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 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.

 

 

 

 

China employment lawyers

It is not news that Chinese labor authorities have been cracking down on employers that fail to make social insurance payments for their employees. What is news is that Chinese labor authorities are taking that enforcement to the next level. Last week, 28 government departments (including the National Development and Reform Commission, the People’s Bank of China, the Ministry of Human Resources and Social Security, and the State Administration of Taxation) jointly executed a Memorandum of Understanding on Joint Punishment against Serious Dishonest Enterprises and Related Personnel in the Social Insurance Sector (the “MOU”) that defines “serious dishonest employer behavior” to include the following:

(1) Failing to participate in social insurance in accordance with the law and refusing to rectify the situation;

(2) Failing to truthfully declare the social insurance contribution base and refusing to rectify the situation;

(3) Failing to pay social insurance premiums;

(4) Concealing, transferring, misappropriating or embezzling social insurance premiums, funds or engaging in illegal investment operations;

(5) Participating in fraud by, among other things, falsifying certification materials or social insurance fund expenses or social insurance benefits;

(6) Illegally obtaining, selling or disguising trading of social insurance personal rights and interests data;

(7) Refusing to assist the social insurance administrative department in its efforts to investigate accidents and problems; refusing to assist the taxation department in its efforts to supervise or inspect social insurance, and failing to provide relevant information related to social insurance; or

(9) Otherwise violating applicable laws and regulations.

Numbers 1, 2 and 3 above — that is, not paying or under-paying employee social insurance — are the violations our China employment lawyers most often see among foreign employers in China, and even before the MOU, we often saw foreign employers get in trouble for such violations.

The Ministry of Human Resources and Social Security, the State Administration of Taxation and the Medical Security Bureau will pass on information regarding employers that violate the social insurance laws to other Chinese government departments via the national credit information sharing platform and publish that information on Credit China, China’s National Enterprise Credit Information Publicity System, and on the official websites of these government agencies. In other words, the dishonest parties will be publicly named and shamed.

Employers/relevant personnel determined by Chinese government authorities to be dishonest may face a number of adverse consequences imposed by different government departments –not just limited to social insurance. Punishment might include restrictions on participating in government procurement as a supplier, financial subsidies and social security funds support, government assistance on streamlining the handling of social insurance, and participating in social insurance cooperation projects. The list of potential punishments also includes enhanced scrutiny or regulations. For example, when a dishonest enterprise applies for customs-related business, its import/export activities will be more strictly supervised and regulated, such as more stringent customs inspection, supervision and audit. The relevant authorities will also consider the “dishonest behavior” of the employer, its legal representative, actual controlling person, directors, supervisors, officers, and senior management in determining whether to grant preferential policy support. Punishment also may include prohibitions on purchasing airplane tickets and withdrawals of previous honors (e.g., taking back a previously-awarded model of high morality honor).

In October of this year, China’s Ministry of Human Resources and Social Security released a set of draft Interim Measures for the Management of a Blacklist for Serious Dishonesty in the Social Insurance Sector for public comments. This blacklist would be publicized on local and national credit information platforms and be made available to all government authorities. The MOU mirrors the spirit of these draft Measures. As always, the localities are expected to come up with their own detailed implementation rules.

Life in China for foreign employers has never been easy, but don’t make it harder by getting your company and its personnel on the “blacklist.” Can you confidently state that your company is in full compliance with its social insurance obligations? If not, you need to take action now to make sure it is.

 

 

 

 

China Sexual Harassment MeToo
By Prentsa Aldundia

On September 5, 2018, the PRC National People’s Congress issued a new draft of Several Sections of the PRC Civil Code (the “Draft”) for public comments until early November. The Draft would provide heightened protection against sexual harassment on a national level and would also impose more obligations on China employers. Below are a few highlights of the proposed law.

First, and perhaps most importantly, Article 790 defines sexual harassment as unwelcome behavior against another person by sexual language or actions or by sexual advances against a subordinate. Though a few China locales formally define sexual harassment in their local regulations — for example, Jiangsu Province’s provincial regulations on the protection of women’s rights define sexual harassment as harassment against women in any form of sexual content or sex-related language, words, images, sounds, and body movements — China does not have any national law defining sexual harassment. That means these PRC Civil Code revisions would constitute China’s first national definition for sexual harassment.

