China HR AuditIn part one of this series, I explained what has changed in China to make employer compliance — especially for foreign companies doing business in China — so important. In this part two, I explain what our China employment lawyers do in our HR audits to ensure that our clients are in compliance with China’s increasingly complicated, increasingly localized and increasingly important labor and employment laws.

An HR or employer audit will make sure you are complying with relevant employer laws (both national and local) and will reduce your regulatory, liability and lawsuit risks. Moreover, a comprehensive review and a full analysis can give you a clearer picture of what’s going on in your workforce and once you have the big picture, you can then determine (and we help our clients with this) the employer-employee problem(s) you need to remedy first.

We usually begin our HR audits by sending our clients a questionnaire to gain a basic understanding of their employer-employee situation in China.  We first ask our clients to provide the registered entity name and address (in both English and Chinese), as well as the official company registration document (usually: business license) for their China office(s). If you don’t have a China entity, there is no way your direct employment of a China employee is deemed legal under Chinese laws and your problems extend way beyond anything an HR audit can fix. See Doing Business in China with Deportation or Worse Hanging Over Your Head. We also ask our clients for an organizational chart of their China office(s), including the employee count for each location and a brief (1-2 paragraph) narrative describing how their China offices are organized and managed, including how HR matters are handled.

In order to complete a document review, we usually request all written employment documents used in their China office(s), specifically including any of the following:

  1. Documents containing job descriptions, including any postings on internal or external websites
  2. Offer letters
  3. Labor contracts (aka employment agreements)
  4. Rules and regulations (sometimes called an employee handbook or manual)
  5. Travel expense policies
  6. Non-compete agreements
  7. Intellectual property protection and/or confidentiality agreements
  8. Education reimbursement agreements
  9. Bonus agreements
  10. Settlement and/or severance agreements
  11. Other employment-related agreements (including company policies) presented or signed by any company representative, or signed by any employee
  12. Any documents filed with the local labor authorities

We want to review the executed copy of any and every document signed by an employee, including each individual employment agreement, along with any employment-related templates or forms used in their China offices. We ask our clients to advise if any of the above documents do not exist.

We also ask our clients to tell us of any any imminent employment related issues or questions they may have, such as imminent employment contract renewals, employment contract revisions in process, employee departures, and new hires. For example, if their China office is in the process of bringing in any new hires, we want to know about any potentially unresolved issues between the new hire and his/her previous employer. See Hiring Employees in China. Ideally, we would also review the employment documents executed by this person and his/her previous employer, but this is not always realistic.

If applicable, we also want to know how past terminations at the company were handled, and to that end we usually ask for a list of any former employees, including:

  1. their hire date
  2. their last date of employment
  3. whether the termination was voluntary or involuntary
  4. whether any severance payment was made
  5. any documents issued to the employee evidencing how the employment relationship was terminated
  6. a description of how the employer handled the transfer of social insurance and employee files.

Finally, we will want to know any particular HR problems the China office has experienced and any HR concerns they may have.

We then review the materials provided to us and we then prepare a written memorandum identifying any employment issues and providing recommendations and estimated costings for remedying the problems found. The time required to complete the audit depends on when the client responds to our questions and on what we find in the files. We then work with our clients to resolve issues that are raised by the audit.

The above may seem daunting at first, however your HR auditor would essentially handle most of the “dirty work” and it certainly beats being fined, named and shamed or criminally charged!

China employment lawyerThis is the first of a two part series on why it has become so important to comply with China’s labor and employment laws and how best to make sure your company is in compliance. In this first part, I briefly explain what has changed in China to make employer compliance — especially for foreign companies doing business in China so important. And in part 2, I explain what our China employment lawyers do by way of Human Relations audits to ensure our clients are in compliance.

