The Employee Trade Secrecy Agreement: What It Means For Your WFOE in China

The Employee Trade Secrecy Agreement: What It Means For Your WFOE in China

Switching or quitting jobs is a common practice all around the world, and China is no exception. Employees often leave the companies they work in for various reasons. For instance, they might want to avail a better employment opportunity or perhaps start their own business.

However, when an employee leaves a company, they take the valuable skills that they learned along with them—and more importantly, they possess trade secrets.

These may include insider information that’s not available to the general public, a company’s future expansion plans, or any other confidential information that a business does not want to share with a third party or make public.

It can be extremely challenging for employers to prevent such employees from disclosing that information. The risk further amplifies when an employee either joins a competitor’s business or starts a business in the same industry.

The problem: Secrecy of trade secrets

Under Chinese law, trade secrets are considered a form of non-registrable intellectual property that cannot be copyrighted, trademarked, or provided with legal protection.

Hence, the only option that businesses have to protect their secrets is by keeping them safe internally.

Companies must take necessary measures to ensure confidentiality because once these secrets are disclosed, there’s very little that they can do.

The solution: Employee Trade Secrecy Agreement

Therefore, when you’re hiring employees for your Wholly Foreign Owned Enterprises (WFOEs) in China, it’s crucial that you make sure that you take the necessary steps to protect your business’s confidential information and trade.

This is where employee trade secrecy agreements come into play.

The Employee Trade Secrecy Agreement is an extremely powerful tool for WFOEs, which enables employers to protect their confidential information and trade secrets from their competitors.

It can be considered a form of non-disclosure agreement (NDA). When employees sign this document, they agree that they’ll never discuss or reveal a company’s trade secrets or any confidential information with others.

This obligation remains valid even after the termination of their employment and continues as long as that confidential information is deemed to be a trade secret.

It’s an effective and prudent way of making sure that your company’s trade secrets remain safe and secure even after an employee join your competitor.

For added protection, you can also add a non-competing clause in your employment contract to prohibit them from competing in the same industry to ensure they don’t attempt to use your confidential information for personal benefits.

If you’re looking to start a WFOE in China and are concerned about how to protect your trade secrets, you can contact Business China. They offer legal advice to their clients, enabling them to successfully set up a company in China.

They also offer an extensive range of services including, but not limited to, company registration, company management, accounting services, among others.

For further information, you can contact them on +86-020-2917 9715 or visit their website.

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