Photo of Grace Yang

Working out of Seattle and Beijing, Grace is Harris Bricken’s lead attorney on China labor and employment law matters and the author of a book, the China Employment Law Guide.

China employment discrimination lawyers

A few weeks ago, China’s Ministry of Human Resources and Social Security and its Ministry of Education (and seven other departments) released a notice regarding women’s employment. Here is a quick overview of this important notice.

The notice makes clear that gender discrimination during recruitment or in hiring is prohibited. Employers are generally prohibited from limiting the gender of candidates, giving preference to any gender, or refusing to hire women. Employers are also not allowed to engage in any of the following:

  1. Asking a job candidate her marital/childbirth status,
  2. Requiring a pregnancy test as part of an employee’s entry medical examination,
  3. Restricting childbearing as a condition of employment, or
  4. Applying a higher recruitment standard to female candidates.

If an employer is suspected of gender discrimination during the recruitment process (usually because someone has filed a complaint or reported it to the authorities), the authorities will interview/talk/meet with the employer and conduct what can be a large-scale employer investigation. Then if the gender discrimination allegations are confirmed, the employer will be ordered to take corrective measures.

An employer that refuses to talk or meet or otherwise communicate with the authorities or refuses to correct its violation after being ordered to do so, will have its information published and be “named and ashamed” via the media. Women who believe they are/were victims of gender discrimination may bring a lawsuit based on violations of their equal employment rights and if they are eligible they will receive legal aid and judicial assistance in bringing those claims.

Chinese employment authorities will “actively” audit the contents of employee recruitment information and issue orders to violators to correct job ads that contain gender-discriminatory content. If an employer publishes job postings with gender-discriminatory content, it will be ordered to make corrections according to law and if it refuses to do so, it will be fined “no less than RMB 10,000 but no more than RMB 50,000.” These violations and will go on the employer’s “human resources market integrity record” and can subject the employer to punishments for being a “serious dishonest employer.”

This notice should not change much for savvy foreign employers, but it should change everything for those not on top of their China hiring and employment game. What I mean by this is that companies that have always had their China employment lawyers monitor and audit their hiring practices and employment policies will likely not need to change much if anything. This notice will definitely bring changes, but smart employers were likely already avoiding most if not all of what will now lead to punishment, simply because discrimination on the basis of gender has never made sense and has always had its inherent risks.

But foreign companies that have ignored such things and failed to have a China employment lawyer audit and monitor their hiring documents (including their help wanted ads) and their treatment of female employees need to change things and fast. If you have employees in China or are seeking to hire employees in China you need to check NOW whether you are complying with all applicable laws. And if you are contemplating terminating a female employee who is pregnant, nursing or on maternity leave you had better be very careful in going down that path. As we wrote in Terminating China employees just got tougher the authorities are cracking down hard on employers that violate the laws on protecting female employees and — as is always the case — foreign employers are their favorite targets. If you are not positive that your China employment and hiring programs have been honed to perfection, you should get cracking now.

China confidentiality agreements trade secret agreementsAs part of our China company formation work, our China lawyers help our clients with their employment matters that arise before, during and after their China entity (usually a WFOE) is formed. Among other things, we draft the employment documents needed for a newly established WFOE. When a WFOE is up and running, it needs employee agreements in place for all its employees and we usually recommend what we call an “Initial Employment Package,” which includes the following for each employee:

  1. Employment Contracts
  2. Rules and Regulations
  3. Trade Secrecy and Intellectual Property Protection Agreements and
  4. Sign Off Agreements (acknowledging each employee’s receipt of the Rules and Regulations)

These China employment packages also often include Non-compete Agreements and Education/Training Reimbursement Agreements as well.

One of the common questions we get from both existing and prospective clients is why they need their employees to sign a trade secrecy agreement at all and in this post I briefly explain why our China employment lawyers always recommend having such an agreement.

Consider this scenario. A China employer hires an employee and gives the employee access to some or all of the company’s trade secrets. The employee then leaves employment and takes the material with her. What can the employer do? Suppose the employee never signed either a trade secrecy agreement or a non-competition agreement.