Over the last few years China and Chinese employees have become serious about enforcing China’s labor and employment laws. I defy you to find any foreign employer in China that has not had their employer decisions legally tested in the last few years. And thanks to a new law called Measures of Public Disclosure of Significant Violations of Labor Protection Laws that took effect on January 1, 2017, China employers that violate China’s labor protection laws face the additional threat of being “named and shamed.” The following violations of China’s labor laws may be made public by the relevant labor authorities:

  • Failing to pay “substantial” employee remuneration
  • Violating the laws on working time or rest or vacation and the circumstances are “serious”
  • Violating any child labor laws
  • Failing to pay employee social insurance and the circumstances are “serious”
  • Violating the special rules on protecting female workers and underage workers and the circumstances are “serious”
  • Causing significantly bad social consequences due to violations of labor laws
  • Other serious illegal conduct

Like pretty much everything related to China’s employment laws, enforcement of these naming and shaming measures is going to depend on the locale. Guangdong Province, for example, has been disclosing labor authorities’ rulings on employer violations even before the new law was implemented. According to Guangdong published rulings for the first three quarters in 2016, the first three violations mentioned above: (1) failure to pay employee remuneration, (2) overtime law violations and (3) using child labor have been the most common illegal practices. Labor authorities are cracking down particularly hard on employer failure to pay employee remuneration.

What is considered a “substantial” failure to pay? If you owe 10 employees wages, you will no doubt be penalized and your violation will be made public. If you owe one employee a substantial amount (could be as low as 20,000 RMB), you may be listed as well. In other words, the threshold is not terribly high, especially for foreign companies whose employee wages tend to be higher. And since the labor authorities have gobs of discretion in deciding whom to name and shame, we are expecting foreign companies to get less slack. Egregious violations subject employer companies and the person-in-charge to criminal liabilities. Failing to pay substantial employee remuneration is a crime and will be prosecuted. This is not something you want to get wrong.

So if you employ anyone in China, now is the time for you to get compliant. In tomorrow’s post, I will set out our method for accomplishing that.

Editor’s Note: Whenever we write something related to ensuring compliance with China’s employment laws, companies with no legal entity in China contact us “to get into compliance.” If you have “employees” in China but no company in China, your problems go way beyond what is written above. For how to handle that sort of situation, you should check out Doing Business in China with Deportation or Worse Hanging Over Your Head and follow and read the links in that post. Now!

China employer social insuranceChinese law mandates employers provide their employees certain mandatory benefits, including social insurance. China has five types of social insurance: pension, medical, unemployment, maternity and work-related injury insurance. The specific types of social insurance employers must provide and their contribution formulas vary depending on the employer’s location. Many foreign employers in China do not realize that failing to make full payments on required social insurance gives their employees the legal right to unilaterally terminate the employment agreement without providing any prior notice and then turn around and sue the employer for damages.

Just to make things more complicated for China’s employers, China has several forms of social insurance violations. You obviously violate the law if you don’t pay any social insurance at all, but the violations by foreign employers in China I most commonly see are more subtle and complicated than that. We see violations when employers fail to pay social insurance for the entire term of employment. This violation often happens when the employer thinks it need not pay social insurance during an employee’s probation period. We also see violations involving employers failing to pay for all five types of social insurance. And with rising wages in China, we have lately been seeing a rash of employer problems arising from paying social insurance based on a lower salary than is actually being paid, either because the employer failed to update the salary amount or because it intentionally reported a lower salary so as to reduce its employer contribution. These are the sorts of things we constantly look out for in our HR audits.

Employees may consent to the employer claiming a lower salary but that is irrelevant once caught or even once reported by the employee who consented. In a fairly recent case out of Jiangsu Province, the court reinstated the employer’s obligation to pay for all required types of social insurances at full rates the entire time. I am simplifying the facts for this post, but basically the employee’s monthly salary was higher than 7000 RMB, and the employer only contributed social insurance as though the salary had been 2200 RMB. The employee terminated the employment relationship and sued the employer for severance, arguing that he had been forced to leave his job because the employer failed to pay mandatory social insurance. The case went from labor arbitration, to trial, to appeal and then the employer petitioned for re-consideration by the Jiangsu Province High People’s Court. The employer lost every single step of the way (which really should have been no surprise to any experienced China employment lawyer, sorry!) and was required — among other things — to pay the employee for statutory severance.

