First Let's Kill All The Non-China Lawyers.
When I started this blog, I swore I would never do a post apologizing for not posting nor would I ever do a post making any sort of excuse for not posting. We are all busy and I hate excuses and unless one thinks this post violates that pledge, I am proud to say I have stuck by it.
In fact, instead of not posting when I get crazy busy, I just tend to get more biting and ornery so if any apology is necessary, I apologize in advance for that.
I also must dedicate this title to my Canadian international trade lawyer friend, Cyndee Todgham Cherniak, with whom I shared a podium at the just completed American Bar Association International Law Section Meeting in Miami. Cyndee commented to the crowd on how "shocking" my titles sometimes are and I thought of her when I penned this one.
My ire today stems from perfectly fine domestic US lawyers who, for some unknown reason, deem themselves able to practice international law. They are not. Last week, I got an email from an unnamed company that had doubts as to the legality of its arrangement with someone it described to me as their independent contractor in China. I then did what i always do when someone uses the US term, "independent contractor." I stopped him and told him that this person is an employee working without a written employment contract and his company is at risk for this.
The laws on this are clear in China. If an individual works for your company, that person is an employee of your company and that individual is covered by China's labor laws. This means the failure to have a proper written agreement and the failure to have a well-crafted employee manual might mean a large penalty for the company and/or an employee for life. If you want someone to work for your company without being your employee, you must contract for that person's work through a third party company. In other words, that person must be employed by some other company and your company must contract with that other company. See "Wanna Get Sued In China? Your Ex-Employees Can Help. Part II, The Corporate Counsel Edition."
But here's the really good part. This person then told me that his company has a written agreement with this person making very clear that this person is an independent contractor and not an employee and would this solve his company's problems. He then told me he had just sent me a copy of this contract and would I please look at it. I did and I wrote the following email in response (altered only slightly to hide any markers that might reveal the company involved):
My firm has a closer relationship with ____________ than just about any other firm and I have heard nothing but good things about Ms. __________'s abilities as a labor lawyer. Two of my best friends, ____________ and ___________ are lawyers there and we are always referring work back and forth. I say this to moderate that this agreement is not worth the paper on which it is printed. I’m sorry, but there is no other way to put it. There is absolutely no way this contract has any validity in China and suing this person in _________ [state] [as per the contract] will be a complete waste of time and money.There is just no way that a contract calling a relationship one thing is going to make it that one thing. It would be like you and me signing a contract saying Seattle is in Oklahoma. We can do that, but it is not going to change the reality. Under Chinese law, this person is an employee and a US contract purporting to claim otherwise will never see the light of day in a Chinese courtroom, nor should it Chinese courts hire out their own translators so even if it did make it to court there (which it would not), it will likely say something very different than what is here in any event. This is why it almost always makes sense to have contracts in Chinese, not English.
The other problem with this document is that it calls for disputes to be resolved in _____ County Superior Court. My firm has dealt with this issue many times for both US and Chinese companies and I know exactly what will happen if you sue this person in _________county. You will win because she won’t show up. You will then take your judgment to China, where it has zero value whatsoever. Zero. Here’s a post I did on this a few years ago: Enforcing Foreign Judgments in China -- Let's Sue Twice. But it’s even worse than what I said and here’s why. This contract probably stops you from suing her in China because her defense there will be that you two agreed that any dispute would be handled in the United States and you already did that and won, so you cannot now sue her in China. We crafted that argument (with a Chinese law firm) on behalf of a Chinese company and they won on it.
At this point, however, I am more concerned about getting you legal than I am about your contract with this person. The real questions that need answering all revolve around what you are doing in China now and what you hope to be doing there a few years from now. It is the answers to those questions that will determine how you should proceed.
A year or so ago, I gave a talk to the Alaska Bar Association entitled What Lawyers MUST Know About China and I then did a blog post with the same name. In that post, I talked about how I should have subtitled the talk, "the biggest mistakes foreign lawyers make when dealing with China." I would love to give a somewhat more general talk on the eight (lucky number) things every domestic lawyer must know about international law, but right now I am having trouble getting past the first one, which is don't do it. Seriously, I think that would make a great topic for a talk and I would love to hear what items you think belong on the list.
Comments
Got to agree with Todgham Cherniak...the titles of the post are what make them so viral. ;-)
Posted by: Adam Daniel Mezei | November 3, 2009 1:13 AM
Thanks Dan, I enjoyed your post more than your title lead me to expect!
Posted by: uk visa lawyer | November 3, 2009 2:35 AM
"It would be like you and me signing a contract saying Seattle is in Oklahoma." So many lawyers think that "saying it is so, makes it so." Over the years I came to notice a certain frontier lawlessness [or arrogance] in the attitudes of many lawyers for large corporations or lawyers from large firms in the U.S. I found your tone of exasperation in this entry quite entertaining.
