Llinks Corporate Compliance & Legal Alert (April 2026)

Contents

Spotlight on News

1. Beijing's new trade union rules to take effect and require prior notice to the trade union for staff dismissal.
2. AMAC announced performance appraisal guidelines to establish the evaluation and compensation system centered on fund investment returns.
3. Shanghai High People's Court released 10 typical cases to clarify boundaries between trade secrets and labor dispute.

Legislation Updates

1. SPC & SPP promulgated Judicial Interpretation II on Embezzlement and Bribery Cases, specifying conviction and sentencing standards.
2. The Supreme People's Court issued the Interpretation on Punitive Damages in IP Infringement Cases, refining factual determination for punitive damages.

Case Study

1. 2025 Supreme Court Released Typical Intellectual Property Cases: Malicious "Poaching" of employees from a competitor constitutes unfair competition and shall be subject to damages.
2. Shanghai High People's Court: Online work assigned by employer outside regular working hours deemed overtime, even without overtime approval procedures.
3. Shenzhen Intermediate People's Court: Employee can refuse out-of-town transfer due to employer's unilateral location change and claim constructive dismissal compensation.

Spotlight on News

1. Beijing's new trade union rules to take effect and require prior notice to the trade union for staff dismissal.

On March 27, 2026, the Standing Committee of the Beijing Municipal People's Congress promulgated the Measures of Beijing Municipality for Implementing the Trade Union Law of the People's Republic of China (hereinafter referred to as the "Measures"). The newly revised Measures, consisting of 57 articles, shall come into force on May 1, 2026. The Measures is divided into seven chapters: General Provisions, Trade Union Organizations, Rights and Obligations of Trade Unions, Grassroots Trade Union Organizations, Trade Union Funds and Assets, Legal Liabilities, and Supplementary Provisions.

The Measures clearly stipulate that, employers shall not obstruct workers from joining or establishing trade unions on grounds of household registration, employment term, employment type and other factors. The Measures refines the rules for platform workers and dispatched employees to participate in trade unions, and requires relevant authorities to work with trade unions to guide platform enterprises in standardizing employment practices, as well as conduct consultations on remuneration composition, order allocation, algorithms and labor rules.

Notably, Article 20 of the Measures clearly stipulates: "Where an employer unilaterally terminates an employee's labor contract, the employer shall notify the in-house trade union of the reasons five working days in advance; if no trade union has been established, notification shall be given to the higher-level trade union." This mandatory time limit makes prior trade union consultation a necessary pre-procedure for unilateral labor contract termination. The Measures fills gaps in previous local employment regulations and fundamentally rectifies irregular practices once adopted by some enterprises, such as ex-post filing, verbal notification or complete bypass of trade union procedures. In all scenarios of unilateral termination, including serious employee misconduct, incompetence for the job, material changes in objective circumstances and economic layoffs, employers must strictly fulfill the obligation of prior written notification to the trade union. Key information such as termination facts, relevant institutional basis and supporting evidence shall be specified in writing, so as to ensure the trade union's statutory rights of verification, objection raising and negotiation are fully guaranteed.

2. AMAC announced performance appraisal guidelines to establish the evaluation and compensation system centered on fund investment returns.

On April 16, 2026, the Asset Management Association of China (AMAC) issued the Guidelines for Performance Appraisal Management of Fund Management Companies (hereinafter referred to as the "Guidelines"). As a major upgrade to the 2022 version, the Guidelines adhere to an investor return-oriented principle and strengthen alignment with investors' interests. They further require fund management companies to fully establish a performance appraisal system centered on fund investment returns. The Guidelines emphasize a comprehensive weighting tilt toward "fund investment returns", and incorporate indicators reflecting investors' gains and losses such as fund profit margins and the proportion of profitable investors, as well as fund product performance metrics including net value growth rate, benchmark comparison results and the development of professional investment capabilities.