Each step of the litigation process, the employer made the following three (futile) arguments. One, the employee never objected to the arrangement of the employer misstating the employee’s salary and therefore underpaid the employee’s social insurance. Two, because the employee never voiced any objection to the social insurance payment arrangement, the parties essentially agreed on a different base for social insurance payments. Three, the employer’s failure to contribute the full amount of social insurance was not the same thing as failing to make any contributions at all, so the employee was not entitled to statutory severance. The Jiangsu Province High People’s Court rejected all arguments and explicitly (and rightly) stated that the laws on social insurance are clear and the employer’s failure to contribute the full amounts based on the employee’s actual wages entitled the employee to terminate the employment contract and receive statutory severance pay from his employer.

To reiterate what is becoming a fairly regular theme of my China employment law posts, most China employment laws cannot be contracted away and an employee’s written consent does not change that. An employee’s written acknowledgement that he or she specifically asked for a particular employment arrangement also does not change that.

As a foreign company doing business in China, you are under a microscope and you will be treated differently than domestic Chinese companies. This means that you are both more likely to get caught on employer violations and more likely to get called out and treated harshly when caught. In our experience, if the labor authorities are not pursuing you for non-compliance, your employees almost certainly will either before or certainly after they leave. This brings me to another point. If your employee tells you she is leaving her employment and alleges she has been forced to quit because of employer wrongdoing (or even just provides inconsistent stories about why she is leaving), you should immediately work on resolving those problems (which is exactly what they are) before she takes you to court.

 

China employment lawChina’s Ministry of Social Security and Human Resources, Ministry of Foreign Affairs and Department of Education recently jointly promulgated new rules for new graduates from foreign countries without working experiences. These rules apply to foreign graduates who obtained their master’s degree or higher education in China and to foreign graduates who received advanced degrees from a well-recognized foreign institution (whatever that means). Those who meet either of the above qualifications must then meet the following additional qualifications to be eligible for China employment:

  • have graduated within the past year
  • be over 18 years of age
  • have no criminal record
  • have good grades (no lower than 80 out of 100 or B/B+) and no record of infractions during school
  • be in good health
  • have a specified employer and a position relevant to the job candidate’s field(s) of study
  • hold a valid passport or any other valid travel document in lieu of a passport

In addition, the candidate’s proposed salary cannot be lower than the local average salary. This will be vigorously reviewed as part of the work permit application.

The prospective employer will need to apply for a work permit for the foreign recent graduate and the authorities will usually require all of the following:

  • the candidate’s resume
  • a proposed letter of intent regarding the employment. This letter of intent must also specify the expected salary.
  • a report specifying why employing this individual is necessary, including certification that the position was advertised to Chinese candidates for at least 30 days
  • a certificate of no criminal record
  • all relevant diplomas
  • a school-issued certificate confirming the potential foreign employee has no record of infractions at school
  • relevant school transcripts
  • a medical certificate showing good health
  • a recent photo (within the last 6 months)

Once approved, the foreign employee can get a China Z work visa. The initial term of employment cannot exceed one year, but employment can then be renewed for subsequent terms of up to five years. Applications will be subject to the applicable national/local quota.

It should go without saying (but since I am a lawyer I am not willing to risk that) that you as the employer should have in place for this new hire all of the usual safeguards you use (or should use) with any of your other China employees, be they foreign or Chinese. In other words, you should at minimum, enter into an employment contract with this new hire.

Local labor authorities are expected to come up with specific measures and local standards in implementing these new rules. Those local standards likely will determine whether this new employment category will become a big deal or rarely be used. I will report back on what I learn from compiling and submitting these applications on behalf of clients.

Terminating a China-based employeeChina employment law. China employment lawyer. is never easy, but unilateral termination is possible without having to pay severance when the terminated employee has committed a serious breach of the employer rules and regulations (aka employee handbook). For your termination to work, you as the employer need a set of rules and regulations that include a legally enforceable provision on which you can rely. “Enforceable” generally means a reasonable provision that does not violate any Chinese laws.

