China employee terminationWhen a China employer and one of its employees end their employment relationship, one of the most important things the employer must do is provide the former employee with a Proof of Termination of Employment Relationship document. This employer obligation is stipulated in the PRC Labor Contract Law (and in many local regulations as well). The Law says that if you as employer fail to perform this obligation, you can be subject to both administrative corrective orders and to damages.

Let’s consider an actual recent case in Beijing (simplified a bit for this post). An employee and employer entered into a contract for a 3-year term and it came to a natural end on May 3, 2014. Employee’s base salary was 16,000 RMB/month. The parties terminated the employment relationship on May 5, 2014. Employee alleged that Employer refused to provide a Proof of Termination of Employment Relationship document. Employee began working for a different employer (Employer B) on May 7, 2014. Due to the Employer’s failure to provide a Proof of Termination document, Employer B issued a termination notice on May 27, 2014 and the parties formally terminated their contract on May 30, 2014. On July 29, 2014 Employee received a job offer from a prospective employer. However, on August 8, 2014 Prospective Employer provided a notice of its decision not to extend employment due to Employee’s failure to provide a Proof of Termination of Employment Relationship document. Employer B paid Employee 22000/month and Prospective Employer offered the same rate.

Employee brought a labor arbitration claim and Employer was ordered to provide a Proof of Termination document. There was some disagreement as to whether Employee contributed to the non-issuance of this document. Employer still refused to provide a Proof of Termination document. Employee sued in court and asked for RMB 113,034.48 in damages or almost 6 months of salary.

Beijing Chaoyang District People’s Court sided with Employee and found the Employer’s failure to provide a Proof of Termination document caused Employee damages but did not agree that the amount of damages should be RMB 113,034.48. Without providing much analysis the Chaoyang court awarded the employee RMB 40,000. Employee appealed and the appellate court (Beijing Third Intermediary People’s Court) affirmed the lower court’s decision. It held that the damages Employee claimed were not actual, definitive, or inevitable losses and after considering the total circumstances of the case and the parties’ fault, the lower court’s decision was appropriate.

Bottom line: Perform your employer obligations at the time of employee termination, including most importantly, issuing your terminated employees a Proof of Termination of Employment document.

 

China employment contractEmployers in China are presumed to have greater bargaining power than their employees and therefore China’s labor laws tend to provide China employees with substantial protections and China courts typically favor employees in disputes with their employers, especially foreign employers. If you as a foreign employer want to avoid legal problems, you should strive to hew to the employment laws, especially when it comes to drafting your employment contracts.

China employment contracts are not a time to get creative and a recent court case out of Guangdong confirms this. In this case, an employee and a Guangzhou-based employer entered into an employment contract for a fixed term (more on this later). The parties explicitly agreed on a contract damages provision stating that if either party terminates the contract without good cause before the end of the contract term, the breaching party shall pay the other party 200% of the employee’s salary for the remainder of the term. This provision was intended to be effective both ways: it did not just apply to the employer.

The contract was properly executed and the employer eventually terminated the employee before the end of the term — about four years into employment, with about six years remaining on the term. The employee then sued the employer for double damages for unlawful termination and for the contract damages per the employment contract: 200% of salary for the six years remaining on the term. The employer argued that it was entitled to damages because the employee had deceived them in securing his job by falsely claiming to be a foreign expert.

The appellate court ruled that Chinese law prohibits imposing a penalty on employees unless an exception applies, which it rarely does and it did not in this case. The appellate court also upheld the damages provision as applied to the employer and held the employer liable for the contract damages. The court ruled that the damages provision as applied to the employee was illegal whereas that same provision as applied to the employer did not violate any laws. The employer therefore owed the employee 200% of his salary.

In reaching its decision, the court noted that China’s labor laws allow for penalties against employees in only the following two circumstances:

  • Pursuant to an education reimbursement agreement, an employer can require its employee reimburse the company for the education expenses if the company pays major expenses for an employee’s employment-related education or training, but the employee quits the company upon completion of the training.
  • Pursuant to a non-compete agreement, an employer can require an employee pay a penalty to the company if the employee violates any non-compete terms by, for example, working for a competitor after leaving employment.