The Guidelines add two new interest alignment mechanisms. First, a tiered adjustment mechanism for fund managers' performance-based compensation is established. For active equity fund managers whose performance lags behind the benchmark by more than 10 percentage points over the past three years with negative fund profit margins, their performance pay shall be reduced by no less than 30%. By contrast, those delivering markedly outperformance against the benchmark and positive returns may receive moderate pay rises, forming a flexible reward-and-penalty mechanism that incentivizes excellence and penalizes underperformance. Second, shareholder dividend constraints are clearly defined. Fund companies with poor product performance and substantial investor losses over the past three years shall reduce the frequency and ratio of shareholder dividends, filling the institutional gap in interest alignment at the shareholder level.

Meanwhile, the Guidelines impose stricter requirements on mandatory co-investment. Senior executives and heads of core business departments are required to allocate 30% of their annual performance-based compensation to purchase the company's public offering funds, while the proportion for fund managers is raised to 40%. All co-investment shares shall be held for no less than one year, enabling core personnel to "share gains and bear risks together with investors".

3. Shanghai High People's Court released 10 typical cases to clarify boundaries between trade secrets and labor dispute.

On April 23, 2026, the Shanghai Higher People's Court released ten typical cases on trade secret protection. Focusing on high-frequency practical scenarios such as talent mobility, employee performance of duties, horizontal competition and data leakage, the cases address key difficulties in cross disputes between labor employment and intellectual property, unifying judicial adjudication criteria and refining identification standards.

Typical Case No.7 released in this batch, "Labor Dispute Evidence Submission Involving Business Secret Infringement", centers on whether former employees' access to and submission of company documents in labor dispute proceedings constitute trade secret infringement. The court held that the boundary between evidence use in labor disputes and trade secret protection shall be comprehensively reviewed from multiple dimensions: whether the information qualifies as a trade secret, whether the information was lawfully obtained, whether the employee acted with malicious intent, and whether the scope of disclosure was expanded.

The documents in question mainly served internal management purposes and conferred no direct competitive advantage to the company, lacking the economic value required for business secret protection under the AntiUnfair Competition Law of China. Acquiring company documents during judicial proceedings does not amount to illegal trade secret acquisition. The employee submitted such materials to fulfill statutory burden of proof obligations and did not broaden public access to the information. Accordingly, the company's claim for trade secret infringement against the employee lacks sufficient legal basis.

The judgment of the above case clarifies the boundary between the use of evidence in labor disputes and the protection of trade secrets, and defines the judicial criteria for determining trade secret infringement in labor dispute scenarios. It strikes a balanced protection between enterprises' trade secret rights and employees' litigation rights.

Legislation Updates

1. SPC & SPP promulgated Judicial Interpretation II on Embezzlement and Bribery Cases, specifying conviction and sentencing standards.

On April 10, 2026, the Supreme People's Court and the Supreme People's Procuratorate jointly issued the Second Judicial Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Embezzlement and Bribery (hereinafter referred to as the "Second Interpretation"). Addressing new circumstances and emerging issues in judicial practice, the Second Interpretation further refines and improves the standards for law application, striving to achieve full coverage of conviction and sentencing criteria for embezzlement and bribery offenses. The Second Interpretation shall come into force on May 1, 2026.

The Second Interpretation contains three major revisions. First, the Second Interpretation further clarifies the conviction and sentencing standards for crimes such as unit bribery and unit bribery offering, improves the identification rules for brokerage bribery, bribery introduction and public fund misappropriation, optimizes the rules for authenticity appraisal and price determination of special property, and refines the calculation criteria for benefits-based bribery gains. Second, the Second Interpretation stipulates that the conviction and sentencing standards for non-state staff bribery, bribery against non-state staff, job-related embezzlement and fund misappropriation shall be applied by reference to those for individual bribery, bribery offering, embezzlement and public fund misappropriation respectively. Third, the Second Interpretation improves the rules for determining voluntary asset surrender, encouraging offenders to actively return illicit gains so as to prevent and mitigate resultant damages.