Since the theft of trade secrets is a both a crime in China and gives rise to a civil claim, the lack of a signed trade secrecy agreement does not bar the employer from suing the employee and/or reporting her to the police. But to succeed on either front there must be clear evidence that the employee took something and that what the employee took was in fact a trade secret. And that is where things can get difficult. Very difficult. For information to qualify as a trade secret in China, all of the following must be true:

1. The information is technical or business information unknown to the public.

2. The information must have economic value.

3. The owner of the trade secret undertook reasonable measures to maintain its confidentiality.

Are you certain you will be able to prove all of the above about everything you do not want your employees taking with them? In our experience, this usually ranges from difficult to impossible simply because most companies are not terribly careful about preserving their secrets.

Though it is possible to bring a trade secret lawsuit in the absence of an agreement protecting confidential information, a trade secrecy agreement almost invariably makes that lawsuit faster, cheaper and — most importantly — better. This is because if your trade secrecy agreement says not to steal X, Y and Z and an employee steals X, Y or Z, you can sue that employee for what should be a relatively clearcut breach of contract, rather than having to prove out everything related to trade secrets, as mentioned above. You will not need to prove that what was taken was a trade secret because your trade secrecy agreement with your employee will make clear what the employee can and cannot use outside your company, regardless of whether it is or is not a trade secret.

Trade secrecy agreements also make clear to your employees what is okay and what isn’t and they let your employee know that you can sue and win if they violate it. And by doing so, they greatly decrease the risk of an employee walking out the door with your trade secrets — as defined by you, not by complicated regulations and a random Chinese court.

One of the things our employer audits consistently reveal is that even companies that require trade secrecy agreements often (like about 90 percent of the time) fail to get all of their employees to sign these. We have learned this from our employer audits and we have learned this from companies that come to us after one of their employees has taken their trade secrets and joined a competitor or started their own competing business.

China employers should also have a clearly documented secrecy/confidentiality policy that sets forth how they handle and protect their confidential information. This coupled with a trade secrecy agreement will give the employer the maximum legal benefits and protections.

Bottom line: Make sure all your employees execute an English/Chinese trade secrecy agreement at the beginning of their employment and make sure your rules and regulations deal appropriately with your trade secrets as well.

 

 

 

China employment lawyersAmending a major term (position/pay) of your China employee’s employment contract involves considerable risk and therefore requires substantial care.

Let’s consider a fairly recent case in Jiangsu province. The employee was hired as a senior engineer for product design and development. The employee made roughly RMB 7,000 per month before leaving his job. Several years into his employment, the employer essentially suspended the employee from his original position as the company was going through structural changes. Right after providing the employee with his suspension notice, the employer stopped giving the employee his original product design and development work tasks and instead instructed the employee to “stand by” at an empty desk at the HR department. The employee also had his salary reduced. About three months after receiving the suspension notice, the employee resigned, suing for severance pay based on his employer having failed to provide him with normal labor conditions by refusing to allow him to engage in his normal work.

The case went through labor arbitration and courts at two levels. The appellate court first recognized that the employee had the right to terminate the employment contract and ordered the employer pay the employee damages for having failed to provide him the labor protections and conditions set forth in the employment contract. The court ruled that because the employment contract provided for the employee to have the position of senior engineer, having the employee stand by at an empty desk at the HR department, reducing the employee’s salary, and not giving the employee any work constituted an abuse of its right of personnel management and entitled the employee to damages for weakening the employee’s professional skills and demeaning him.

The court rejected the employer’s argument that the employee had implicitly agreed to amend his employment contract by not making any objections within one month following notice of his suspension. The court ruled that the employer was entitled to manage its own personnel according to its business needs but it had abused that right by acting unreasonably. The court ordered the employer to pay the employee severance for the termination. Because the employee had worked for the employer for 16 years before his resignation, the court awarded the 16 months’ salary as severance.