The wording of this sexual harassment definition would greatly increase protection against sexual harassment. Before the Draft, the national laws that cover sexual harassment limit protection to only female employees. For example, the Law on the Protection of Women’s Rights and Interests prohibits sexual harassment against women and it further says female sexual harassment victims may file a complaint with their employer and/or with the authorities. The Special Rules on the Labor Protection of Female Employees require employers prevent and stop sexual harassment against female employees in the workplace. The local rules also protect only female employees against sexual harassment. The Draft would extend sexual harassment protection to include male employees for the first time.

The Draft also makes clear employers will need to take reasonable (whatever that means) measures to prevent sexual harassment in their workplaces, create procedures for employees to file sexual harassment complaints, and create an internal company system for handling sexual harassment complaints. Though the Draft is not yet very detailed about any of this, it would still be a substantial improvement over the current law which says little more than that employers must seek to prevent and stop sexual harassment against female employees in the work place. This Draft is a clear signal that China is getting tougher on enforcement against employers that fail to fulfill their obligations under the sexual harassment protection law.

With its increased protections against sexual harassment, the Draft should serve as a clarion call to China employers to increase the protections they provide against sexual harassment in their workplaces. In other words, employer risks for not having proper sexual harassment policies/rules/measures in place to deal with sexual harassment are quickly increasing. Though the Draft has not yet been finalized, now would be a good time to audit your employment situation to make sure you have an enforceable and practical set of company rules and policies on anti-sexual harassment that complies with both China’s national and local laws (as noted above, your locale may already have more developed and detailed regulations than the national requirements and you must follow them).

#MeToo has gone international and any employer that ignores this is asking for trouble.

China employee terminationsIf you are a China employer, you must have a written employment contract with all your employees. This means that once you hire an employee in China it is generally difficult to terminate that employee during his or her contract term.

Consider this hypothetical (based on a real case with its facts greatly simplified for this post). Employer and Employee enter into an employment contract for a non-fixed term. Several years into employment and before the end of the year, Employer issues a termination notice to Employee for immediate termination of the employment contract, but the termination notice fails to specify any basis for the unilateral termination. Employer pays Employee a big severance and an additional amount of money in lieu of advance notice for the termination. Employee demands Employer pay the year-end bonus and Employer claims no bonus is required because Employer’s rules and regulations document says if an employee is terminated for any reason (including as a result of employee serious wrongdoing), the employee will not be entitled to any portion of the year-end bonus for that year. Employee brings a labor arbitration claim against Employer to collect the unpaid year-end bonus, among other things.

Employer lost big. What did Employer do wrong here?

Mistake #1: Issuing a termination notice without specifying the reason for termination. This can and will lead to problems for the employer and yet many foreign employers in China do this, oftentimes because they want to quickly wrap up the employee termination. Terminating a China-based employee is almost always complicated and proceeding with a termination in haste is almost always a bad idea. In this case above, the employer did not have any legal basis for terminating the employee and it only claimed the employee was terminated for employee wrongdoing after it was sued. As a China employer you need to provide your soon-to-be-former-employee with appropriate notice of what led to the employee termination and you must do so at the time of the termination. If the employee did something wrong to bring about your unilaterally terminating that employee, you must make that clear in the termination notice.

Mistake #2: Claiming the employee was terminated for wrongdoing yet giving the employee a big severance payment. This sort of thing confuses everyone from the employee being terminated to other employees in the company to — most importantly — the arbitrators and judges that eventually get the case. If an employer has a legally permissible ground for a unilateral termination, why pay severance? Paying severance oftentimes is used to show that the employer probably had no good legal grounds for termination. If that is the case, fine; but that would be a completely different type of termination and you cannot call that unilateral termination due to employee’s fault. It is called an employer-initiated mutual termination. On the flip side, if you as the employer know that your facts or evidence are not looking great from a legal standpoint, why not make clear that you are entering into a mutual termination deal with the employee? When terminating an employee it is critical that both your severance payments and your termination documents line up with each other and that both truly fit the situation.

