Guangdong Province (home to Shenzhen, Guangzhou, and Dongguan, among others) recently came out with new employment laws. The provincial High People’s Court recently released a document entitled the Answers to Difficult Questions regarding Adjudication of Labor Disputes Cases, with the primary goal of making the province’s labor adjudication more consistent. This post discusses a few of its key provisions and I will be writing more about this new law in future posts.
If during the course of the employment relationship, an employer suffers damages as a result of an employee’s gross negligence or intentional wrongdoing, the employer may pursue the employee for a single sum payment at the time of termination. However, the damages will be limited to direct economic losses suffered by the employer, and the court will consider the nature and degree of the employee’s conduct in determining the damages to the employer and it will not allow the employer to impose its own operational risks on the employee.
An employee leaving employment because of employer wrongdoing or abuse (such as failure to provide necessary labor protections or labor conditions), must clearly provide to the employer the reason why he or she was allegedly forced to terminate the employment contract. If the employee fails to notify the employer that he or she is terminating the employment relationship on grounds of employer wrongdoing or abuse, the employee cannot (in most cases) later demand statutory severance for employer abuse/wrongdoing. Though this new rule is employer-friendly, we still advise our employer clients to try to figure out why an employee is leaving. Even if the employee may be barred from suing for statutory severance, he or she may still sue for other issues, such as unresolved overtime pay or vacation penalties. Your goal as an employer is usually going to be to try to resolve all problems with a departing employee without getting sued.
When an employer moves its location, it constitutes major changes of the objective circumstances on which the employment contract was concluded, and for that reason, the employer must consult with the employee and reach an amendment to the parties’ contract. If the parties are unable to reach agreement, the employee can terminate the contract and demand the employer pay him or her statutory severance. However, if the employer’s move does not have any obvious (whatever that means) impact on the employee and the employer has taken reasonable measures to accommodate the employee (such as providing a company shuttle or paying the employee transportation subsidies), the employee’s demand for statutory severance may be denied as there is insufficient ground for the employee to unilaterally terminate the contract. This is not exactly new either, but it is worth repeating that it is virtually always safer to reach a written agreement (in Chinese!) with your employee before you change any clause of their employment contract.
An employee can demand its employer pay contract damages pursuant to the parties’ employment agreement. The applicable employment laws impose restrictions on employers imposing contract damages (similar to and called liquidated damages in some countries) on their employees, but they do not prevent an employee from collecting contract damages from the employer under certain circumstances. Unless there is a law to the contrary, the employee can demand contract damages in addition to statutory severance (or double statutory severance in the case of unlawful termination). If a contract is being proposed by the employee (which is rare but does happen from time to time), the employer should be careful in checking whether there is such a provision that specifies contract damages payable by the employer (note that we generally recommend our clients not use any contract presented to them by an employee). On the flip side, when an employee — especially an expat — gets to negotiate his or her own employment package, they should consider whether it makes sense to include a contract damages clause in their contract.
Stay tuned for more on the new employment law developments in Guangdong.