Llinks Legal Alert – Labor & Employment Law September 2025

Spotlight on News

1. To Guide Corporate Compliance: Ministry of Human Resources and Social Security Issues Non-Compete Implementation Guidelines.

On September 4, 2025, the General Office of the Ministry of Human Resources and Social Security issued the Compliance Guidelines for Enterprises Implementing Non-Compete Agreements (hereinafter referred to as the "Guidelines"), which shall take effect as of the date of issuance. Operating within the existing legal framework, the Guidelines serves to clarify compliance requirements and offers enterprises more concrete guidance for lawfully applying non-compete restrictions to employees.

The Guidelines advises enterprises against leveraging their dominant position to impose unfair non-compete restrictions on employees. It emphasizes that non-compete clauses should only be used after identifying specific trade secrets, and be limited to senior management, technical staff, and other employees with confidentiality duties - not broadly applied to ordinary employees. The Guidelines clarifies that employees who possess only general industry knowledge and skills or common business information are not considered bound by confidentiality obligations. Additionally, companies are encouraged to prioritize other protective measures like access controls, data encryption, or declassification periods, and only use non-compete restrictions when necessary. If such restrictions are deemed necessary, a prior assessment justifying their need should be conducted.

The Guidelines also addresses compensation standards, proposing that the monthly payment should generally be no less than 30% of the employee's average monthly wage in the preceding 12 months before termination and not fall below the local minimum wage. Furthermore, for the non-compete period exceeds one year, a higher threshold of no less than 50% of that average wage is suggested. Penalties for breach should be reasonable and typically not exceed five times the total compensation paid. 2. Beijing and Shanghai Set 2025 Social Insurance Contribution Bases, Shanghai Concurrently Raises Economic Compensation Cap to RMB 37,302 per Month Based on the Newly Released 2024 Average Monthly Wage. On September 18, 2025, Beijing Municipal Human Resources and Social Security Bureau and other relevant authorities jointly announced that effective July 2025, the monthly social insurance contribution base has been set with an upper limit of RMB 35,811 and a lower limit of RMB 7,162. This base applies to basic pension, unemployment insurance, work-related injury insurance, and basic medical insurance including maternity insurance. Insured entities and individuals must make up the premium arrears resulting from this adjustment by the end of December 2025 to avoid impacts on personal benefits and the imposition of late fees.

2. Beijing and Shanghai Set 2025 Social Insurance Contribution Bases, Shanghai Concurrently Raises Economic Compensation Cap to RMB 37,302 per Month Based on the Newly Released 2024 Average Monthly Wage.

On September 18, 2025, Beijing Municipal Human Resources and Social Security Bureau and other relevant authorities jointly announced that effective July 2025, the monthly social insurance contribution base has been set with an upper limit of RMB 35,811 and a lower limit of RMB 7,162. This base applies to basic pension, unemployment insurance, work-related injury insurance, and basic medical insurance including maternity insurance. Insured entities and individuals must make up the premium arrears resulting from this adjustment by the end of December 2025 to avoid impacts on personal benefits and the imposition of late fees.

On the same day, the relevant authorities in Shanghai announced that, effective July 1, 2025, the monthly social insurance contribution base will be adjusted to an upper limit of RMB 37,302 and a lower limit of RMB 7,460. Any contribution arrears resulting from this adjustment must be settled by the end of October 2025 without incurring late fees.

Concurrently, Shanghai released the city's 2024 average monthly wage for urban employees, which is RMB 12,434. This figure serves as the statutory basisfor calculating severance compensation. Specifically, if an employee's average monthly wage prior to termination exceeds three times this amount (RMB 37,302), the compensation will be calculated based on a capped monthly amount of RMB 37,302.

3. Supreme People's Court Releases Typical Cases to Further Clarify Judicial Stance for Fair Market Competition.

In September 2025, the Supreme People's Court issued 8 typical anti-unfair competition cases and 5 antitrust cases, aiming to provide judicial guidance through exemplary cases, guide market behavior and safeguard fair competition. These cases encompass common disputes like counterfeiting, technical secret infringement, commercial defamation, and online unfair competition, in addition to key monopoly issues such as horizontal agreements and monopolistic activities by industry associations.

In Anti-Unfair Competition Typical Case No. 2 (SPC (2022) Intellect. Prop. Civ. App. No. 1592), which involved an employee secretly establishing a competing business and misappropriating technical secrets from their original employer, the court clarified the criteria for establishing infringement and liability. The court ruled that the software and data in question constituted core confidential business information with significant commercial value, accessible only to relevant internal personnel. The employer had implemented confidentiality policies, specified obligations in employee contracts, and marked technical documents as "Controlled," satisfying the legal requirement for “taking corresponding confidentiality measures” since the secrets were not obtainable by external parties through proper means. The court thus affirmed that the software and data met the statutory definition of trade secrets and that employees with access were bound by confidentiality obligations. This case offers clear guidance for enterprises on effectively implementing confidentiality systems to meet the statutory standard for protecting trade secrets, serving as a valuable reference for standardizing intellectual property protection practices.

Legislation Updates

1. Shanghai Issues Administrative Measures on Work Ability Appraisal, Standardizing Procedures and Strengthening Cross-Departmental Coordination.

On August 26, 2025, the Shanghai Municipal Bureau of Human Resources and Social Security, together with the Municipal Health Commission and Municipal Healthcare Security Bureau, jointly issued the Shanghai Municipal Measures for the Administration of Work Ability Appraisal (hereinafter referred to asthe "New Measures"). The New Measures took effect on its issuance date, will remain valid until August 31, 2030, and the 2022 version (Hu Ren She Gui [2022] No. 31) was repealed simultaneously.

