A Study On The Rules Of Reducing The Liquidated Damages Of Non-competition

The number of non-compete cases is increasing,and the focus of dispute in noncompete cases is on liquidated damages.Judicial discretionary reduction the liquidated damages of non-competition is both a key issue and a difficult issue.First,the nature of the liquidated damages for non-competition is not clear,second,the result of the judicial discretionary reduction of non-competition compensation is different,resulting in the consequences of different judgments in such cases.Therefore,whether the noncompetition liquidated damages should be reduced? How to reduce the liquidated damages of non-competition? These are needed to study.For the question of whether the liquidated damages of non-competition is discretionary.Through the case study method,the judicial cases of discretionary noncompetition damages nationwide during 2018-2021 are investigated,and the current judicial status is dominated by discretionary non-competition damages.The judicial discretion reduction of non-competition liquidated damages has a theoretical basis.In terms of the nature of non-competition liquidated damages,there are compensatory liquidated damages,punitive liquidated damages and liquidated damages of both compensatory and punitive nature.Considering the characteristics of the covenant not to compete and the terms of the covenant,the nature of the non-competition liquidated damages should be both compensatory and punitive.The judicial discretionary reduction of non-competition liquidated damages is justified.From the history of the liquidated damages,the liquidated damages have gone through the history of repeated twists and turns from not limiting to limiting the amount,and finally the German Civil Code established the rules of judicial discretion of liquidated damages and applied to the liquidated damages of non-competition.In terms of the discretionary approach,the judicial discretionary approach is more relevant than using the principles of good faith and fairness to negate the entire effect of the non-compete.In terms of the nature of social law,judicial discretionary reduction of the excessive amount of non-compete damages is also in line with the pursuit of the value of substantive equality in social law.As to the question of how to reduce the amount of non-competition damages,the application of the discretionary rule is distinguished into two levels: substantive and procedural.The substantive elements include the validity of the covenant not to compete and the standard of "excessive" non-competition damages.The procedure is initiated by the application of the parties,but if the employees raise a defense to the non-compete amount and do not request a discretionary reduction,the court will not support the defense,and the court should take the initiative to explain to the employees to adjust the amount of liquidated damages of non-competition.Among the reference factors of the judicial discretion reduction of noncompetition,although the legal basis reduction of liquidated damages for noncompetition is reference to discretionary rules for liquidated damages of Civil Law,there are still differences between non-competition liquidated damages and civil liquidated damages,so it is necessary to reconstruct the rules for reduction of liquidated damages for non-competition.The principle of good faith and the principle of fairness shall be used as the guiding principle for discretionary judicial reduction of noncompetition liquidated damages,in which the principle of good faith requires the employers and employees to be honest and faithful in the course of performing the noncompetition agreements,and the principle of fairness requires that the amount of noncompetition liquidated damages shall be within a reasonable range.When considering any specific factor for reduction,a court shall take into overall consideration the losses incurred by the employer,the qualifications of the employee,the economic capacity of the employee,and the fault degree of the party concerned.