China HR AuditsEarlier this year I wrote about Beijing’s new labor laws, called the Responses to Several Issues Regarding Application of Law in Trial of Labor Disputes (关于审理劳动争议案件法律适用问题的解答)(“the Responses”). These new laws focus mostly on adjudicating labor disputes more fairly, effectively and consistently. My previous post focused on the new rules on reinstating employees to their old jobs when an employer’s termination decision has been deemed unlawful. A super brief summary is that an employer that unlawfully terminates an employee must reinstate that employee to his or her previous position unless one of a limited number of circumstances exists that render the original employment contract no longer able to be performed. As I noted, one of the “defenses” the employer may raise is that the employee has started working for another employer and it therefore would not make sense to grant the employee reinstatement.

The new rules set out in the Responses were not an attempt by Beijing to make itself an employer-friendly jurisdiction, but rather, to increase uniformity in the law across the different courts within the municipality of Beijing. Nonetheless our China employment lawyers have been seeing employer-friendly interpretations that seem to be bringing Beijing one step closer to Shanghai, which is the most employer-friendly among China’s major expat cities. One example is Article 13 of the Responses, which provides that an employer may terminate an employee who seriously violates labor disciplines or professional ethics, even if the employer’s rules and regulations and employment contracts are silent on the specific employee misconduct. The Responses refer to paragraph 2 of Article 3 of the PRC Labor Law which mandates employees shall comply with labor disciplines and professional ethics. The Responses state that an employee’s serious violation of this requirement will allow the employer to terminate that employee based on paragraph 2 of Article 3 of the PRC Labor Law.

This means employers need worry just a little bit less about listing every single possible punishable offense in their rules and regulations. However, what constitutes a “serious violation” of labor disciplines or professional ethics is unclear and will be determined on a case-by-case basis. What has not changed in Beijing (or even Shanghai for that matter), is that an employer’s termination decision must be reasonable and the employer must prove the reasonableness of the employee’s termination to prevail in a labor dispute. In other words, Beijing is becoming more like Shanghai with respect to employee terminations but it is NOT like the United States which mostly allows for employee terminations at will.

Beijing employers still must proceed with extreme caution in terminating anyone and mutual terminations with settlement agreements and claim releases are still usually the safest route for employers to take. We still routinely see China employers’ unilateral termination decisions stricken because of defects in either their rules and regulations or in how they implemented those rules and regulations. We constantly perform HR audits of foreign companies doing business in China and more than nine out of ten of these companies are clearly not doing enough to withstand an employee termination dispute.

I will be writing more about Beijing’s Responses in later posts so please stay tuned.