The New Measures further clarifies the responsibilities of municipal and district-level Work Ability Appraisal Committees: District committees are primarily responsible for conducting initial and recheck appraisals of work ability for individuals with work-related injuries, as well as initial appraisals for those disabled by illness or non-work-related injuries. The municipal committee handles reappraisals for applicants dissatisfied with the conclusions from the district level.

The New Measures also emphasizes inter-departmental collaboration, mandating the Committees to strengthen data verification with health authorities as well as medical institutions to ensure the authenticity of the appraisee's identity, diagnosis certificates and medical records. Additionally, it aligns with the national Measures for the Administration of Work Ability Appraisal (effective July 1, 2025) regarding the formats of supplementary application notices, the size of expert panels, and expert qualification requirements.

2. National Health Commission Issues Parenting Subsidy Standards to Strengthen Procedures.

On September 18, 2025, the general offices of the National Health Commission and Ministry of Finance issued the Administrative Standards for the Parenting Subsidy System (Trial) (hereinafter referred to as the "Administrative Standards"), which took effect immediately. The Administrative Standards aims to implement the Parenting Subsidy Implementation Plan released by the General Office of the CPC Central Committee and the General Office of the State Council on July 28, 2025, by refining working mechanisms, standardizing procedures, and ensuring the smooth operation of the subsidy program. It establishes a unified national management standard, while local health and finance authorities will formulate detailed implementation rules based on local conditions.

The Administrative Standards specifies that subsidies are available for children under three years old who were born or adopted in compliance with laws and regulations on or after January 1, 2025. For children born before January 1, 2025, but under three years old, subsidies will be calculated and disbursed proportionally based on the number of eligible months. The subsidy is calculated on an annual basis and disbursed in a lump-sum payment each year. It can be claimed by one of the parents or another guardian (including child welfare institutions) and must be used for child-rearing expenses.

Emphasizing accessibility and simplicity, the Administrative Standards allows applicants to submit applications online through the national unified parenting subsidy information management system, or in person at the township government (sub-district office) where the child is registered. In principle, the preliminary review and verification process shall be completed within 30 working days.

Case Study

1. Shanghai No.1 Intermediate Court Rules: Restricted Stock Units Granted by Overseas Affiliates Do Not Constitute Labor Remuneration; Related Disputes Are Not Labor Disputes.

• Facts
  
  On July 5, 2018, the Company extended an offer to Mr. Wang, stating it intended to hire him as Deputy Director of the China Administration Department. The offer letter stated: "Subject to approval by the Company's board or its authorized representative, you will be granted Restricted Stock Units equivalent to USD 120,000, which shall be governed by Company's equity incentive plan and your agreement with it." Mr. Wang joined the Company on August 16, 2018 and held the positions of Deputy Director of the China Administration Department and later Director of the Workplace Services Department before his departure.
  
  On June 30, 2022, Mr. Wang filed for arbitration, requesting the Company to: 1) Pay stock sale proceeds of RMB 769,149.29; and 2) Compensate for losses from cancelled stock options totaling RMB 254,247.54. On July 4, 2022, the arbitration commission dismissed the case ruling that the claims fell outside the scope of labor dispute arbitration. Mr. Wang subsequently filed a lawsuit before court.
  
  
• Judge's Viewpoint
  
  The Shanghai No.1 Intermediate Court held that, although the offer letter was issued by the Company, the Restricted Stock Units therein were granted by a third-party, Company A. Additionally, the Company itself was not the entity that previously paid Mr. Wang's equity incentive income. Thus, the evidence failed to prove the claimed amounts constituted labor remuneration or benefits payable by the Company. The court affirmed the first-instance ruling that the dispute was non-arbitrable as a labor dispute and dismissed the claims. It clarified that this dismissal does not preclude Mr. Wang from pursuing claims based on other legal relationships or against other parties.

2. Beijing No.1 Intermediate Court: Mere Failure to Report Employment Status Does Not Constitute Breach of Non-Compete Obligation.

• Facts
  
  Mr. Xu previously held the position of Senior Product Operation Manager at Company E. On his last day of employment, the company presented him with a "Notice on Non-Compete Obligations," which required him to submit quarterly documentation—such as proof of employment, salary records, social insurance contributions, and tax certificates—during the non-compete period. After his departure, Mr. Xu failed to provide any of the stipulated post-employment materials. Company E consequently asserted that he had breached the agreement and sought payment of liquidated damages for the alleged non-compete violation.  Judge's Viewpoint The court held that Company E failed to provide evidence establishing that Mr. Xu had joined a competing enterprise. It reasoned that a mere failure to submit employment-related documentation does not, in itself, amount to a breach of non-compete obligations under the Labor Contract Law. Accordingly, the claim was dismissed.
  
  The court further clarified that while employees have a good-faith obligation to report on their employment status in a timely manner, a standalone failure to fulfill this reporting duty does not violate non-compete rules. Therefore, an employer is not entitled to claim liquidated damages solely on this basis. Pursuant to Article 24 of the Labor Contract Law, such penalties are only applicable where an employee actually joins a competitor or engages in competitive business activities. Imposing a penalty merely for failing to provide employment information exceeds the statutory scope of non-compete provisions and lacks legal basis.
  

Introduction of Llinks Labor and Employment Law Practice

Llinks provides clients with efficient solutions and pragmatic labor law compliance advice based on clients' business needs. Our services include: providing daily labor law 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.

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• In 2024 and 2025, Patrick Gu was recommended as a Ranked Lawyer in the Greater China Region Guide by Chambers and Partners.
• In 2023 and 2025, 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.

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