Let’s take absenteeism as an example. This is a fairly straightforward misconduct and there is nothing in the law prohibiting an employer from disciplining an employee for absenteeism. The question is whether your company rule is reasonable. Suppose your Rules and Regulations provide for immediate termination of any employee absent from work for half a day without good reason. Will such a provision be upheld as enforceable simply because it doesn’t violate any laws? Almost certainly not. As with almost everything regarding China’s employment laws, the answer could depend on the employer’s locale. But most China labor boards and courts will refuse to enforce this provision as too harsh. What about three days of absences without good reason? Would that be enough to allow immediate termination? Probably yes, but we still need to check the local rules and check in with the local labor authorities to confirm local practices. The line between what is considered harsh and what is not is often fuzzy, so it is important the termination provisions in your handbook be both clear and enforceable.

But what if you do not even have a set of Rules and Regulations or your Rules and Regulations are silent on absenteeism and you want to terminate an employee who has been absent from work for 3 consecutive days without any justification? Can you discipline or terminate that employee without having to pay any severance? Again, it will depend on where you are, but in most places, the answer is no. If your Rules and Regulations do not list out the misconduct you want to use as your basis for an employee’s termination, you typically cannot terminate the employee on that basis. This is yet another reason why having a set of Rules and Regulations is so important and why it should be an evolving document. If you are finding your employees engaging in misconduct not addressed in your Rules and Regulations, you should update it to add provisions that address that misconduct.

Speaking of how China’s employment laws can vary so much depending on the locale, Shanghai is an employer-favorable outlier to much of the above. In Shanghai an employer that can show its employee acted in bad faith and thus violated his or her basic duties as an employee can usually terminate an employee without justification based on a particular provision in its Rules and Regulations. Despite this Shanghai difference, you still will be on firmer ground for an employee termination that can be justified by a provision in your Employer Rules and Regulations.

China employment lawyerThough most foreign companies doing business in China understand the importance of delicately handling their employee terminations, too many do not understand the need to pay special attention to employee resignations as well. This is because it is not at all uncommon for a Chinese employee to claim that his or her resignation was not voluntary, and that in fact he or she was compelled to leave the company because it failed to follow Chinese employment laws. This means that you as the employer need to be clear on the reason for all of your employee resignations and, more importantly, you need to maintain written records documenting what led to your soon-to-be former employee’s departure.

The first thing you should do with an employee who is resigning is to make sure that his or her resignation letter properly lists the reason for the resignation. If your employee tells you orally or by WeChat or QQ that he or she is leaving for a job with a “better fit,” but the resignation letter lists the reason as “compensation issues,” you have a problem. The Chinese labor authorities recently just made clear their intention to crack down hard on employer failures to pay employees and in response to this, this “bait and switch” resignation letter technique has become quite common. The employee who writes you this sort of resignation letter may turn around and sue you for allegedly due back wages, plus interest, plus penalties, plus attorneys’ fees.

If you get this sort of resignation letter, we suggest that you seek to clarify with your employee the compensation issues he or she is referencing in the resignation letter. Is your employee blaming you for having failed to pay wages on time or in full or both? If you approve your employee’s resignation letter by affixing your company chop to it resignation, you probably just admitted in writing to having violated China’s employee compensation laws. And by doing so, you have just opened your company up to a lawsuit you will almost certainly lose.

To the extent you have any outstanding issues with one of your resigning employees, the best solution is usually to resolve those issues with your employee via a properly drafted, properly executed Chinese language settlement agreement. Settlement agreements in China are like settlement agreements pretty much everywhere else in that the key is that it prevents any future claims or lawsuits. And just to scare you a bit more, our China lawyers are often called in to resolve matters for foreign companies in China with DIY settlement agreements that are either 100% ineffective or even worse, can be used against the foreign company as an admission of wrongdoing in a newly filed lawsuit.

Bottom Line: Treat all employee departures seriously. Document them and, if it makes sense to do so, resolve them with an appropriate settlement agreement.

