Being unencumbered is a status gained by not having any main hand item, off hand item or gloves equipped. If any of those item slots have something equiped at any point, the status is lost. This makes it a stricter version of unarmed, with the additional prerequisite of not being able to wear gloves and neither shield. This means that an unencumbered character is also unarmed.
Related passive skills
|Hollow Palm Technique||You count as Dual Wielding while you are Unencumbered|
60% more Attack Speed while you are Unencumbered
14 to 20 Added Attack Physical Damage per 10 Dexterity while you are Unencumbered