Yesterday, I wrote a long post, How to React to a China Economy in Decline: The China Lawyer Edition, setting out (1) why the sorts of China legal matters on which my firm’s China lawyers are working convince us that China’s economy is in decline (2) and listing out what foreign companies that do business in China or with China should be doing in the face of this decline.
Boy did I miss something. Grace Yang is my law firm’s lead China lawyer. Or as I always like to say, Grace wrote the book on China employment law: The China Employment Law Guide. All of this means that Grace heads up pretty much every China employment law matter we get, usually assisted by one of our more junior China employment lawyers.
But Grace took a four day weekend over Memorial Day and so that meant that I ended up handling the preliminaries of four days of China employment law matters and the impact of that really only started hitting yesterday and this morning.
Let me explain….
Yesterday I listed out the legal matters our China lawyers have been getting that indicate China’s economy is declining. Today I realize that I left out a very important type of matter that until I subbed in for Grace I did not realize was becoming so common: China employee terminations. In just the four days I was subbing for Grace we got three China WFOE companies looking to terminate one or many of their China employees, presumably due to business problems in China stemming from China’s economic problems. I have since updated yesterday’s post to include this as another indicator of China’s declining economy.
What I have learned from the last four days is that many foreign companies do not understand how complicated and risky it is to terminate an employee in China. I say this because far too many of the companies with which I communicated over these four days believed that I could give them good advice in a 30 minute phone call even though I was clear with them from the very beginning that I was merely stepping in for Grace during her absence. By the end of this four days I wrote the following as an email template for companies (NOT our existing clients) that come to us expecting us to resolve their China employee termination issues in “an hour or so”:
We cannot help you plan out your next steps for these terminations with just a one hour phone call, of that I am certain. Such a consultation would not be helpful for anyone as all we would do in that phone call is tell you that we cannot give you any advice without first reviewing your China employment contracts and your China Employee Rules and Regulations, and then getting a full explanation from you regarding the reasons for the terminations and then reviewing the local laws regarding termination. We probably would want to discuss your terminations, at least hypothetically, with the local employment bureau as well. There is no way we can give any advice without these things because employee terminations done wrong in China virtually always end up in expensive and risky litigation. This is especially true of foreign companies and even more true of American companies these days.
China is not an employment at will country. This means you can generally only terminate an employee for violating their employment contract or acting contrary to your company’s Employee Rules and Regulations. There are also all different kinds of employees in China, ranging from those on probation to those with open term contracts and the grounds for terminating each of these types of employees can vary. All of this means that firing an employee wrongly in China can and usually does lead to lawsuits with big penalties, starting with monetary penalties and ranging to being put on lists that can eventually lead to the foreign company eventually having to leave.
I suggest you read the following articles and decide for yourself what sort of assistance you believe your company needs with these terminations.
- China Employee Terminations: Always be Careful
- China Employee Terminations: Avoid These Mistakes.
- China Employee Problems: If You’ve Got One You’ve Got Many
- Terminating a China Employee: Why YOUR Rules and Regulations are Key
- Why Mutual Termination is so Often the Key.
- Terminating your China employee just got tougher
We would love to help you but if we are not going to be able to do enough to truly protect you and your company, we cannot take on the assignment. Please let us know one way or the other how you wish to proceed. Either way, we wish you and your company nothing but the best.