China employment law complianceChina is serious about improving the situation for its workers. I repeat, China is serious about improving the situation for its workers.

I feel the need to repeat this because many foreign companies doing business in China believe decreasing economic growth will lead the government to favor foreign employers. Wrong, wrong, wrong. Foreign employers do not protest; Chinese employees do, and the Chinese government values stability above nearly all else.

Our China lawyers are seeing this play out in the following ways:

  • China”s government, courts and administrative bodies are getting tougher on foreign companies that do not comply with China’s labor and employment laws. Like pretty much everything else related China’s employment laws, the extent to which this is happening varies by location. See China Employment Law: Local and Not So Simple.
  • China employers that violate China’s labor protection laws will be named “and shamed.” Employers are also getting graded on their compliance with China’s labor and employment laws. I explain what this means below.

Beginning earlier this year, China enacted Measures for Announcing Major Violations of Labor Security and the Measures for Credit Rating Evaluation of Enterprise Labor Security Compliance. These measures evidence the government’s seriousness regarding employment law compliance and they give the government new powers to ensure compliance. According to the Supreme People’s Court, new labor disputes accepted by the Chinese court system totaled 483,311 in 2015, up a whopping 25 percent from the previous year. And I have no doubt that these numbers have been rising in a straight line upward ever since. China employees are getting smarter and more proactive about enforcing their legal rights against their employers, especially as against foreign employers.

The new measures include publicizing “serious” employer violations in newspapers and magazines and on TV. These public announcements will include the employer’s name, address, and registration code, along with the full name of the legal representative or key person in charge and the exact violation and fines or other sanctions imposed. Just imagine what this will do for your company’s reputation and your ability to hire new employees. Will individuals who have been named and shamed want to leave China? Will they have to do so?

In addition to naming and shaming, employers will receive A, B or C grades based on their compliance in various areas, including the following:

Employer grades will eventually be shared with various Chinese government agencies, including (it is widely believed), taxing authorities. In other words, if your company scores a C on its labor compliance, it may find itself at risk in all sorts of seemingly unrelated areas (beyond just fines for labor law non-compliance), such as income tax or environmental compliance. We expect China’s biggest cities with large numbers of foreign employers will get out in front of employer inspections and enforcement first and early.

Your job (pun intended) as a China employer is to get out in front on compliance as well. The best way to do this is to have an independent audit conducted on your employer-employee situation. As recently as a year ago, our China lawyers were rarely asked about “employer audits,” but hardly a month goes by these days without such a discussion. Foreign employers in China are seeing what is going on around them and they are reading the news. They recognize that the Chinese government now realizes there is lots of money to be made by fining foreign companies for failing to comply with China’s employment laws, while improving employee/citizen satisfaction at the same time. Our best employer audit clients are those who have already been fined, sanctioned or sued for employer violations. Our second best employer audit clients are those who know of someone in their own industry who has already been fined, sanctioned, sued or shut down over employment law compliance issues.

What exactly is an employer audit? An employer audit is little more than a review to make sure a company is complying with relevant employer laws (both national and local), all done with an eye towards reducing the company’s regulatory, liability and lawsuit risks. The nature of this review can range from focusing on one or a few employment law or compliance issues to a full on legal analysis of pretty much everything related to the company’s employer-employee relations. The review can range from just reviewing documents off-site, to one or more bilingual Chinese-English lawyers going to the employer’s facility(ies) for an on-site document review and to interview key personnel.

Employer audits begin with a review, but they virtually always continue with drafting or revising company documents and contracts and meeting with Chinese government officials to remedy problems found. There is no point in having your China employment law problems diagnosed without your then doing whatever you reasonably can to remedy them. See this Lifelock advertisement for a different (and much funnier) take on what I am talking about here.

Bottom Line. If you employ anyone in China, now is the time for you to get compliant. Compliance with China’s myriad and confusing and heavily local employment laws and regulations is no fun at all, but it sure beats your being named and shamed or fined or shut-down for non-compliance.

China employment lawyerHiring employees in China (the right way) is almost as difficult as terminating them. If you do not do your due diligence on your new employees, you find yourself losing lawsuits.