2. The Supreme People's Court issued the Interpretation on Punitive Damages in IP Infringement Cases, refining factual determination for punitive damages.

On April 20, 2026, the Supreme People's Court issued the Interpretation on the Application of Punitive Damages in Civil Cases Involving Infringement of Intellectual Property Rights (hereinafter referred to as the "Interpretation"). Targeting key and difficult issues in the judicial application of punitive damages for intellectual property rights, the Interpretation further refines and improves the standards for applying the law, enhancing the operability of judicial application of punitive damages.

The core contents of the Interpretation cover three major aspects. First, the Interpretation refines the circumstances for determining "intentional infringement" and "serious circumstances". The Interpretation adds new scenarios constituting a defendant's intentional IPR infringement, such as committing identical or similar infringements again after reaching a settlement with the plaintiff and undertaking to cease infringing acts, and further clarifies the connotation of "engaging in intellectual property infringement as a business". Second, the Interpretation specifies the calculation methods for the base number of punitive damages. Where the base is determined based on the defendant's illegal gains or infringement profits, operating profits may be taken as the reference. For defendants engaging in IPR infringement as a business, sales profits shall prevail. If the profit margin cannot be verified, reference may be made to the average industrial profit margin released by statistical authorities or industry associations, or the right holder's profit margin. The Interpretation explicitly stipulated that statutory damages shall not serve as the calculation base for punitive damages. Third, the Interpretation improves the criteria for determining the multiplier of punitive damages. In accordance with the principle of proportionality between punishment and offense, where a fine or pecuniary penalty for the same infringing act has been fully enforced, people's courts shall take such circumstances into consideration when deciding the punitive damage multiplier, regardless of whether the party concerned makes a corresponding request.

The issuance of this Interpretation marks a key measure taken by the Supreme People's Court to implement the central authorities' decisions and arrangements on strengthening intellectual property protection and improving the punitive damages system. The Interpretation provides clear judicial guidance for courts at all levels in hearing similar cases, delivers definite behavioral expectations for parties to litigation, and effectively addresses long-standing problems including inconsistent adjudication criteria and unbalanced damage awards.

Case Study

1. 2025 Supreme Court Released Typical Intellectual Property Cases: Malicious "Poaching" of employees from a competitor constitutes unfair competition and shall be subject to damages.

• Facts

Company Ke and Company Zhui, along with their affiliated companies, are competitors in the same industry. Company Ke and Company Zhui had previously been involved in a trade secret infringement dispute arising from the hiring of each other's employees, and they subsequently entered into a Settlement Agreement regarding the employment of personnel. The agreement stipulated that "neither party shall, directly or indirectly, hire any employee of the other party who is currently employed, has left employment for less than six months, or is subject to non-compete obligations." Thereafter, Company Zhui nonetheless recruited more than twenty former employees of Company Ke, including department heads and senior technical executives, and provided measures to help these employees circumvent their non-compete obligations. Company Ke asserted that such conduct violated the principle of good faith and commercial ethics, constituting unfair competition, and thus filed a lawsuit, requesting that Company Zhui be ordered to immediately cease its unfair competitive acts, issue a public apology, and pay RMB 2 million in damages. The first-instance court dismissed Company Ke's claims.

Company Ke appealed the judgment.

• Judge's Viewpoint

The Suzhou Intermediate People's Court of Jiangsu Province held in the second instance that Company Zhui and Company Ke had previously been involved in a trade secret infringement dispute arising from the hiring of each other's employees and had reached a Settlement Agreement. Thereafter, when hiring former employees of Company Ke and its affiliated companies, Company Zhui should have assumed corresponding duties of care, such as proactively verifying whether the hired individuals were former employees of Company Ke or its affiliates, or promptly notifying Company Ke upon becoming aware of such facts and taking appropriate corrective measures. However, Company Zhui failed to comply with the terms of the Settlement Agreement. Instead, it continued to hire more than twenty former employees of Company Ke, and took measures such as having third parties sign labor contracts on behalf of the company, issue payroll, pay social insurance premiums, promise high compensation, and assume liability for breach of contract on behalf of these employees, thereby assisting them in evading their non-compete obligations. Such conduct constituted malicious poaching, done with actual knowledge or constructive knowledge that these former employees were subject to non-compete obligations.