What lessons are to be learned here? The safest way to amend an employment contract is via a mutual agreement. Employees nearly always consider unilateral changes to their job duties, position or remuneration to be a big deal and China’s labor authorities and courts typically feel likewise. Not only will mutual amendments lead to far fewer lawsuits and greatly decreased liability risks, a well-crafted employment contract amendment also ensures both sides are on the same page with what is being amended (and what is not). There are few things more frustrating for our China employment lawyers than being called after an employment contract amendment rather than before. As for our clients, I can tell you that amending an employment contract typically takes our China employment lawyers a few hours, while defending against an angry employee whose contract has been unilaterally amended typically takes us tens of hours.

From a physiological standpoint, working with an employee to amend their employment contract also gives the employee a voice in the process and makes them feel more empowered. Mutual amendments are considerably more likely to achieve an outcome acceptable to both parties and less likely to result in confrontations and disputes and high costs. If the employer and the employee are unable to reach agreement on amending the contract, the employer should consider whether it might make sense to reach a mutual termination agreement with the employee so the parties can part ways amicably.

The case I wrote about above involved a Chinese company and its Chinese employee, but it highlights how this economic downturn is heightening protections for Chinese employees across the board. In Terminating Your China Employees Just Got Tougher, I wrote about how the Chinese government and its courts are taking a tough line regarding how foreign employees treat their Chinese employees. As a foreign employer, you should always just assume China’s tribunals will be even tougher against you for whatever you do involving your Chinese employees. These are tough times for foreign employers in China and the costs of getting even the smallest things wrong have gone up.

Just saying….

China lawyersChina craves stability. High unemployment can cause instability.

Today’s South China Morning Post, in an article entitled, China’s small businesses forced to cut back on staff just to survive as economic mood sours amid trade war, talks about how China’s slowing economy is leading to government concerns about joblessness:

With the Chinese economy slowing, concern has increased among Chinese policymakers about the outlook for employment, since ensuring a sufficient number of new jobs is seen as a necessary ingredient in maintaining social stability in the country. Employment was the top priority the Politburo set last July when it shifted its economic policy focus to stabilizing growth, leading the government to enact a series of policies to counter rising joblessness. This series will explore the employment challenges faced by different segments of the Chinese economy. The first installment examines the issues confronting small to medium-sized enterprises.

Chinese President Xi Jinping warned on January 21 that the Communist Party needed to pay particular attention to the risks to social stability from rising economic problems, as evidence increasingly suggests that the nation’s employment situation is deteriorating rapidly, particularly among small and medium-sized businesses.

The article goes on to talk about Chinese companies laying off workers but it does not talk about foreign companies doing the same, though of course they are as well, but perhaps more quietly. Our China lawyers are hearing from our clients with WFOEs in China that local government officials are stopping by essentially to make sure no layoffs are coming and if they are, that they are informed in advance.

Our China lawyers have been representing foreign companies in China for more than twenty years and that means we have gone through all sorts of economic and business cycles, including many downturns, though probably none as scary as this one. One of the things we have learned from past downturns is that China really really really does not want foreign companies to layoff or terminate employees during economic downturns and that alone should impact your layoff and termination decisions.

China is going through tough times right now and foreign companies that reduce employment will not be viewed kindly. Before you terminate any employee you should weigh the economic benefits of the termination against the possible detriment in your company’s local standing. If you must terminate any employee, by far the best (safest) way in these troubling times is via a mutual termination that includes a settlement. A private settlement is way less likely to be noticed by your local government and way less likely to cause major concern. For more on employee settlements, check out Terminating a China Employee: Why Mutual Termination is so Often the Key and China Employee Mutual Terminations: The Dos and the Don’ts.

China employment lawyersUnilaterally terminating a female employee in China, especially one who is pregnant, nearly always leads to the terminated employee bringing some sort of legal action. Though there are a few legally permissible grounds for an employer unilaterally terminating a pregnant employee without having to pay severance, those grounds are few and far between and the burden will always be on the employer to prove such ground: e.g., the employee failed to satisfy her conditions of employment during her probation period. Yet if everything from step one to the termination is done right, it is possible to legally terminate a pregnant employee during her termination.