Consider the following scenario, based on an actual case:

New Employer wanted to hire Employee. Employee was still working for Old Employer, but he assured New Employer that all he had to do to leave Old Employer was to give Old Employer 30 days written notice. Employee then informed New Employer that Old Employer was angry with him for having left his Old Employer and was demanding he pay Old Employer damages for the early contract termination, but because it had been 30 days since he had given Old Employer his notice, “there should be no problems.” Employee also proposed a “perfect solution” to New Employer: he would sign a letter of guarantee to New Employer stating that he (Employee) would be solely responsible for any damages payable to Old Employer and expressly providing that New Employer would not be liable for any such damages.

New Employer was in a rush to hire an employee with the Employee’s particular skill-set so New Employer went ahead and hired Employee right after Employee executed the guarantee letter. About a month after Employee started working for New Employer, Old Employer sued both Employee and New Employer. Employee and Old Employer had an education reimbursement agreement that required Old Employer pay a substantial amount of money for Employee’s extensive training in Europe, and Employee had agreed to a 5-year service period in return for this European training. Employee was nowhere near to completing his contracted-for five years of service when he left Old Employer to be hired by New Employer.

At trial, Old Employer was able to prove everything, including producing actual receipts for the training provided to Employee. The court deemed the education reimbursement agreement valid and found New Employer liable for the damages incurred by Employee’s breach of contract. In other words, New Employer had to pay for having failed to conduct due diligence on Employee before hiring him. Even if New Employer could pursue Employee for all the money it paid Old Employer, it still is itself on the hook for the liability and it still had to pay its own lawyers to defend against the lawsuit. It also took a public hit to its reputation.

This case (and various other cases) make clear the importance of ensuring that your China hires are not joining you with similar legal baggage. Non-compete agreements are the most common “baggage” of which you should be aware. There are plenty of other employee agreements that can be important as well, such as the education reimbursement agreement in the case above. We do not recommend our clients use private investigators to investigate their potential new hires as that is generally illegal in China. We instead advise they request their potential employees provide such agreements before making any hiring decisions and that they also check with the potential hire’s previous employer, after first securing the potential employee’s consent to do so. It is, of course, entirely at the discretion of the previous employer to provide or not provide information on the previous employee, but in our experience, they usually will. It also is a good idea always to check the proof of termination of employment relationship. If the potential employee does not have this proof or is taking too long to get it, there is probably a problem. The failure to get this proof quickly likely means the potential employee did something wrong or is subject to some sort of contractual restriction. And when there are red flags, you should consider not hiring that person.

It also makes sense to insert a provision in your employment contracts with new hires that makes clear that a condition of employment is that your new employee has no restrictions of any kind from its previous employment. Note though that for this sort of provision to be effective you must set a probation period, and not a super short one. Then if the employee fails to meet the conditions of employment, he or she can be terminated before the end of probation period. Just be sure you have a well-drafted employment contract, well-drafted Employer Rules and Regulations, and that you document everything. 

Slack off in making a new hire at your own peril.

China employment lawyerChina’s labor laws require employers provide their employees paid vacation days based on their total years of service. Employers are legally obligated to ensure their employees take their vacation days and to the extent the employer fails to do so, it must pay the employee an additional 200% of her normal wages for each unused vacation day.

The law also requires China employers pay their employees for unused vacation days at the time of termination. One question our China employment lawyers are often asked is whether an employer has the same payment obligation when it unilaterally terminates an employee for employee breach. The governing law is silent on this. But since it says that at the time of termination, an employer must pay employee compensation for unused vacation days, a strict interpretation would dictate such a payment must be made. As is typical of almost everything China employment law related, the real life answer depends on where the employer is located and even at which court the labor dispute will be adjudicated. For example, the general view of the Shanghai courts is that an employee terminated for her own fault is not entitled to payment for unused vacation days, because she is at fault for being terminated before she could use all of her vacation days.