Company Zhui's conduct caused a succession of departures of numerous senior executives and technical personnel from Company Ke, which to some extent weakened Company Ke's competitive advantage, increased its operational costs, and disrupted the normal order of market competition. Such conduct should be found to constitute unfair competition. Accordingly, the court ruled to reverse the first-instance judgment, and ordered Company Zhui to immediately cease its unfair competition practices and pay Company Ke RMB 1 million in damages.

2. Shanghai High People's Court: Online work assigned by employer outside regular working hours deemed overtime, even without overtime approval procedures.

• Facts

Liu joined a Company in 2008 as a planning specialist for the logistics warehouse in the Shanghai region, and the parties signed an open‑ended labor contract. In September 2024, due to adjustments in the Company's business operations, the parties mutually agreed to terminate the labor relationship. However, Liu was unable to reach an agreement with the Company regarding unpaid overtime wages, and therefore filed a lawsuit with the people's court. Liu argued that from July 2023 to September 2024, the Company frequently arranged for him to check logistics operation data and create data statistics tables online after work hours and on rest days. Liu contended that such work should be recognized as overtime and that corresponding overtime pay should be paid. The Company argued that it had an overtime approval procedure, and that Liu had not submitted any overtime application. Moreover, the Company claimed that the relevant tasks took "only a few minutes" and therefore did not constitute overtime as a matter of law, and that it was not required to pay overtime wages.

• Judge's Viewpoint

The Shanghai High People's Court held that the phenomenon of "invisible overtime," where employees handle work-related matters outside of working hours via instant messaging tools, is becoming increasingly common. An employer's legally established overtime approval procedure cannot override the fact that an employee has actually performed overtime work as arranged. In determining whether overtime constitutes overtime, the court should not rely solely on the formal requirement of the employer's internal approval process. Instead, it should substantively examine whether the employee provided substantial labor arranged by the employer outside of statutory working hours. If the employee can provide evidence that the overtime work was actually arranged by the employer and that the work content fell within the scope of the employee's job duties, the employer shall bear the obligation to pay overtime wages even if the approval procedures were not followed.

The employer may not infringe upon the employee's "right to disconnect from work outside working hours."

In this case, Liu engaged in online data compilation and verification after work each day, and also needed to prepare statistical reports on weekends. These work tasks were specific, continuous, and regular, contributed to the employer's production and operational activities, required considerable energy and a certain amount of time, and constituted substantive labor. Moreover, all such tasks were directly arranged and managed by the Company and should therefore be recognized as overtime. The Company's denial of overtime on the grounds of "lack of approval" was insufficiently substantiated. Considering the fragmented and invisible nature of online overtime, the court reasonably determined the amount of overtime hours based on Liu's job nature, work content, and frequency of overtime, and ruled that the Company should pay the corresponding overtime wages.

3. Shenzhen Intermediate People's Court: Employee can refuse out-of-town transfer due to employer's unilateral location change and claim constructive dismissal compensation.

• Facts

Ding joined a Company in June 2011 as a cement worker. The labor contracts signed by both parties stipulated that the place of work would be Shenzhen, but Ding had actually been working in Huizhou City, where he also lived for 13 years. In August 2024, due to the Company subcontracting a water source construction project to a third party, Ding's original position was eliminated. The Company then issued a job transfer notice to Ding, requiring him to relocate to the Shenshan-Shantou Special Cooperation Zone branch. Ding explicitly expressed his disagreement with the transfer, arguing that such a significant change in work location would severely affect his work and daily life.