A fairly recent case in Guangzhou illustrates this. The employee and the employer entered into a three-year fixed-term employment contract with a six-month probation period. The employer provided the employee with a document that set forth the recruitment requirements and provided that the employee would be considered to have failed to meet her recruitment requirements if she were late for work three times or more during her probation period. The employee signed off on this document and then right after starting her job informed the employer she was pregnant. Before the end of her probation period, the employer issued a notice to the employee terminating the employment relationship for being late for work four times during her probation period. The employee brought a labor arbitration claim demanding reinstatement. The employee argued she was only late a few minutes late each time and she had completed her work tasks and the employer violated the law protecting female employees. The employee lost at labor arbitration and appealed to the court and lost there again.

The court noted that the real issue was not whether the employer was aware that the employee was pregnant at the time of her termination, but rather whether the employer was justified in terminating the employee for failing to meet the recruitment requirements during her probation period. The attendance records proved the employee was late four times during her probation period and the employer was able to prove that it had provided the recruitment conditions to this employee in writing at the time of her hiring. The court held that for these reasons the employer had the right to terminate the employment contract and the employer’s requirements did not violate any mandatory law and therefore the termination was not unlawful. The court rejected the employee’s argument that the employer’s decision was unfair because other employees who were late more than three times were not terminated. The court also did not side with the employee on her claim that she had been terminated just because she was pregnant.

This case shows it is possible to terminate a pregnant employee without having to pay severance and without having to provide advance (30 days) notice, provided the employer can show there is a legally permissible ground for the termination decision.

It is possible to terminate a probationary employee for failing to meet recruitment requirements provided the employer is able to prove why the employee did not meet its requirements. For this to work, it is important the employer have a clear writing setting out its probationary employee’s conditions of employment and it get the employee to review and acknowledge receipt of such conditions. Furthermore, if a termination becomes necessary, the employer needs to have another clear writing documenting exactly how the employee failed to meet the specified conditions or requirements during the probation period. Note that the termination notice must contain the reason for the termination and the notice must be in writing.

The employer prevailed in this case because it met all these legal requirements. Would it have turned out differently had the termination happened after the employee had completed her probation period? The employer would have needed to rely on another legally permissible ground for the termination: e.g., employee’s serious breach of the employer’s rules and regulations. It would then depend on more factors, such as what the employer’s rules and regulations say regarding employee discipline in general and regarding the specific behavior at issue.

Nonetheless, this particular employer’s decision seems a bit harsh and even though it ultimately won, it no doubt lost substantial time and money defending itself in costly labor arbitration and litigation and now it is known to the outside world as the company who fired a pregnant employee just because she was late for work by a few minutes on a few occasions. Had this been my client I would have recommended against it instituting such draconian employment conditions in the first place and I would have most certainly recommended trying to quietly and expeditiously settle the claims before they blew up into full blown legal proceedings.

As a general matter, you should not implement an employer policy that you do not intend to strictly enforce. Also, for certain eligible positions it can make good sense to designate the employee to work flexible hours so he or she can focus on getting the job done and not worrying about being at the office from 9 to 6. These sort of nascent problems are what our China employment lawyers look for in our employer audits because in China — like most everywhere else — an ounce [gram] of prevention is worth a pound [kilo] of cure.

 

WeChat for China Employers and employeesWith widespread use of WeChat in China (it is China’s leading multi-purpose messaging, social media and mobile payment app by far), both employers and employees need to be careful with what they do and say on there. Put simply, what you say or write on WeChat may be used against you in an employment dispute. There have been written Chinese employment decisions where an employer used evidence from WeChat (such as screenshots of an employee’s WeChat posts) to prove employee misconduct and to thereby justifying discipline/termination decisions (see here). And our China employment lawyers have been involved in many matters where WeChat communications were used to influence a settlement.

