With the end of the year fast approaching, our China employment lawyers have been handling an onslaught of China Employer Audits and with those audits comes an onslaught of China employment law questions. The below are some of the most commonly asked questions we get about China employment contracts with short answers to each of them.
Question 1: I have an English version of the employee agreements our parent company uses around the world. Can I put that into Chinese and send it to our China employees to sign?
Not a good idea. When it comes to China employee agreements, localization is key and I have yet to see a single non-Chinese style employment agreement that does not contain at least one thing that is completely unenforceable under Chinese law. You need a China-centric contract because that sends a strong signal to your China employees and to China’s labor authorities and arbitrators/courts that you understand how China’s employment laws work and you have made the effort to comply with those laws. Using China-centric employment contracts will greatly decrease the odds of your having China employment law problems and greatly increase the odds of your prevailing in any China employment law dispute.
Question 2: The labor authorities in my locale provided me with an employment contract template. Is it okay for us to just use that?
Not a good idea. First off, these templates are often outdated and often fail to keep up with national (and even local) law changes. Second, they completely fail to account for your specific situation and goals or for the situation of your employees. Third, they virtually always favor the employees and fail to sufficiently protect the employer.
Question 3: Our China employment contracts are just in Chinese. That’s okay, right?
Not really. Legally, this makes complete sense in that you really do need to have all of your China employment contracts in Chinese. But if you also are going to want all of your China employment contracts to be in English as well if anyone in your company who might be making what even looks like an employment decision cannot read Chinese. We always draft our Chinese employment contracts in both Chinese and in English because that works best.
Question 4: How easy it is to terminate an already signed China employment contract?
Not easy at all. Since China does not have employment-at-will it is generally difficult to terminate an employee during his or her contract term and, contrary to popular belief, this includes employees on probation. Under Chinese law, a probation period is part of the contract term and so probationary employees are also not at-will employees. Once you bring someone on as your employee in China it is difficult to terminate them. See Terminating a China Employee: Why YOUR Rules and Regulations are Key.
Question 5: Will an open-term employment contract mean that I will not be able to terminate the employee until his or her statutory retirement age?
Not exactly. Open-term employees have greater protections against termination than employees on fixed-term employment contracts, but they can be terminated. For example, an open-term employee can be unilaterally terminated without severance if the employer can prove that the employee engaged in serious wrongdoing in violation of the employer’s rules and regulations. But it does often make economic sense to try to work out a mutual termination even with your most troublesome employees.
Despite the issues that arise from open-term contracts, they are sometimes all but required for business reasons. We see them most often in situations where our client is intensely competing for a particularly desirable job candidate and offering this candidate an open-term contract is necessary to get him or her to work at their company.
Question 6: Does not this offer letter constitute our employment contract?
It most certainly does not. An offer letter is not an employment contract and no offer letter I have seen even comes close to including all that is necessary for a good China employment contract. We regularly take our clients’ offer letters and incorporate the relevant terms from those letter into employment contracts, but doing so always requires we get additional information from our clients for the employment contract.
Question 7: We have been using this same employment contract template for years and no employees have complained about it. Why then do I need to have you review it?
There are many benefits in our reviewing your employment contracts, especially if they were drafted years ago. The mere fact that no employees have complained about your employment contracts does not mean they do not need to be improved. Most importantly, China’s national and local employment laws and enforcement policies are constantly changing and you want your employment contracts to reflect those changes. See China Employment Law: Local and Not So Simple. Not only that, your own situation may also have changed over the years and you want your employment contracts to reflect that as well. We often review employment contracts that made sense for a company that had 20 employees in one city doing one thing and now make no sense at all for the same company with 200 employees doing ten different things in three different cities. You do not want your company to get ahead of its employment contracts.
Next week I will write about the questions we get about Employer Rules and Regulations.