Except for the two circumstances above, an employer and an employee may not agree on any provision that requires the employee pay a penalty to the employer.

Bottom line: Chinese laws are strict about when an employer can impose a penalty on an employee and employers typically cannot contract around China employment laws. For these reasons, it rarely makes sense to draft an employment contract with provisions that purport to do otherwise.

China cybersecurity lawsThe PRC government promulgated its Cybersecurity Law on November 7, 2016, with an effective date of June 1, 2017. To say that foreign tech firms are concerned about the impact of this new law on their business in China would be an understatement. In addition to tech firms, our China lawyers have received a steady stream of questions from clients with China WFOEs who are concerned about an entirely different set of issues. Article 35 of the law states that “personal information and other important data gathered or produced by critical information infrastructure network operators during operations within the mainland territory of the People’s Republic of China, shall store it within mainland China.” Our clients keep asking what this will mean for them.

The surprising answer is not much.

Any company that operates a WFOE in China collects personal information about its employees. China’s new cybersecurity law defines personal information as “all kinds of information, recorded electronically or through other means, that taken alone or together with other information, is sufficient to identify a natural person’s identity, including, but not limited to, natural persons’ full names, birth dates, identification numbers, personal biometric information, addresses, telephone numbers, and so forth.” Certainly, the standard information any company maintains on its employees will qualify as personal information under China’s new cybersecurity law.

In the EU and various other jurisdictions, such personal information must be maintained within the jurisdiction and there should be no transfer of such information across borders. This causes many problems for companies that seek to manage an international workforce through a central location.

So what clients keep asking our China attorneys is whether China’s new cybersecurity laws will establish the same sort of protective system within China? The simple answer is that it will not. China does not have a comprehensive law or regulations relating to the collection, processing or transfer of employee data gathered by a WFOE or other business entity in the normal course of its China business operations and China’s new cybersecurity law does not change that situation.

The cybersecurity law specifically provides that its personal data maintenance and collection rules apply only to critical infrastructure network operators. Network operator is defined as “network owners, managers and network service providers.” In more general terms, this means telecom operators and Internet ISPs. The requirements do not apply to the China business operations of normal private businesses with respect to their normal record keeping requirements for their employees.

Even though nothing has legally changed in China, it is still best practice for foreign companies employers in China to follow the basic rules the PRC government imposes more generally in the consumer context on the collection and maintenance of personal information, including the following:

1. Be sure the disclosing party (your employee) is aware that the company maintains personal information. The company should have a written policy (in Chinese and in English) on how long that information is maintained and that policy should be revealed to the employee.

2. You should not collect more personal information than necessary.

3. You should maintain the confidentiality of the personal information you collect and maintain. That means you should limit internal access to that information and you should take proper security measures to prevent a data breach of the company’s online systems.

4. You should not sell or otherwise transfer the personal information to any third party. Stated more bluntly, do not sell employee personal information to marketers or spammers.

China employment lawI have been writing a lot lately about various myths regarding specific aspects of Chinese employment law. The below posts — all written this year — set forth many of those myths:

But I have yet to write about the most common China employment law myths overall. Until now.

Myth 1: A China employer can hire an independent contractor to avoid having to hire someone as a regular employee and have to pay all kinds of employee benefits. Though retaining someone as independent contractor is not entirely impossible, it can only be done under very limited circumstances. First, you need to consider the tasks of the person you are seeking to hire. For example, if you are a software company and this person is expected to work as a software design engineer, you probably need to retain this person as an employee. If your “independent contractor” is being managed according to your rules and regulations and all other company policies, it is very likely that such person will be deemed an employee for purposes of Chinese labor law. Moreover, if you wish to have full control over such person’s behavior, you might as well hire him/her as an employee in the first place. This is not something you want to get wrong and yet we constantly see foreign companies get this wrong.