Let’s consider a fairly recent case in Ningbo City. One day after 10 pm, a supervisor sent a WeChat message to an employee working as a store manager requiring the store manager provide the current month’s store sales data within ten minutes. The employee was pregnant at the time and had gone to bed early that night and did not respond within the deadline. After the 10-minute ultimatum had passed, the supervisor notified the employee on WeChat that she was fired for failing to respond in time. The employee sought help from the local workers’ union which offered her legal aid and in short, the final outcome is that the employer and the employee reached a settlement where the employee received a generous amount of severance for the termination.

Also, note that the employee being terminated in the case above was pregnant. It is worth emphasizing (again) that female employees with a special status such as pregnancy are given heightened protection in China and terminations of such employees are almost always tricky and complicated. The employer should have thought long and hard before terminating the employee even if the employer had been justified in making the unilateral termination decision in the first place. Moreover, note that there are restrictions on arranging overtime for pregnant employees.

The moral of the story does not stop there though. If you are an employer in China, you should be careful with how you use WeChat with your employees. Just to give a few examples, many of which our China employment lawyers have seen, some frequently.

  1. Do not send an employee work outside normal work hours via WeChat that requires an immediate response or turnaround, because that sets you up for overtime claims/liabilities.
  2. Do not amend the terms of an employment contract via WeChat. You should either sign an amendment to the employment contract in hard copy or sign a new contract in hard copy. In fact, you should not negotiate with the employee regarding the amendment on WeChat in the first place. It is just too tricky to know what of what you do on WeChat will actually count for the contract and this is not usually going to be the sort of “paper trial” you are going to want showing up in a court in any event.
  3. If you constantly check in with a part-time employee via WeChat regarding work, you may be deemed to have converted that part-time employee to a full-time employee by making the employee work beyond the statutory maximum hours allowed for part-time employees. This conversion may expose you to all sorts of problems and risks.
  4. Do not issue employee discipline via WeChat. For example, if you issue a notice of suspension of employment, do it in hard copy and deliver the notice in person to the employee and have witnesses who can attest to the delivery. Sending something via WeChat will allow an employee to claim never to have received it or to claim not to have known it to be real or even not to have taken it seriously.
  5. If you need to express your concerns about an employee’s performance formal documentation of the employee’s performance issues and a corresponding improvement plan should be prepared. Just sending out a WeChat is likely not going to count before a court or other employment tribunal.

As a general matter, WeChat does not work well for record retention. Also, since WeChat is an instant chatting tool, people far too often fail to take the necessary time to think carefully before they hit send. As a China employer, you will almost always be held to a high standard and this high standard will apply even to something like WeChat. You should assume that whatever a company supervisor or higher up sends out via WeChat can and will be used against your company in a dispute. Sometimes what you do on WeChat will decide the case against you. Sometimes it will tip the evidence against you. Other times, it will “merely” make you look bad and cause the judge to want to rule against you, which in turn can lead the judge to rule against you. And if you think your ability to “retract” a WeChat message within a couple of minutes is going to save you, think again. First off, you may not always able to do so quickly enough. Second (and trust me on this one), there is a really good chance that whomever you sent the offending WeChat message will already have seen it and taken a screenshot and saved it. This is how many celebrity scandals start; someone posts something on WeChat and then deletes it within a minute, but it is already too late. Keep in mind also that WeChat messages are not secure and can easily be accessed by Chinese government authorities (and others).

Most importantly, nearly all WeChat communications/correspondence have not been reviewed by the real powers at your company nor approved by your China employment lawyer before they go out and potentially expose your company to regulatory/liability/lawsuit risks. Your company’s general rule should be to limit labor management via WeChat as much as possible.

What have you seen out there?

China employment lawyer

Though China employers are generally not allowed to impose a penalty on an employee who causes his or her employer economic losses, the employer can require the employee compensate the employer for such losses by deducting funds from the employee’s wages. Nonetheless, because wage deductions are a big deal for China employees, special care by employers is required — just as with pretty much anything else involving China employees.

If a China employer is to succeed with deducting from an employee for economic loss, it should be sure to do the following so as to be able to prevail if sued by the employee:

First, the employer will need to be able to show all of the following: (1) the employee’s act caused the employer losses; (2) the basis for calculating the losses; and, (3) the amount of such losses. In other words, if challenged by the employee, the employer needs to be able to meet its burden of proof and failing to do so means the employer will be ordered to return the deducted amount to the employee.