Posted by: stevelaudig | November 3, 2009 3:00 AM
Hi,
Thanks for your many interesting posts. Here's a question for you:
Part 1: I'm thinking of hiring someone in China, via the Internet, to do some translation work. If I'm hiring them from abroad what rules apply? I'm not even slightly interested in being able to sue them - I just don't want them to be able to sue me and get a judgment against me, then enforce it if I decide to move to China in five years. Can I use a simple English-language agreement in this case?
A few more details: This would be a very part-time arrangement and total payments would be under $10K per year.
Part 2: How would it change the situation if I visit China next year, meet with them, and train them in some related computer technologies while in the country?
Thanks :)
Douglas
Posted by: Douglas M. | November 3, 2009 6:46 AM
So, let me get this straight...You are saying that if I am a firm looking to do business in China, then I shouldn't hook up with someone just because his LinkedIn/Facebook page states that he is an Independent Contractor , and his profile picture looks really professional?
Pffffsh. Terrible advice Dan. You might as well claim that China has a load of legally established companies, starving for contracts, who are willing to help with this sort of thing and that it's usually a good idea to do thorough due diligence on a contract before signing it. Pffffsh. Seriously though, Dan, you shouldn't joke about this stuff.
Posted by: Damjan | November 3, 2009 8:24 AM
Your comments are correct; since 1996 legal distinctions were abolished between these type of "contingent employees" and formal employees and both enjoy the benefits of labor laws.
However, China does permit the hiring of independent contractors under labor service contracts (laowu hetong) who are not under the direct control of the employer and they may fall outside many of the labor protections. Additionally, their labor issues and disputes with the employer under the service contract are handled under the contract law rather than the Labor Dispute Mediation and Arbitration Law (of course they, themselves, are likely "employees" with their own employer). Additionally, some local laws exclude independent contractors (such as those under labor service contracts) from certain benefits, such as Shanghai wage regulations. In a selfless plug, this issue in discussed in my new book (November, 2009) by Cambridge, Understanding Labor and Employment Law in China at pp. 30 and 32.
Posted by: Ron Brown | November 3, 2009 11:06 AM
Valuable thoughts and advices. I read your topic with great interest. It is very helpful. Thanks.
Posted by: Mackeran | November 3, 2009 11:14 AM
Douglas ,
Why don't you ask some Chinese in the State to do the translation? There are tons of Chinese students here and way easier to manage. Heck, if your work is about economics/finance, I can do it for you, of course with a fee lol.
Posted by: zjin | November 3, 2009 1:19 PM
@ Douglas:
You should hire professionally-trained translators who are based in the United States. There are translators here with extensive experience in your field with advanced degrees in translation, some of whom have received certification from organizations such as the ATA (American Translators Association). While a US based translator may cost slightly more (perhaps only $0.04 to $0.05 more per word), you can avoid the legal hurdles of outsourcing to China and have someone nearby you can manage much more easily. That air ticket to China to visit your low-cost translator is going to set you back at least $1,000.00, in addition to hotels, meals and the time you spend away from other work. Why not use that money more efficiently and invest it in the translation itself?
Just a thought.
Posted by: Glen | November 3, 2009 3:46 PM
Thanks, Glen & zjin, for the feedback.
First: With regards to the "travel to China cost" issue - this is a valid point, and I should have been clearer. I plan to go to China for pleasure in any case and, sadly, I enjoy working when I'm on vacation. :)
Second: A shameless bit of promotion for my project: Check out http://languagecollaborative.com. We're creating free "language tutor" software that will run on next-generation cell phones. For the most part this is a language neutral platform. I'm hoping that many people and organizations will create many learning modules for many different languages. But I'm personally studying Chinese so - surprise! - I'm interested in creating Chinese learning modules...
Third: If any of you can provide feedback or links on where to find translators, either in the US or in China, and/or information on what the costs tend to be, I'd be grateful.
Finally: Dan, I'd still love some feedback on my original legal question. I've been wondering about this for years. I realize that my project is minuscule at this point, especially compared to the likes of Expedia, but I'd be willing to bet that you have a fair number of readers who are also curious about these questions.
Posted by: Douglas McCarroll | November 4, 2009 6:10 AM
One note is that the big reason for the distinction between independent contractors and employees in the US is because of the taxation system. Employees are subject to income tax withholding, contractors are not.
Another point is that Chinese labor laws are not particularly unusual by international standards. When it comes to labor laws, it's the US that is really bizarre.
The other thing is that laws can sometimes be rather inflexible because the second you put any sort of exception then everyone is going to take advantage of it.
Posted by: Twofish | November 4, 2009 11:16 AM