After multiple failed negotiations, Ding issued a "Notice of Forced Termination of Labor Contract" to the Company on August 26, 2024, and subsequently filed for arbitration with the labor arbitration commission. The arbitration commission ruled in favor of Ding, ordering the Company to pay him over 70,000 yuan in economic compensation, the wage difference for August 2024, and to issue a certificate of resignation. The Company, dissatisfied with the arbitration award, filed a lawsuit with the court.

• Judge's Viewpoint

The Shenzhen Intermediate People's Court held that job transfer, as a means for employers to exercise their autonomy in operational management, aims to optimize the allocation of human resources and improve organizational efficiency. However, when adjusting an employee's position, the employer should adhere to the principles of legality, necessity, and reasonableness, striking a balance between the operational needs of the business and the legitimate rights and interests of the employee. A lawful job transfer by the employer should generally take into account the following factors: 1. Whether there is mutual agreement with the employee, confirmed in writing; 2. Whether the transfer is based on the objective operational needs of the employer (necessity); 3. Whether the transfer causes a substantial impact on the employee's work and personal life, or results in adverse changes to the employee's compensation or other working conditions (reasonableness).

In this case, the Company subcontracted a water source construction project to a third party, resulting in the elimination of Ding's original position, so the job transfer had a certain degree of necessity. However, the Company lacked sufficient grounds for transferring Ding to the Shenshan-Shantou Special Cooperation Zone. First, although the Shenshan-Shantou Special Cooperation Zone is administratively under the jurisdiction of Shenzhen, its actual geographical location is considerably far from Huizhou City, where Ding had long worked and lived, objectively causing substantial adverse effects on his family life and work convenience. Second, the transfer to the Shenshan-Shantou Special Cooperation Zone exceeded the foreseeable scope of work locations as stipulated in the original labor contract. Third, the Company failed to provide evidence showing that it had offered necessary solutions or compensatory measures to address the actual difficulties arising from the change in work location. In summary, Ding's refusal to accept the job transfer on the grounds that the significant change in work location severely affected his personal life, and his subsequent termination of the labor contract based on that refusal, constitutes a case of forced termination of the labor contract as provided for by law. The court ruled that the Company shall pay Ding economic compensation of over 70,000 yuan for the termination of the labor contract, as well as the wage difference, and shall issue a certificate of termination of the labor contract in accordance with the law.

Introduction of Llinks Corporate Compliance Practice

Llinks provides clients with efficient solutions and pragmatic corporate compliance advice based on clients' business needs. Our services include: providing daily corporate compliance advice and training; designing strategies and plans for mass layoffs and participating in on-site negotiations; assisting in solving personnel replacement in mergers and acquisitions, and providing on-site support and crisis management for strikes and other collective action; representing clients in labor arbitrations and litigations involving terminations of employment contracts, bonus payments, etc.; advising on issues of white-collar crime, anti-corruption and anti-bribery, anti-discrimination, personal information protection, protection of trade secrets and non-competition obligation, equity incentives, and senior-level employee dismissals, etc.

Awards and Honors:

• In 2024, 2025 and 2026, Patrick Gu was recommended as a Ranked Lawyer in the Greater China Region Guide by Chambers and Partners.
• In 2023, 2025 and 2026, Patrick Gu was recommended for Regulatory and Compliance, Labor and Employment by The Legal 500 Greater China Ranking.
• In 2024, Patrick Gu was recommended for Labor and Employment by The Legal 500 Greater China Ranking.
• In 2023, Patrick Gu was recommended as a Leading Lawyer by The Legal 500.
• In 2023, Llinks Law Offices received the Labor & Employment PRC Firms of the Year award from The Legal 500.
• In 2021, 2020 and 2019, Patrick Gu was consecutively recommended as a Leading Labor Lawyer by China Law & Practice.
• In 2023, 2022, 2021, 2020 and 2019, Patrick Gu was consecutively recommended as a Top-Tier Labor Lawyer by LEGALBAND.
• In 2020, Llinks Law Offices received the Best Law Firm for Client Service (China Awards) from Chambers and Partners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.