Myth 2: In China, employment at will is possible, provided there is a well-crafted contract in place. Wrong. China is not an employment-at-will jurisdiction. Nonetheless, China employees can leave pretty much at any time for pretty much any reason so long as they give advance notice (generally speaking, 3 days notice during the probation period and 30 days written notice once past the probation period). In some Chinese cities (but not in others), with a well-crafted employment contract in both English and Chinese, it is possible to have an at-will arrangement with a non-Chinese employee.

Myth 3: A China employee on an open-term contract cannot be terminated. Ever. You cannot terminate a lifetime employee without cause just like generally you cannot terminate an employee on a fixed term contract without cause. Having an open-term contract means the employee has much more leverage when it comes to negotiating a mutual termination and that you will likely need to pay much more to dismiss the employee than to an employee on a fixed term contract. However, such employee is not untouchable. For example, if he or she has materially breached your rules and regulations, you may have valid grounds to terminate.

Myth 4: Employer rules and regulations are just a formality. I cannot stress enough the importance of having a set of English and Chinese rules and regulations that work for China. If you don’t have one, you should get started on drafting one NOW.

Myth 5: Overtime rules are not enforced and I know this because most other employers in my locale don’t follow the overtime rules. Wrong. The general direction in China is toward more enforcement and furthermore “foreign” employers are always going to be under closer scrutiny than their Chinese counterparts. Most importantly, even if the local human resources and social security authorities are not cracking down on illegal practices in your area, this does not mean your employees will not pursue you in labor arbitration for overtime.

Myth 6: We acknowledge our sales people are employees and we give them all social insurance and other employee benefits but because they get so much in commissions, we don’t need to provide them with any base pay. Wrong. If someone is hired as an employee, the safest route is to pay him or her a monthly base salary. Generally speaking, the absolute minimum is the local minimum wage standard. It usually does not matter that the employee’s average monthly pay is a lot higher than the local minimum. Where there is no base pay each month, the argument that the employee made a ton during the busy season is likely to fail and you will be deemed to have violated minimum wage laws.

 

China Legal HolidaysLike pretty much everything else related to China employment law issues, the rest (or not) schedule for national holidays is a bit more complicated than one would think. For example, employees get a couple of long breaks but usually have to make up the time on a weekend, so the actual days off are shorter than they at first appear. This concept of “making up the time for a legal holiday” (节假日调休) for purposes of having a (superficial) long break is unique in China and as with so many other aspects of China employment law, is quite different from the U.S. or the European systems.

Per the PRC State Council’s recent notice, the national holidays for 2017 will include the following: New Year’s Day, Chinese New Year, Tomb sweeping day, Labor day, Dragon boat festival, Mid-autumn festival and National day. Specifically:

  • New Year’s Day: A one-day holiday. As January 1 falls on a Sunday, China employees will get January their day off on Monday, January 2. 
  • Spring Festival (aka the Chinese New Year): A three-day holiday, i.e., the first three days of Chinese New Year according to the lunar calendar. China employees will get a long break: from January 27 through February 2, however, they will have to work on January 22 (Sunday) and February 4 (Saturday), unless their employers provide a more generous time-off policy (e.g., per the employer rules and regulations).
  • Tomb sweeping day: A one-day holiday and the specific date will be according to the lunar calendar. China employees will get April 2-4 off, but will have to work on April 1st (Saturday).
  • Labor day: A one-day holiday: May 1st. Employees will get 3 days off: April 29, 30, May 1st. Note however April 29 and 30 are rest days so it’s really just one day off.
  • Dragon Boat Festival: A one-day holiday and the specific date will be according to the lunar calendar. Employees will get May 2829 and 30 off, but will have to work on May 27 (Saturday).
  • Mid-Autumn Festival: A one-day holiday and the specific date will be according to the lunar calendar) (Three days—October 1, 2 and 3). This Festival will be combined with National Day in 2017, meaning that China employees will get a long break from October 1 through 8, but will have to work on September 30 (Saturday).

