Tech employees in China are limited by contractual obligations from switching jobs, known as noncompete contracts.
In the bustling world of China's e-commerce market, Pinduoduo stands as a formidable force, known for its strict corporate culture. However, recent allegations have cast a shadow over the company, with former employees speaking up about the alleged misuse of noncompete agreements.
One such case involves a middle-level manager named Samuel, who was asked to sign a noncompete agreement that included a list of rival companies and an additional clause about returning exercised restricted stock units (RSUs). After leaving Pinduoduo, Samuel sold 50% of his RSUs worth over RMB 10 million. He used the money to buy an apartment and start two companies. However, Pinduoduo sued Samuel, claiming he joined an affiliate of delivery platform Meituan, and asking him to pay back what he received from the share sale.
The lawsuit numbers related to noncompete agreements in China have skyrocketed in recent years. These agreements are common in China and are evolving into powerful tools for companies like Pinduoduo, Tencent, ByteDance, Baidu, EV battery giant CATL, and others to prevent employees from joining rival employers.
The 11 former Pinduoduo employees, with an average age of 30, claim that Pinduoduo's abuse of noncompete agreements has impeded their employment rights and livelihood. One of them, a 24-year-old tech worker named Emma, was on the verge of suicide in February due to financial pressure from a compensation claim by her former employer, Pinduoduo. Emma had chosen to drown herself in a river in Hangzhou but was saved by her boyfriend.
Emma was followed and secretly filmed by a former Pinduoduo employee for weeks before being sued for breach of noncompete agreement. Her current job has no overlap with what she was doing at Pinduoduo. At Pinduoduo, she dealt with food vendors for the domestic market, while now she deals with toy manufacturers and targets overseas markets.
Despite the employees and their lawyers objecting to the legality of the footage, many Chinese tech companies have monitored and videotaped former employees from the moment they left their residential compounds until they reached their new workplaces. Companies can go to creative and sometimes extreme lengths to collect evidence of noncompete breaches.
In another case, a former Pinduoduo employee, Emma, was directed to pay compensation, almost three times her annual income, to Pinduoduo due to a breach of a noncompete agreement. However, Emma and the other former employees refused to pay any compensation, arguing that they were neither senior management nor senior technical staff and had no access to trade secrets.
Pinduoduo, on the other hand, stated that only a very small number of departing junior staff are subject to noncompete agreements when they leave. The company also argued that the two companies Samuel founded overlapped with their business scope, which they considered further evidence of a breach of the noncompete agreement.
The surveillance and recording of employees by their former employers is a common practice in China, despite the controversy it has sparked. As the debate continues, the impact on the lives and careers of these former employees remains a significant concern.
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