Mistake #3: Not possessing good evidence to support the unilateral termination for alleged employee wrongdoing. In a China employment dispute, the employer bears the burden of proving it had a valid basis for the employee’s termination. In real life this means that the moment you as a China employer realize you have a problem employee or the moment you realize that one of your employees has done something wrong you should start documenting everything you can so that you will eventually be prepared to argue your case in the event of a termination or employee dispute.

Mistake #4: Not resolving all outstanding issues at the time of termination. In the real case on which the above hypothetical is based, the employee was a high-paid employee and the employer paid the employee a big severance before the employee sued. The employer should have had its employee sign a termination agreement that set forth employer-employee agreement on all necessary issues before it paid the employee the large severance. If you are going to pay one of your employees severance, there is no excuse for not doing what is necessary to get full resolution for doing so.

Mistake #5: Not understanding that an employee termination does not absolve the China employer from having to pay a year-end bonus. And please note: just because you have a company rule that says your employees are not entitled to something (like a year-end bonus) when their employment relationship with your company ends does not give you the right to terminate the employee. In other words, even if your company rule is legal in your locale, the fundamental rule of China’s employment laws does not change: China is not employment-at-will jurisdiction.

Employee terminations in China always require you make sure the termination is done legally and correctly so you will not get sued over a termination after you thought you had completed the employee separation.

China non-compete lawyers

It has become increasingly common for both foreign and Chinese companies to require their expat employees sign a non-compete agreement as part of their employment contract package. The below are some of the more common issues that arise with most expat non-compete agreements.

Non-compete timing. When it comes to China employment contracts, our China employment lawyers represent both foreign companies and expats. One of the things we have been noticing lately when retained to review expat employment documents is what we have taken to calling a “future” non-compete agreement. We mostly see this where a high level expat is negotiating employment with a Chinese company and the Chinese company’s employment contract will explicitly mention a non-compete agreement and explicitly state that the expat will sign a non-compete agreement, but the Chinese company will not provide the expat with a non-compete agreement for signing. To make matters worse, this mention of a non-compete is a lot clearer in the Chinese language portion of the employment contract than in the English portion and always to the expat’s detriment. This really matters because unless specifically specified otherwise in the Chinese language portion of the agreement, the Chinese portion of any China employment contract is all that legally matters in a Chinese court or arbitration. See Dual Language China Contracts: Don’t Get Fooled! This means an expat who is negotiating with its putative Chinese employer without the assistance of an experienced China employment lawyer will be signing on to sign on to a (very likely onerous) non-compete agreement without ever having seen it.

Non-compete compensation. Will the expat receive fair compensation for performing her or his non-compete obligations? According to China’s Supreme People’s Court, if the employee and the employer agree on the employee’s non-compete obligations but the employment agreement is silent on the post-employment compensation for the non-compete, the employer must pay the employee 30% of the employee’s average monthly salary in the twelve months before termination or the local minimum wage where the employment contract was performed, whichever is greater. This generally means the post-employment non-compete compensation agreed to in the employment contract or in the non-compete agreement will prevail because the parties are free to agree on this amount by a mutual agreement. There are though some China courts and judges and arbitrators who will disregard the parties’ own agreement and apply the 30% standard if the parties’ agreement calls for a lower than 30% payout. No matter what, it is generally a good idea for both the employer and the employee to agree in writing to a clear and specific compensation amount for the employee’s agreement not to compete with the employer.

Geographic scope. Far too often the agreement that sets forth the non-compete obligation fails to clearly address exactly what this obligation will be. We most commonly see this in its failure even to address the geographic scope of the non-compete. In other words, will the expat be forbidden to compete with her employer in Shenzhen? In China? In China and Hong Kong? In China, Vietnam and Thailand? In all of Asia (and how is that defined?)? In the entire world? Uncertainty on geographic scope usually works against the expat down the road because it can limit the expat’s ability to get hired. Sure, you can as an expat argue that your non-compete does not extend beyond China, but will potential employers in Hong Kong or Vietnam be willing to hire you and take on the risk that it extends beyond that?  On the employer side, one of the more common mistakes we see is a non-compete that extends so far that few courts anywhere would ever enforce it. It behooves both the employer and the employee to have a non-compete that reasonably coincides with the employee’s position/company role and the employer’s business, size, and industry. A multinational with offices in 85 countries will be given more geographic leeway than a company that sells tortillas in just Qingdao.