Bottom line: As a China employer, if possible, do not have your employees work on a legal holiday.

 

China employee benefits
China employee benefits: the myths.

China employers must provide certain mandatory benefits to their China employees (both Chinese and expat), and failing to do so can expose them to serious risks. In this post, I discuss six common myths about my firm’s China lawyers often hear or get asked about regarding mandatory employee benefits.

Myth 1: Employers need not pay into an employee’s social insurance during the employee probation period. Wrong. Your obligation to contribute to your employees’ social insurance starts when the employment relationship commences. Do not delay setting up your employees social insurance account or completing the transfer from the previous employer.

Myth 2: Employers need not provide any social insurance benefits to part-time employee. In most places in China, employers are required to pay for a part-time employee’s occupational injury insurance. Whether or not an employer is able to enroll such employee in just this one type of social insurance, rather than the full set of mandatory social insurance program, depends on your locale. For how virtually everything regarding China employment law is localized, check out China Employment Law: Local and Not So Simple.

Myth 3: An employer registered in City A with an employee who resides and works in City B can pay the employee cash to cover the employer’s portion of social insurance contributions. Wrong. Very wrong. The social insurance payments must be made under the name of the employer or, to the extent permitted under the law in the relevant locale, under the name of a qualified HR company. Either way, paying an employee (full-time or part-time) cash is never the right way to go. Note that hiring employees in other cities implicates company formation issues and should always be coordinated with the human resource and social security bureaus of both the city in which your company is located and the city in which your not-so-local employee is located and companies that get this wrong usually pay a very steep price.

Myth 4: Employers decide whether to make housing fund contributions for their employees. Issues regarding employee housing fund contributions do not come within the jurisdiction of the local human resource and social security authorities, but rather are overseen by a different agency. However, this does not mean you as the employer can simply opt out of this program. You must make such contributions for your China employees and if you do not know what these contributions are all about, you should find out.

Myth 5: Employers need not pay into a non-Chinese employee’s social insurance fund. That depends. In some cities (Beijing and Shenzhen, for instance) you cannot contract out of such obligations for non-Chinese employees. However, in other cities (Shanghai, for example) employers can enter into a contract with their foreign employees that relieves them out of having to contribute social insurance for their foreign employees. Note though that this contract has to be a valid and enforceable one under Chinese law and our China attorneys rarely see one that qualifies.

Myth 6: Employers can stop paying social insurance for an employee on statutory sick leave. Wrong, wrong, wrong. Statutory sick leave is defined as a period when the employee gets to take time off to recover from a non-work related injury or illness without having to worry about being unilaterally terminated by the employer. The employment relationship is not severed by such a leave and that means you as the employer must continue making all required contributions during your employee’s statutory sick leave.

For more China employment law myths, check out Six Myths About China Employee Probation, Six Myths About Working Hours and Overtime, and Six Myths About China Employee Non-competes.

china employment lawyer

Earlier this year, the PRC Ministry of Human Resources and Social Security (“MOHRSS”) issued a set of Measures for Evaluating Compliance and Integrity of Employers’ Labor Protection (《企业劳动保障守法诚信等级评价办法》). These Measures are set to take effect on January 1, 2017 and will apply to all China employers, domestic and foreignSo if have employees in China and you have not already done so, NOW is the time to ask yourself, do you feel ready?

