Employment Contract Clauses That Cause the Most Disputes—From Both Sides

An employee worked at a company for two years before resigning. Only then did he learn a non-compete clause buried in his onboarding documents restricted him from joining any competitor for two years. He had signed it without realizing what it was—it was sandwiched between a code-of-conduct form and a benefit acknowledgment.

Contracts that create the most disputes are often the ones neither party read carefully at signing.

For Employees: Five Clauses to Read Closely

Salary composition: "Monthly salary of RMB 20,000 per company policy" is not a contract—it is a reference to an external document you may not be able to review or enforce. Ask for the breakdown: base salary, performance bonus structure, calculation basis for overtime, and conditions attached to bonuses.

Probation period limits: Under China's Labor Contract Law, probationary periods are capped based on contract term. For contracts of one to three years, the cap is two months. Probation periods above the statutory limit are partially void, and any wages paid at the probationary rate during the excess period may be recoverable.

Non-compete vs. confidentiality: These are different obligations. Confidentiality duties apply broadly to anyone with access to trade secrets and have no compensation requirement. Non-compete obligations restrict post-employment work and must be accompanied by monthly compensation from the company. A non-compete agreement without compensation is unenforceable. Do not feel bound by one.

Liquidated damages: Employers can only impose liquidated damages on employees in two situations: specialized training with a service period agreement, or breach of a valid non-compete clause. Other provisions requiring employees to pay damages for early resignation are void.

Contract renewal terms: Know whether the contract renews automatically, requires affirmative action, or terminates by default at the end of the term. Confusion here frequently leads to disputes about whether employment continued and under what conditions.

For Employers: Two Common Compliance Gaps

Rules and policies must be lawfully adopted and communicated. Disciplinary measures, including dismissal, can only rely on company policies if those policies were created through proper procedure (employee representatives or union consultation) and employees were informed and acknowledged receipt. An intranet post without a sign-off is often insufficient.

Overtime must be authorized and compensated. For roles without quantifiable output, overtime is difficult to prove but easy to dispute. A written approval process—even a simple one—protects the company and establishes clear expectations for employees.

Employment contracts function best when both sides understand their contents at the start of the relationship, not when litigation is already underway.