left in a prolonged state of uncertainty and financial strain, Cui added. Seeing corporate legal departments begin to profit from NCC-related lawsuits, he argues that individual workers — being the weaker party — deserve greater protections.

Fan Wei, a professor at Beijing’s Capital University of Economics and Business, told local media, “In the long term, the abuse of non-compete agreements not only violates a worker’s right to freely choose their employment, but also leads to talent waste and stifles mobility and innovation.”

Catch me if you can

Although violating an NCC can result in lawsuits worth millions of yuan, some still take the risk. For those with modest incomes and little savings, spending up to two years out of work is just not feasible.

As a result, suggested workarounds regularly circulate on social media, with possible solutions including job placements through subsidiaries of new employers, signing contracts under a pseudonym, or taking on outsourced roles through third-party agencies.

Ren Chuanqian, a lawyer in Shanghai who represents corporate clients, said the biggest challenge for an employer is proving that someone has breached a non-compete agreement by getting a new job.

The most direct approach is to follow the employee or stake out the rival company’s office. “But this is also the most difficult, as it can take days of surveillance to catch someone entering the building regularly or scanning into security gates several times,” Ren explained. “A single visit could easily be explained away as a job interview.”

For those working remotely under aliases, companies may resort to trickery, such as posing on the phone as recruiters or social security officials to coax people into revealing their new employment status. Clues can also be found in LinkedIn updates, casual social media posts, and news releases.

An internet industry worker in Shanghai who asked to be identified as Zero said his former employer sued him for 920,000 yuan after he resigned and refused to sign an additional agreement on restricting his next job.

Soon, strange packages addressed to him began arriving at his new office. He knew that if he signed for them, it would be used against him in court as evidence that he’d joined a rival company.

“The six months after I left that firm in 2019 felt like I was living in a spy thriller,” Zero told Sixth Tone. He claims that his former employer used a barrage of pressure tactics, including hiring private investigators to tail him and take photos, tracking his car licence plate, questioning of his friends and colleagues, and relentless anonymous calls.

“Some of the private detectives aren’t even subtle — they think they’re blending in, but I’ve already noticed them. Still, just knowing you’re being followed is terrifying,” he said. “Some companies don’t even try to hide it. They’ll tell you directly that they’re watching you.”

Ren explained that, despite privacy concerns, courts generally accept such “gray evidence” unless it is obtained through serious violations of public order. “The prevailing judicial standard now is that as long as it’s not a serious infringement upon someone’s privacy, it can be used as the basis for establishing facts,” he said.

Enforcement issues

Many countries and regions, including India and the U.S. state of California, have begun restricting or even abolishing NCCs. However, experts believe the agreements will remain a major tool for Chinese employers to protect their interests in the foreseeable future.

Xiaohongshu made a high-profile announcement in May that the tech company was scrapping NCCs for all its employees as part of a shake-up to its work culture. It’s yet to be seen whether other major companies will follow suit.

In China’s corporate landscape, organizations use a mix of legal tools to safeguard trade secrets — such as non-disclosure agreements, or NDAs — but not all of them are effective.

Under Chinese law, NDAs cannot set predetermined financial penalties, weakening their power. Ren argues that without meaningful consequences, enforcement is a challenge.

Filing a lawsuit for a trade secret infringement is one option, but it’s a costly and uncertain path. The plaintiff must prove that a former employee used or leaked confidential information, a high bar in any legal system. “Even if they win,” Ren added, “calculating the actual damage and obtaining proportional compensation is difficult, leaving many businesses frustrated with the outcome.”

This is where NCCs come into play. Unlike NDAs, non-compete agreements allow employers to state the possible financial penalties for violations.

If a former employee joins a rival — especially in a similar role — the law dictates that there is a significant risk of disclosure or misuse of commercial secrets. This presumption gives companies a stronger legal footing to demand compensation.

Companies could rely on limiting data access and information segregation, but these aren’t foolproof, Ren said. “As long as employees have access to sensitive data, the risk of leakage remains. In practice, NCCs have become one of the most reliable and manageable tools for companies aiming to protect their intellectual assets.”

While the practice is open to misuse, whether the clause is activated depends on the scenario, according to a former employee in the labor and HR risk control department of a major internet company.

“For example, if a competing company deliberately targets employees from one of our business units in a certain period of time, we react accordingly by issuing a special notice, adding a non-compete clause, and requiring the employee to sign it,” she explained, asking not to be identified.

If the case involves a particular staff member, the company might also initiate the process against that individual. “Employees are often quite passive in this situation — they are simply notified when an NCC is added,” she said.

For Zuo Xuejing, an associate professor in the School of Economics at Shanghai’s Fudan University, the growing prevalence of non-compete agreements reflects deeper structural shifts in China’s labor market.

“Industries are becoming increasingly cutthroat in China,” said Zuo, who specializes in labor economics. “Firms are under pressure to protect their competitive edge, and workers simply lack the power to resist. Our laws haven’t kept pace with these changes, so individuals often find it hard to defend themselves in the workplace.”

However, Zuo cautioned against a simplistic view of “abusive employers,” adding, “We need to assess case by case. For monopolizing companies, which already enjoy extra profits and low efficiency, stricter scrutiny is justified. And when NCCs extend to interns or junior employees, that clearly crosses the line.”

She believes China must strike a careful balance between safeguarding trade secrets and enabling labor mobility.

“If we abolish NCCs overnight, it could hurt companies’ short-term competitiveness,” she added. “But in the long run, curbing overreaching non-compete agreements will foster fairer competition and more innovation. Stronger regulations, clearer definitions, and support from labor unions or worker associations will be key to that transition.”

Additional reporting: Yang Xinrui; editor: Hao Qibao.

(Header image: Visuals from Imazins and 500px/VCG, reedited by Sixth Tone)