Under these new measures all employers in China will be evaluated annually, and based on their legal compliance and any violation, they will be divided into 3 categories: A, B and C, with C being the lowest category. In conducting its evaluations, the relevant human resources and social authorities will consider all of the following:

  • whether the employer has formulated its internal labor protection rules and regulations
  • whether the employer has executed employment contracts with every employee
  • whether the employer is in compliance with labor dispatch laws
  • whether the employer is in violation of the child labor laws
  • whether the employer is in compliance with laws regarding female workers and underage workers
  • whether the employer is in compliance with laws on working hours, rest time and leave
  • whether the employer is in compliance with laws regarding employee remuneration and meets the applicable minimum wage standard
  • whether the employer contributes all mandatory social insurance
  • whether the employer is otherwise in compliance with labor protection laws and regulations

For employers in Category A, the frequency of administrative checks by the local labor authorities will be reduced, while the frequency of inspections for employers in Category B will be increased appropriately (whatever that means) and employers in Category C will become subject to the most scrutiny. Also for employers in Category C, the person-in-charge will be required to schedule meetings with labor authorities to be reminded of the importance of following labor protection laws. The evaluation results will be kept on file for a minimum of three years. You do not want to find yourself in Category C, or even B!

Also taking effect on January 1, 2017 is MOHRSS’ Measures of Public Disclosure of Significant Violations of Labor Protection Laws (《重大劳动保障违法行为社会公布办法》). Under these Measures, if a China employer commits a serious violation of Chinese labor and employment laws, it may be made public by the labor authorities. The following rulings/decisions on employer violations of China’s labor laws may become public:

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

When publishing these labor law decisions, the following information will be released to the public (with exceptions for national security, trade secrets or individual privacy):

  • The employer’s full name, integrated social credit code/registration number, and address
  • The name of the legal representative or the person-in-charge
  • The main facts of the violation
  • The decision made by the authorities

This information will go into the employer’s credit file on integrity and legal compliance and may be shared with other governmental departments. China’s local human resources and social security bureaus will be responsible for clarifying and implementing these rules.

Bottom Line: Effective on the first day of January 2017, two important sets of rules will be implemented by MOHRSS to deter employers from violating China’s labor and employment laws and regulations. Go ahead and call these legal changes the China employment lawyers full employment act (as a couple of our clients already have), but just make sure you are in compliance and you stay in compliance,

NOW. 

 

China employment lawyer There are many issues and many myths related to China employee non-competes, in large part because this is a complicated and very localized aspect of China employment laws. In this post, I set out the following six common myths I and the other China lawyers at my firm often hear from our clients regarding China non-compete agreements:

Myth 1: A China employer can have a non-compete with anyone. Non-compete agreements are permissible with only senior management, senior technicians and other personnel who have a confidentiality obligation. The last catchall category is not to be confused with “any employee.” If you enter into a non-compete with an employee that did not have access to your confidential information (note that such information must be information the employee gained from working for you), your non-compete will likely be deemed unenforceable. Also, note there is no legal requirement that you enter into a non-compete agreement with all of your employees.

Myth 2: A China employer can set the non-compete period for as long as it wishes. Wrong. The maximum period for an employer to prevent an employee from competing is generally two years after an employee’s departure.

Myth 3: A China employer can terminate a non-compete anytime it wants, because it is releasing the employee from non-competition restrictions. Wrong. Once signed, a non-compete becomes a legally binding agreement on both parties. You cannot walk away from a non-compete without having to pay a penalty to the employee. Note also that some locales in China also require that you pay any promised employee non-compete compensation through the end date of your non-compete agreement, no matter what.

Myth 4: A China employer can walk away from a non-compete that is silent on the payment amount for non-competition during the non-compete period because such an agreement is void. Not sure why, but our China attorneys have been hearing this one a lot lately. Even though China’s national employment laws do not explicitly address this issue, generally speaking, if an employee can show he or she performed on the non-compete obligations, the court will deem it unfair to declare the non-compete agreement invalid. We are seeing local differences on this issue. Some places (such as Shanghai and most parts of Beijing) believe that the lack of non-compete compensation is a “flaw” that can be fixed by the parties and therefore does not automatically render the entire agreement void, while others hold the opposite position. For those places that do not believe such a non-compete agreement is automatically void, 30% of the employee’s average monthly salary in the 12 months before termination (or the local minimum wage) will generally be applied.

