Header graphic for print
China Law Blog China Law for Business

When In China …. China Labor Law Controls

Posted in Legal News

Just received an email from a friend stating/asking the following (note that I have changed some elements of the email to strip it of any even potentially identifying information):

I am heading off again to work for a few years at our China Rep Office.  My new employment contract with the head office says that [foreign country] law will apply.  Will it?  And what if there is a conflict between [the foreign country] law and China’s laws, which will control?

We get this question far too frequently and we have seen way too many employment contracts written as though U.S. law (it was actually not a U.S. company in the above instance) applies all around the world. The reality is that if you are working for a Chinese company in China (be it a Rep Office, a WFOE, a JV, or whatever), Chinese law is going to apply to your employment relationship.  I know of no country that would allow otherwise.  I mean, imagine if a United States subsidiary of a Pakistani company were to claim in a U.S. court that it should not be required to pay overtime because their contract with the employee calls for Pakistani law and Pakistani law does not provide for that, or that it can discriminate against women because there is no such law prohibiting that in Pakistan?  Even if the employee at issue were a Pakistani citizen, there is absolutely no way in the world a U.S. court would go along with any of those arguments.  In fact, the argument is so bizarre I am not even aware of anyone ever having made it.

Any employer-employee relationship between a Chinese company and an employee working in China is going to be governed by China law, no matter what the contract says.  So in China there would be no conflict of laws because Chinese law would simply apply. This is why we also advocate for drafting China employment contracts and employee manuals with Chinese as the official language.  Chinese courts and Chinese administrative bodies are the only rightful jurisdiction for China labor law disputes stemming from employment in China (yes, this is true for expats too) and so it only makes sense to have these documents in the language they are sure to understand.

Here is a more interesting/complicated related question: what would happen if a U.S. company had a contract with a U.S. citizen and that contract provided that the U.S. citizen would go work at the U.S. company’s WFOE for a few years and that contract called for application of U.S. law.  Now as I have said above, no Chinese court would apply anything but Chinese law to this relationship, but what would happen if the U.S. citizen were to flip around and sue the U.S. company in a U.S. court for failing to abide by some particular U.S. law?  I do not know the answer to this question (any U.S. employment lawyers out there), but I can tell you that if it were to benefit my client, I would argue that Chinese law applies and I think I would prevail on that.  But, I can also tell you that if it were to benefit my client, I would argue that U.S. law applies.

Anyone know how a U.S. court would rule?

  • rzehbe

    It depends. The general rule seems to be that “[t]he application of U.S. federal employment law operates under the general presumption that U.S. laws will not be presumed to apply beyond U.S. territorial jurisdiction unless the U.S. Congress clearly has intended such extraterritorial reach. E.E.O.C. v. Arabian American Oil Co., 499 U.S. 244 (1991).”

    There should be circumstances where U.S. employment laws would apply, especially in the case of a U.S. citizen employed abroad by a U.S. company. For instance, if a U.S. citizen employed outside the U.S. by a U.S. company were to sue U.S. company in U.S. court for violations of Title VII (Anti-Discrimination), Title VII would very likely apply. The same would hold for the Age Discrimination in Employment Act and the Americans with Disabilities Act. On the other hand, the Equal Pay Act is not applied extraterritorially.

    More on this issue and other U.S. laws/extraterritorial application can be found here: http://www.proskauerguide.com/law_topics/25/III