Non-compete period. China’s legal maximum is two years after the employment contract is terminated or ends so the first thing our employment attorneys do is make sure the non-compete agreement complies with this. We then focus on making sure the non-compete period makes sense for our client. What this usually means is that when we represent the expat we seek a non-compete duration of less than two years. Because so much of our expat representation is for high level management and physicians, both of whom are in high demand by China employers, we have a very good track record of being able to narrow the scope of the employer’s proposed non-compete, both in duration and in geographic scope.

Termination rights. What are the termination rights (if any) for either party? Is the employer allowed to terminate the non-compete agreement at any time without making any additional payment? Can the employee terminate the non-compete agreement and, if so, how? Keep in mind once a non-compete agreement is signed it is usually difficult for either party to get out of it.

Contract damages. Is there anything in writing specifying the damages the employee will need to pay for breaching the non-compete agreement? If yes, what does it say? When dealing with Chinese employers we often see the damages provision be a lot clearer in the Chinese portion of the contract than in the English portion and always to the expat’s detriment. Since the Chinese portion of any China employment contract is all that legally matters in a Chinese court or arbitration (unless clearly specified otherwise in the Chinese language portion), this really matters. At minimum, the damages you as the expat must pay should be proportional to the non-compete compensation you will receive. Note also that it typically makes sense to impose specific breach of contract damages against the employer as well.

The non-compete agreements my firm’s China employment lawyers review for expats always favor the employer; this makes sense because the employer prepares this agreement. Non-compete agreements are not “just a formality” and it is critical you as the expat fully understand what you are being asked to sign and that you make a concerted effort to negotiate for better terms and protection. The fact that the Chinese language portion of the agreement is nearly always the only portion that legally matters further tilts the playing field against you. Having an experienced Chinese employment lawyer who is completely fluent in Mandarin review your non-compete agreement is usually your only real protection.

 

 

 

China employment lawyers

As promised in my post from last week, China Employment Contract FAQs, I am back to write about some of the most commonly asked questions we get about China employer rules and regulations with short answers to each of them. The below are the questions that we field most often when doing our China employer audits.

Question 1: I have several separate company policies that deal with different topics such as overtime, employee leaves and discipline. Do they need to be in one document called employer rules and regulations?

Yes. You need a comprehensive employer rules and regulations document that includes all your employer policies/rules. First, this is what Chinese authorities like to see. Second, the fewer documents you have, the easier it will be for your management to enforce your company polices and for your employees to learn about and follow them. Third, by including all the policies in the same document, it will be easier to search out and eliminate any potential inconsistencies. Fourth, this makes it easier for you to be sure to keep everything updated. Lastly, having all employer policies and rules in one document and then getting each of your employees to sign a receipt proving they received it will give you added protection.

Question 2: I have more than one office in China. Do I need a different set of employer rules and regulations for each of my offices?

Yes. China’s employment laws are highly localized and this means employment rules/practices can and usually do differ by city and even by district within the same city. The differences between your various rules and regulations will depend on where your offices and your employees are based. For example, if you have an office in Beijing and an office in Shanghai, you will likely have a very different set of rules and regulations for these two cities. On the other hand, if all your offices are located in Guangdong Province, you likely will have quite similar employer rules and regulations among your offices.

Question 3: I have been operating in China for a long time and I’ve never had a set of rules and regulations. Is it too late to start doing it now?

Absolutely not. Having a well-drafted set of employer rules and regulations will not solve past problems but it will certainly go a long way towards preventing future problems.

Question 4: The rules and regulations seem negative in tone. Will my employees accept them?

Your rules and regulations need to be reasonable to be enforceable in China. But so long as they are reasonable and enforceable, and you implement them according to Chinese law, your employees need to abide by them. One thing you as employer need to do is to get an acknowledgement of receipt signed by your employees proving they received a copy of your rules and regulations. Their signing that acknowledgment also means they have agreed to follow your rules and regulations. It is true that a big part of the standard China employer rules and regulations relates to employee discipline and terminations, but a well-drafted set of these rules and regulations should also provide detailed explanations regarding employee rights and benefits, which will give your employees clarity and protections. Well-written employer rules and regulations are good for both employers and employees and most China employees recognize this and they virtually always are willing to sign off. See China Employee Rules and Regulations: Use Them as a Talent Magnet.