Myth 5: The contract damages amount will be enforced because a contract is a contract. It usually makes sense for a China employer to set a contract damages amount in its non-compete agreements to both deter its employees from breaching the agreement in the first place and to provide a concrete monetary amount when it comes to enforcement. However, for either of these things to be true, you need to set this amount carefully; it should be neither too high nor too low. If a court views your contract damages amount as significantly disproportionate to the non-compete compensation you have been paying your former employee, it will likely ignore your set amount entirely. 

Myth 6: If your China employee breaches its non-compete agreement during the term of his or her employment, you as the employer have free reign to penalize this employee. Wrong. Generally speaking, regardless of the circumstances of an employee’s departure, you as the employer must (among other things) provide your soon to be ex-employee with a Proof of Termination of Employment Relationship document. This is a right afforded to every employee by China’s labor laws. You should think long and hard before you hold off on performing any of the myriad legal obligations you owe to your employee just because you believe that employee has breached a contractual obligation he or she owes you.

Bottom line: 1. Choose with whom you will be entering into a non-compete wisely. 2. Craft your non-compete agreements wisely. 3. Enforce your non-compete agreements wisely. 4. Ignore the myths.

For more China employment myths, check out Six Myths About China Employee Probation and Six Myths About Working Hours and Overtime.

 

 

China labor lawyerWorking hours for most China employees are usually determined under China’s “standard working hours system,” and in most places in China, that means a 40-hour work week — 8 hours a day and 5 days a week. This system does not allow for a lot of flexibility since work done outside the normal working hours is considered overtime that obligates the employer to pay overtime. I am finding that foreign employers are often (virtually always, actually) confused about China’s working hours and they often believe (and repeat to me) the following six myths regarding working hours and overtime in China, all of which are daily costing foreign companies extra money in China.

Myth 1: China’s overtime rules are similar to the exempt employee rules in the United States. Wrong. For example, it does not matter how much your China employee gets paid. Your China employee might be making three times the average salary in the city where you are located (this amount is a common threshold for a number of things under Chinese employment law). Generally speaking, you must pay all overtime.

Myth 2: Managerial employees are exempt from overtime pay. If a manager works under the standard working hours system overtime incurred must be paid. If your manager(s) have been approved to work under an alternate working hours system (usually the flexible working hours system) you can avoid paying overtime on most occasions, except for (and this depends on the locale!) time worked on a legal holiday such as New Year’s day, Chinese New Year, National Day, etc.

Myth 3: An employer and employee can contractually agree to have the employee work under an alternate working hours. Nope. Most places in China require prior government approval for an employee to work under a non-standard working hours system. The employee’s written consent alone is usually not sufficient.

Myth 4: Comp time can negate overtime obligations. Not necessarily. This depends on the employee’s situation and the locale in China. If an employee working under the standard working hours system stays beyond the normal 8 hour work day, you must pay overtime, which is usually 150% of that employee’s normal wage. But in most locales in China, an employee who works during a weekend can be compensated with comp time. However, if you are unable to give the employee comp time (perhaps because you mistakenly failed to do so or because you simply were too busy), most locales in China will require you pay 200% of the employee’s normal wage or 300% if the work was on a legal holiday.

Myth 5: An employee on an alternate working hours system needs never be paid overtime. Be careful. Again, this — like pretty much everything else employment related in China, depends largely on the locale. Most places in China require the employer pay even alternate hour employees overtime for time worked during a Chinese legal holiday. Also, we cannot even count the number of times a foreign employee has insisted that such and such employee is under the alternate working hours system and one of our China labor lawyers has discovered that was never the case or is no longer the case due to a failure to timely renew.

Myth 6: The employee (not the employer) is required to keep track of time for overtime pay. Tell this to the many foreign employers who thought this was the case and then ended up having to pay all sorts of back overtime pay when the employee has left, to avoid getting sued for having done so. You as the employer need to document what is going on with your employees on overtime and just because an employee has not yet hit you up for it, does not mean you don’t owe it. Your rules and regulations should contain a section setting out your company’s overtime policy, including your internal procedures your employees must follow for securing approval before incurring overtime and your procedures for reporting such overtime.