Next, some locales require the employer provide the employee with advance written notice (times may vary) specifying the reason for the deduction and the amount to be deducted. Regardless of whether the employer’s specific locale imposes such a requirement, our China employment lawyers virtually always recommend to our employer clients that they provide a written notice regarding the wage deduction and seek to get the employee to acknowledge receipt of such notice before they proceed. Frankly, much of the time our recommendation is that the employer not even bother with the deduction because the risks outweigh the rewards.

Third, depending on the amount involved, usually the best way to proceed with an employee deduction is to break it out in equal monthly installments. This is because in many places employers are only permitted to deduct only up to 20% of an employee’s monthly wage. Further, the employer cannot deduct from an employee’s wages an amount that would cause the employee’s wages to fall below the local minimum wage. Moreover, some local rules mandate employers ensure their employees receive enough wages to cover expenses related to basic living needs, child care/education and elderly support, so you need to be sure the deduction will not bring you out of compliance with this rule. Provided an employer meets all applicable legal requirements, it can deduct from an employee’s wages every month until the amount that employee owes the employer has been paid in full or until the employee has left the company.

Fourth, if by the time the employment relationship is terminated the employee still owes the employer money, the employer can demand the employee make a one-time payment to the employer for the outstanding amount.

An employer can bring a legal action against an employee for damages caused by the employee, however in practice even if the employer meets its burden of proof, the court will consider a number of factors and balance the interests of both parties in determining the amount of the award, such as the employee’s intent (gross negligence vs. intentional misconduct), the employee’s wrongdoing, the amount of the employer losses, the employee’s income and ability to pay, any employer measures taken to prevent the potential loss, any employer trainings provided, whether the employer should bear this sort of risk during its normal course of business (the courts generally do not like the employer trying to impose such business risks on the employee). The employer rarely is awarded the full amount of damages it seeks.

The bottom line with employee deductions is that you as the employer should be careful in choosing your legal battles, especially now with China so worried about its economy. Do you have good evidence to support your claim for being able to deduct? Is it worth you spending the time and money and effort to pursue an employee for a small amount you probably will not be able to recover in full anyway? If you win in court will you be able to enforce the judgment against the employee? If the answer is no to these questions, you should probably just move on.

China employment lawyerIf you are a China employer, you need a set of Employer Rules and Regulations that are not only enforceable and up-to-date but also practical for your specific locale in China. Employer rules and regulations are so important because China does not have employment at will and this means that without enforceable rules and regulations you as an employer generally cannot discipline or terminate your employees.

Let’s consider a recent case in Guangzhou City. In this case, the employer required all employees clock in and out with their fingers on a time clock system. An employee made a mold of his fingers and asked a co-worker to clock in and out on his behalf for several days in a row. The employee failed to show up at work during those days without any justification. The employer terminated the employee on the basis of a serious breach of the employer’s rules and regulations and the employee brought a labor arbitration claim.

The employer was able to produce a copy of the employer’s rules and regulations, the employee’s acknowledgement of receipt of the employer’s rules and regulations, witness statements, fingerprint records showing there were clock ins and outs with the employee’s fingerprints, and security footage showing the employee himself was not present at the clock ins/outs, and WeChat screenshots of the employee’s video and phots posts showing the employee was sightseeing at a tourist attraction during the days at issue.

Notwithstanding all of this (granted, the employer failed to produce all of the evidence at once), the employer lost at labor arbitration for failing to produce sufficient evidence proving the lawfulness of its unilateral termination decision. The employer appealed to the court and lost there as well and was ordered to pay the employee a substantial amount in damages to the employee for unlawful termination.

