Leaving the company and "poaching" senior management personnel to engage in competitive behavior not only can cause brain drain and disrupt the normal production and operation order of the company, but also can cause the company to lose its competitive advantage and threaten its survival and development, which is deeply hated by most companies. This article attempts to analyze how to remedy and prevent this situation from the perspective of relevant cases.

Case Description

Case 1: (2009) Minshenzi No. 1065

The applicant for retrial claims that the applicant, Mr. Ma, has persuaded the kelp business personnel of Company S to resign to work for Mr. Ma, which is one of a series of unfair competitive behaviors that Mr. Ma has implemented in a planned, step-by-step, and premeditated manner to seize the business opportunities of the applicant for retrial. The Supreme People's Court held that the evidence provided by the applicant for retrial was insufficient to prove that Mr. Ma had persuaded the kelp business personnel of S Company to resign and work for Mr. Ma. To put it a step further, if Mr. Ma has committed such an act, as long as he has not used improper means, lobbying others or recruiting talents does not violate the law.

Case 2: (2015) Hu Yi Zhong Min Si (Shang) Zhong Zi No. 2212

The plaintiff, Company Y, claimed that most of its employees worked in Company C, where the defendant, Mr. Hu, operated the same business as Company Y. Mr. Hu's resignation and investment in Company C caused project losses and personnel losses to Company Y. The court held that the cause of action in this case was a liability dispute for harming the interests of the company. However, when Hu became a shareholder of Company C, he was no longer a shareholder and director of Company Y; Company Y also did not submit evidence to prove that Mr. Hu had served as a shareholder and director of Company Y and served as a senior manager of Company C. As for whether other employees of Company Y will work for Company C where Mr. Hu works after resigning, there is no relevance to this case.

Case 3: (2013) JMCZ No. 2992

The plaintiff, Company K, claimed that the defendant, Mr. Xia, used the information he had obtained during his tenure as Deputy General Manager of Company K to entice more than ten key employees of Company K to move to Company B, which was invested and established by Mr. Xia to engage in similar businesses, and to seek business opportunities for Company K, which violated the fiduciary obligations of senior management personnel to the company and damaged the rights and interests of Company K. The court held that Xia had resigned from Company K before investing in the establishment of Company B and was no longer entitled to the position of a senior manager of Company K. Even if Mr. Xia has sought business opportunities from Company K, engaged in proprietary business, or operated businesses similar to that of Company K for others, it is based on information known to him during his previous tenure. Therefore, Company K should claim rights against Mr. Xia based on the prohibition of competition or infringement of trade secrets, rather than violating the loyalty obligations of senior management personnel to the company.

Lawyer Analysis

Based on the judgment points of the above cases and in combination with the current legal provisions of China, enterprises can take the following judicial remedies for senior executives who leave their positions and engage in "poaching" business competition from enterprises:

1. If an executive decides to resign and begins to "poach" employees from the enterprise to compete before leaving, it is suspected of violating the statutory obligations of loyalty and prohibition of competition, and the enterprise may file a liability dispute against the executive for damages to the interests of the company in accordance with Article 148 of the Company Law.

2. If an executive "poaches" from the enterprise to compete after leaving the company, then the executive no longer has a fiduciary obligation to the enterprise. However, if the executive "poaches" using confidential information he or she has obtained during his or her long-term work in the company, the executive may be suspected of infringing on the company's business secrets, and the company may file an anti unfair competition dispute with the competing enterprise and the outgoing executive in accordance with the provisions of the Anti Unfair Competition Law on infringing on business secrets; If departing executives and competing companies use other unfair means to "poach", companies can also file anti unfair competition disputes against competing companies and departing executives in accordance with Article 2 of the Anti Unfair Competition Law.

3. If a former employee who has been poached by a senior executive belongs to a person who knows or possesses the business secrets of the enterprise, and violates the confidentiality obligation or the requirements of the enterprise for keeping business secrets, disclosing, using, or allowing a competing enterprise to use the business secrets it possesses, the enterprise may also file an anti unfair competition dispute against the competing enterprise and such former employee in accordance with the provisions of the Anti Unfair Competition Law on infringement of business secrets.

4. If an enterprise has entered into a non competition clause or non competition agreement with a former senior executive or a former employee who has been poached by a former senior executive, the enterprise may file a non competition dispute with the former senior executive or former employee in accordance with Article 23 of the Labor Contract Law.

However, through cases, it is not difficult to find that enterprises who seek relief through the first three channels often lose the lawsuit because they cannot provide evidence. Therefore, enterprises should pay attention to collecting and preserving relevant evidence in their daily operations; At the same time, establish and implement a complete confidentiality system, clarify the detailed scope of business secrets and take confidentiality measures, clarify the scope of senior management personnel and non competition clauses in the company's articles of association, timely sign non competition clauses or non competition agreements with personnel with confidentiality obligations, continuously track the reemployment dynamics of employees within two years after leaving the company, and timely discover whether the company's business secrets have been used by other operators, Encouraging employees to make complaints, report and provide clues will also help companies improve evidence and win lawsuits.