This though gets complicated when the unused vacation days are spread among several years. For example, suppose an employee terminated in 2017 due to employee breach did not use any vacation days in 2017 prior to her termination. Assuming the employer’s unilateral termination decision was held to be lawful, the employer will probably not be required to pay the employee for unused vacation days in that year. But suppose that same employee was never paid for unused vacation days in 2016 either. In that case, the employer very well may be required to pay for unused vacation days — assuming the employee did not voluntarily relinquish her vacation time via a clear writing and the statue of limitations has not otherwise run out against the employee.

Employees usually do not pursue labor arbitration just to try to collect money for a few unused vacation days. These claims typically show up as part of a claim challenging the lawfulness of the employee termination. So this is yet another reason why unilateral termination can be so problematic. Employers that unilaterally terminate their China employees often find themselves caught up not just in one lawsuit but in several proceedings—labor arbitration, trial, appeal, and sometimes a retrial and in most of those proceedings, it has to defend itself against not just its termination decision but also against multiple other ancillary claims. “Mutual” terminations with a clear written settlement agreement avoid the employer having to jump (stumble) through so many hoops.

Also, like most aspects of China employment law, vacation time is not an area where it makes sense getting creative. For example, don’t just assume that a provision in your rules and regulations stating that your employees forfeit their unused statutory vacation time by not taking that time. Think twice before you ask your China employees to give up something to which they are legally entitled. If you are unable to secure a separate written agreement (in Chinese) from your employee saying she voluntarily chooses not to take her vacation time (who would, really?), you must pay her for those days or find a way to let her take the paid time off.

Last but not certainly least, we also are sometimes asked whether employees under the flexible working hours system are entitled to statutory vacation time just like employees under the standard working hours system. The answer to that is a resounding yes.

 

 

China employment lawyers
Do not flick off your China employees!

The old saw, “hire slow fire fast” does not work for China. This is because China employee terminations require far more careful legal handling than in the United States. When it comes to employee terminations, China is still very much a Communist country. Think France not the United States. I estimate botched terminations cost foreign companies on average around five times as much as a well-handled termination that includes severance, and yet our China employment lawyers spend more time trying to fix badly done terminations than providing legal consulting on how to achieve one correctly.

This is largely because in disputes arising from an employee termination, the employer bears the burden of proving its termination was both handled properly and justified. This means that for an employer to prevail in a termination dispute, it must have the evidence/records to support the termination.

A recent employee-employer case out of Shenzhen nicely highlights the importance of the employer have good evidentiary support, and what can happen to an employer lacking that support. The facts of this case are not terribly complicated and I have simplified it even more for this post. A Shenzhen employer issued a written notice to an employee immediately terminating the employment relationship. At trial, the parties did not dispute the termination date (even though this issue is often contested) or that the employee actually received the termination notice (even though this is often contested by the employee). The termination notice essentially said nothing more than “we are unilaterally terminating your contract.” The employer contended that it had fired the employee for a series of breaches of the employer rules and regulations and alleged it had orally explained the reasons for the termination to the employee when it delivered the employee’s termination notice.

The Shenzhen intermediary court basically said that the employer had failed to specify the grounds for termination when it served the employee with the termination notice because oral communications of those grounds do not count. Since the employer never gave its terminated employee the grounds for termination, the court deemed the termination to have been unlawful and it awarded the employee the full amount of statutory severance, doubled.

Complain all you like about this court decision, but recognize that if you should find yourself in the same situation as the Chinese employer who lost this lawsuit, you too will probably lose 999 times out of a 1000. This court handled everything “by the book,” which is 100% par for the course in China employer-employee disputes. The employer lost because it got lazy and failed to do something the law required it to do and because it had no good evidence that it had done it. Had this employer merely provided its employee with a written explanation for the termination and made the employee sign for having received that written explanation (it does not hurt to videotape the providing of notice), it no doubt would have prevailed. In other words, all the employer needed to have done was to have strictly complied with the law.

All the employer needed to have done was to have fired slow, by first determining all necessary steps to a proper termination under all applicable China and local laws, and then done all that it needed to do to act accordingly.