Finally however, the appellate court reversed the lower court’s ruling (and that of the labor arbitration board) and held that the employer did not have to pay any employee damages. The appellate court first emphasized that the employer bears the burden of proof in an employee dispute that arises from the employer’s unilateral termination decision. It further stated that since unilateral termination on the basis of an employee’s wrongdoing is the most severe punishment by an employer and since the employer is usually better positioned to obtain evidence, employers will be held to a high standard in that regard. But in the end the appellate court ruled the employer had come forward with enough evidence to support its claim that the employee was absent from work for days without a proper reason and had used a co-worker to clock in and out for him. Therefore, even though the employer rules and regulations did not specifically list having another employee clock in/out with a finger mold as employee misconduct, the employee’s behavior violated the good-faith principle and the employer was justified in making the unilateral termination decision.

The big lesson from this case is that if you want to minimize future employee problems and avoid costly employee litigation, you should make sure right now that you have comprehensive and enforceable employer rules and regulations and you save all evidence that may be used in any future employment disputes.

Though the appellate court finally ruled in favor of the employer on the basis of the employee having failed to act in good faith, I’m convinced that the employer having a thorough set of rules and regulations and having strived to maintain good employee records was a major factor in the decision. Nonetheless, as a China employment lawyer who spends much of my day helping China employers avoid employee disputes I cannot resist pointing out how the employer in this case would likely have made its life considerably easier had it maintained clearer attendance records and required the employee provide his signature as confirmation of such attendance records, kept the pay stubs that corresponded to the days actually worked and had the employee sign such documentation during the course of the employment relationship. In other words, as a China employer (especially if you are a foreign company), it is critical that you document everything every step of the way as though you are right now preparing for an employee lawsuit down the road.

 

China employment lawyer

As regular readers of this blog should know, employers in China, (especially foreign employers) face myriad, complicated and hypertechnical local employment laws. One little employer mistake can lead to big and expensive problems. As much as we wish all our employment law clients would first come to us requesting we audit their employment program to bring it into compliance, truth is that about half the time they come to us only after they’ve been hit with a big (and nearly always expensive) employee problem.

The good news is that most who come to us to solve their pressing employee problem realize the benefits of having us work with them to prevent future problems. These are the clients who realize that it makes sense to change their oil every 3,000 miles than to buy a new engine every 40,000 miles. Some clients are convinced (or should I say convince themselves) that their employee problem was just a one-off and that their “relationship” with their other employees means there will be no such problems in the future. About all I can tell them is that my experience and that of every single other China employment lawyer I know says that their future odds are not so good.

In general, the best way to deal with just about every legal problem (in China and everywhere else) is to do both what you can to solve that one and to search out and remedy the root cause of that problem so that the same sort of problem does not recur. This all just seems so obvious to me.

Consider this hypothetical based on one of the two or three most common China employment law issues we see. Employer wants to terminate an employee and approaches the employee to discuss a severance package. The employee responds by saying, “You can’t terminate me because not only do you not have any legal basis to do so, I am also on an open-term contract.” The employer then seeks to check the employee’s contract but cannot find a signed copy of it. Now let’s suppose the employer then has a face-to-face meeting with the employee where the employee says: “I like working here so I will forget about what you said about my termination.” The employer replies, “Great. We appreciate your cooperation.” and then goes on about its business.

Smart move by the employer? NO, NO, NO, a thousand times no. When our China employment lawyers get a matter like this, the first thing we do is try to clarify with the employer why it wanted to terminate the employee in the first place. Was it because there was not enough work? Was it because the employee is incompetent? If there is a legally permissible ground for a unilateral termination, the employee’s consent is not required and the employer can (and oftentimes should) proceed with the termination. In some cases, especially where the employer is dealing with a problem employee, it will make sense for the employer to initiate a unilateral termination as soon as possible and in doing so be sure to preserve its evidence backing up its claimed basis for the termination for any labor arbitration or litigation in the future. In most cases, if the employer does not wish to retain the employee, the employer should talk with the employee about a mutual termination as soon as possible, even if the employee is an open-term employee.

Even if the employer continues to employ the (almost terminated) employee it should do what it can to determine whether the employee was indeed on an open-term employment. Not having a written employment agreement does not necessarily mean the employee has become an open-term employee. If the employee is not an open-term employee, the employer should still decide whether it wants to use a fixed-term or an open-term agreement with the employee going forward.

