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Former Employee Ordered to Compensate RMB 150,000

One company failed to pay non-competition compensation to its former employee who had cancelled his payroll card after resignation. The employee worked for an affiliated company later on. Recently, Xuhui District Court issued its judgment for this labour dispute case and ordered the employee Wu to pay a penalty of RMB 150,000.

On 20 October 2008, the plaintiff Wu entered a certain payment company (the defendant) as an account representative. On 1 May 2011, both parties signed a "Confidentiality and Non-Competition Agreement" which stated that the company should pay 30% of the monthly salary to Wu as non-competition compensation, and that during the non-competition period, the company can exempt Wu from his non-competition obligation by terminating the compensation payment. Otherwise, Wu should pay RMB 150,000 to the company for breach of agreement.

On 19 October 2012, the labour contract was terminated. On 5 December 2012, when issuing the non-competition compensation the defendant found out that the plaintiff had cancelled his payroll card. The plaintiff believed that he was exempted from his non-competition obligation because the defendant had not paid compensation based on the agreement. In addition, the plaintiff started work for another affiliated company in November. The defendant believed that the plaintiff had violated their agreement, thus it required the plaintiff to bear responsibility for breach of contract and to compensate RMB 150,000.

On 1 February 2013, the labour dispute arbitration commission made the award and ordered Wu to compensate RMB 150,000 for breach of non-competition obligation. Wu was dissatisfied with the result and submitted a lawsuit.

The court held that on 5 December 2012, the defendant tried to pay non-competition compensation to the plaintiff from 20 October to 19 November 2012, where the reason for unsuccessful payment was that the plaintiff himself had cancelled the bank card. To sum up, the plaintiff's claim that the defendant had remitted his non-competition obligation lacked factual basis. For this reason the court required Wu to pay the default fine of RMB 150,000.