Employers to gain from amended law on breach of contract issues

On 31 August, the Standing Committee of the National People’s Congress passed an amended version of the Civil Procedure Law, which will take effect on 1 January 2013. The amendment includes several provisions that may make it easier for employers to take enforcement action against employees in breach of contractual and statutory duties, as well as to submit evidence related to any employment dispute.

Previously, the law only explicitly allowed for preliminary injunctive relief for patent, trademark and copyright infringements. The amendment now provides that such relief can be granted in all civil cases where the conduct of a party may make enforcement of a final judgment difficult, or where significant harm may be caused. In the employment context, such change could potentially significantly strengthen the ability of employers to take enforcement action against employees in non-compete and breach of confidentiality cases, since such preliminary relief could help the employer prevent further damage resulting from the employee’s breach of their restrictive covenants before the actual trial on the merits commences.

The amendment requires the company to show that the employee’s behaviour would probably cause the ultimate court ruling to be unenforceable or cause damage to the company. However, it is unclear whether the company would have the burden to establish that it is likely to succeed on the merits of the case. Also, it remains to be seen how aggressively the courts will use this preliminary injunctive power in the future.

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com