If there truly is no written employment contract between the parties that accurately reflects the employee’s specific situation, the employer should seek to enter into a written employment contract with this employee as soon as possible. Once the issues concerning this employee have been resolved, the employer should then see what sorts of current employment contracts it has with all of its other employees. Even if the employer does have contracts with all its employee that still will not suffice if the contracts are not current. If there are any imminent employment contract renewals due to an employee’s contract expiring soon (i.e., within 30 days) the employer needs to not delay in dealing with those also. In other words, it must not lose sight of any other employee because of this one employee.

If the employer in the above hypothetical executes an appropriate new employment contract with this one employee but does nothing more we can expect it will have similar employment matters with its other employees soon enough. China employees talk with their fellow employees about these things (just like pretty much everywhere else in the world), and trust me, this one employee will soon be telling your other employees how he or she got a great deal from you and they should too and if they have any shot at all they will try. It is not uncommon for our China lawyers to have to deal with a situation where one employee has complained about an employment contract problem and even before the employer has had time to sign our fee agreement, it is now dealing with three or four employees with the same complaint.

It is nearly always much cheaper to deal with your employment issues proactively and not wait until they come “from nowhere” in the form of a complaint. Think of that first employee complaint as your canary in your coal mine and use it to your advantage to nip impending/future employee problems in the bud with an employer audit.

China employment lawyersIt is fairly easy for China-based employees to leave their employment. Regardless of the circumstances surrounding an employee’s departure/termination, China employers must issue a proof of termination of employment relationship document to the departing employee. It is generally not possible for a China employer to hold the employee to specific performance by making the employee come back work or continue working. Sometimes it is possible for the employer to pursue the departing employee for contract or other damages, but doing so rarely makes business sense. The reverse is NOT true though as it is easy for a terminated employee to hold the employer to specific performance (i.e., reinstatement) and to sue for damages.

In other words, if you are a China-based employer, watch out! But I’m guessing all of you already knew that, but with quickly deteriorating relations between the United States and China and between Canada and China and between much/most of the EU and China, this warning has never been more important or urgent.

Consider this hypothetical (based on a real case in Shanghai with the facts simplified and slightly revised). Employer and Employee enter into an employment contract for a fixed term. Employee leaves before the end of the term. Employee demands Employer issue a proof of termination of employment relationship document. Employer provides the requested document but Employee claims Employer put in the wrong start date and so refuses to accept the document. Employee begins working for a new employer several days later. Employee then sues Employer for damages allegedly caused by Employer’s failure to provide a proof of termination document. How will this case turn out for the parties?

The short answer is the employer will probably have to pay damages for having failed to timely provide its former employee with a proof of termination document. Employers generally must issue such a document when the employment contract is terminated and no later than 15 days after the termination. This document is important for China employees because China employers usually require this as part of their new employee on-boarding process, and without such a document, the employee will likely not be able to work for the new employer. China employees also need this document to claim unemployment benefits. Our China employment lawyers often see foreign employers in China get into trouble for failing to get this key document to their former employees or being late in doing so. We have had to settle far too many employee disputes arising from these mistakes.

Note though that in the above hypothetical the employer did provide its employee with the proof of termination document but it was rejected by the employee. In an employment dispute, the employer bears the burden of proving the employee’s commencement date. So when an employer is unable to produce evidence showing the employee’s commencement date is indeed correct on the rejected proof of termination document, the employer will have to bear the adverse consequences of failing to meet its burden of proof. In the actual case on which I based the hypothetical, the employer did not issue a proof of termination document until trial; nor was it able to produce evidence showing that it had issued a proof of termination document within 15 days after termination. The employer was therefore required to pay its former employee damages (calculated based on the local unemployment insurance payment standard) from the 16th day after the employee left the job until the day the employee started her new job. All of this employer’s problems could have been avoided had it properly handled its task of providing this one document to its employee at the time of employee separation.

As a foreign company that employs people in China, you should make sure your employee terminations are performed correctly. This has always been the bare minimum, but this is especially true today.