Bottom line: Make sure you understand the national, the regional, and the local laws that apply to overtime in the city in which you are located.

For more China employment myths, check out Six Myths About China Employee Probation.

China employment lawyersAs the end of the year is fast approaching, regardless of whether you are conducting a year-end employer-employee audit, now is a good time to update and refine your China employee rules and regulations. As this is usually (and should be) a much longer document than your employee contracts, doing this will probably take a fair amount of work. To make this task just a little bit easier, I suggest you focus on the following eight basic things to do to whip your China employee rules and regulations into shape for the new year:

  1. Make sure the Chinese version of your document is in tip-top shape. Far too many companies have a non-lawyer translate their rules and regulations into Chinese and far too many companies therefore have Chinese language rules and regulations that are not appropriately written for a court or other tribunal. Make sure this is not the case for yours and while you are doing so, check it for typos, etc. You should also make sure that your Chinese version lines up with your English version. For example, if your English version says “do not”, and your Chinese says “do,” you know there is something wrong (I see this sort of basic error all the time when conducting employer-employee audits).
  2. If your company’s rules and regulations are in Chinese only, you really should have an English translation done. You as the employer will need to refer to this document when you make most employee decisions and unless all of your employees who will be making these decisions are fluent in written Chinese, you need a well-written version in English as well.
  3. Focus first on the sections of your rules and regulations that matter most to your managing your China employees. This means you can for the most part gloss over any mission statement. Focus instead on sections where any failure to follow that which is written will get you into big trouble. When I am asked by a company to review their rules and regulations to let them know if it will work for China, the first thing I look at is the section on disciplinary actions because it is that section which is so often litigated. If that section is not well-crafted, I immediately know revising the rules and regulations is in order.
  4. If there is a section of your rules and regulations on which your employees are frequently commenting, questioning or voicing their concerns, this is a section you should be reviewing and probably revising.
  5. If you are seeing employee infractions that are not well addressed or addressed at all in your rules and regulations, put something in there for those or fix what is already there. Do this before one of your employees commits this infraction again you find yourself (again) in a situation where you are powerless to do something about it.
  6. Make sure you use the appropriate word/phrase in your rules and regulations to actually accomplish what you are seeking to accomplish. If you want to impose an obligation on your employees, make sure you use the word “must” and as noted above, make sure the Chinese version also says “must.” Saying “employees are expected to do something” does not usually cut it, and yet our China employment lawyers see language like this all the time in rules and regulations. If all you want to do is encourage your employees to do something, fine, but your rules and regulations are almost never the best (or even the right) place to do that. The rules and regulations are called rules and regulations for a reason and they should be used to clearly delineate what your employees must do and must not do and to make clear the repercussions for violations. If your rules and regulations say “DO NOT DO XXX!!!”, and then do not make clear that doing XXX will lead to termination, you likely cannot legally terminate an employee who does XXX no matter how large the font or how many exclamation points you use.
  7. Remove from your rules and regulations anything that no longer complies with China’s ever shifting labor laws. And when I say China labor laws, I mean any applicable national, regional or local law. See China Employment Law: Local and Not So Simple. Just by way of one very common example: if your rules and regulations provide for termination for an infraction that is not a terminable offense where your employees are located, there is a good chance you will engage in ineffective terminations that waste your company a lot of time and money by creating unnecessary employee-employer disputes.
  8. Make sure your rules and regulations clearly spell out incentives, bonuses and benefits and if your rules and regulations say that you will be providing any of these, you really should provide them. Well over half the rules and regulations we review or audit need substantial cleaning up of these provisions and a good portion of the China labor law disputes on which our China labor lawyers are retained involve these sections.

Bottom line: If you have employees in China, resolve to clean up and improve upon your employee rules and regulations by the New Year.