Question 5: Can I just use a template set of rules and regulations from the Internet? 

Only if you do not care at all about preventing all sorts of future employee problems and setting yourself up for difficult and costly employee litigation. Your rules and regulations should match your specific situation, your industry, your locale, and, most importantly, your specific issues, goals, and concerns. Every employer client for whom we have drafted rules and regulations has had their own unique programs/policies/rules and the job of our China employment lawyers is to work with our clients to determine whether what they want is workable and legal for their specific situation and locale.

 

 

 

 

China employment lawyers
China employment contracts: the questions we get

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.

China employment lawyer

We have done a ton of China employer audits this year and from those our China employment lawyers have compiled the following list of the top six “warning signs” of impending employment problems.

1. All or some of your employment documents are in English only. If your employment documents are in English, you are handing your employees with a valid defense for not abiding by them. Nearly all Chinese courts and arbitrators will either refuse to enforce such contracts and documents or just rule in the employee’s favor. Equally bad is that anyone who believed that having their China employment documents in just English has no clue about Chinese employment law and the documents (in English) reflect this. You are almost certainly not going to be able to enforce your English language employment documents and yet your employees will be able to sue you for what you put in them, including any provisions that violate Chinese law. Your only real remedy is compliant documents with the English and the Chinese in one document.

2. All or some of your employment documents are in Chinese only. This one is very common and almost always a big mistake. I hate to sound like a broken record (actually I don’t) but you need your employment contracts and agreements to be in both English and Chinese and these two languages should be drafted together in each document, not as separate documents. You need these contracts in both Chinese and in English unless ALL of your relevant higher level employees (typically your HR personnel and management or anyone else who will be overseeing your employees in China) can read and understand written Chinese perfectly. Separate documents can lead to all sorts of problems. For example, when one version gets updated or amended and the other version does not (trust me when I say this happens all the time) you have a problem. Having separate documents also creates headaches for your HR people in terms of document retention. Much of the time when we see the employment documents in just Chinese they were drafted by a “trusted” Chinese employee not an HR expert and this usually means they fail to comply with either the national or the local employment laws AND they favor the employees. This situation also commonly leads management (especially out of the home office) to make employee decisions that run counter to what their own documents say simply because they do not know what their documents say. Again, your only real remedy is compliant documents with the Chinese and English versions in one document.

3. You get a lot of employee questions regarding your employment document or your employment policies. For example, your company recently implemented a new leave of absence policy and many employees are asking whether they are eligible and what they need to provide if they want to apply for the leave. This does not necessarily mean the relevant document is unworkable or even that the provision needs a re-writing. But it usually means you should at least consider making the document that is generating so many questions more clear. Similarly, if your employees are frequently contacting you with questions not addressed in your documents, you likely should put the answers in your employer rules and regulations or your employment contracts.

4. Your employer documents were implemented years ago. China’s national and especially its local employment laws and rules are constantly changing. On top of this, local interpretations and enforcement policies are constantly changing as well. See China Employment Law: Local and Not So Simple. Just last week, one of our China attorneys got an email from a reader thanking us for our employment law blog posts and for our China employment law book and saying that his new China WFOE had used those to draft all of its employment documents. Our lawyer wrote back with the following:

Using our blog posts and our book to draft your employment documents is a huge mistake. These are meant to give you general information and general guidelines but much of what we write becomes outdated soon after we write it and much of it will not apply to your specific locale or your specific industry or your specific situation. You need real employment law help and fast.

You should have someone who truly understands Chinese national and local employment laws review your employer rules and regulations at least once a year and, ideally, audit your entire HR program at the same time.

5. Your China office(s) has undergone or will be going through a significant change (such as a merger or an exit of key personnel). Your employment documents need to fit your existing situation, not what it was a week ago when you were half or twice your size. Your solution is to be sure to stay current.

6. Some or all your employment agreements are not signed or chopped. Check now to make sure all of your employees have signed your latest version employment contracts and written acknowledgments confirming receipt of your latest version employer rules and regulations. If this is not the case, your remedy should be clear and immediate. Do what it takes to update what you need to update and get signed what you need to have signed.

Bottom Line: If you see your company in the above, get moving. Now.