PDF Understanding Labor and Employment Law in China

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PRC law protects trade secrets and intellectual property-related confidential information of the employer. Any information or document can be treated as a trade secret if the information or document: i is not known to the public; ii is capable of bringing economic benefits to the owner of the trade secret and has practical applicability; and iii for which the owner has undertaken measures to keep secret.

Business connections like client, customer or supplier information, designs, formulae, source code, etc. The duration, geographical scope and business to be restricted shall be agreed by the parties. There are no specific tests to determine the effectiveness of a non-dealing, non-solicitation or non-poaching clause. It will be examined by the court on a case-by-case basis when being disputed.

In the past few years, there has not been much progress on the legislation relating to discrimination protection. Besides the general principles of protecting the equal work rights of vulnerable groups, such as the disabled, we have not seen any constructive rules being adopted to promote this protection. On the other hand, discrimination against women in working environments who are within the age range of giving birth has drawn massive attention.

Highlights of the Ministry of Labor

Particularly, the Chinese government has changed the one-child policy and is encouraging women to have a second child. This policy has caused employers to be reluctant to hire female employees. Under the PRC law, an employment contract may only be terminated with legal cause. Legal cause for an employer to terminate employment is limited to the following circumstances:. Usually the employer is obliged to pay severance compensation for termination except in scenario a , b , c , d , e , f or g. Where the employer terminates the employee on the basis of scenarios h to l , the employer should pay severance compensation.

For each year of service with the employer, the employee is entitled to one month of severance compensation subject to a statutory cap. Where the employer terminates an employment contract without legal cause, it should pay double the usual severance compensation; the employee may still request the reinstatement of the employment contract in this case, which in practice could be upheld by the alabour arbitration tribunal or the court.


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For example, if there is illegal appropriation, it is common for the court to require proof that it has been reported to the public security bureau. Under the PRC law, employees are entitled some statutory rights. After the probation, the statutory notice period for the employee to terminate an employment contract is 30 days, which is usually not allowed to be extended by the company through the employment contract.

In practice, we have seen many cases in which an employee has waived its entitlement to social insurance contribution in order to receive higher take-home pay. However, according to PRC law, such waiver by the employee is not valid or legally binding upon both parties. Under PRC law, a company is required to enter into a written agreement with its employee. PRC law allows the employee to claim double salary for each month the employee works, calculated from the second month of work which is not performed under a written labour contract, if the company fails to enter into or renew the written employment contract.

In practice, the labour arbitration tribunal or the court will usually uphold a claim for double salary for 11 months at the most. In order to validate the internal rules and regulations involving the immediate interest of employees, the employer shall make them public or communicate the same to the employees.

In practice, it is common to have the employees sign meeting minutes to evidence that the democratic procedures have been followed when passing the rules and also sign a copy of the finalised internal rules and regulations to evidence that the internal rules and regulations have been communicated to the employee properly.

What is legal employment in China and how can one dismiss employees in China

Under PRC employment laws and regulations, the trade union plays an important role in the formulation of company rules and regulations, collective employment contract negotiation, termination of employees, and mass layoffs. In case the employer intends to terminate the employment contract, it shall first inform the trade union of the cause of termination. The trade union may request the employer to take corrective action if it considers that the cause of termination will violate the laws, administrative regulations or the employment contract. The trade union may enter into a collective employment contract with the employer on behalf of the employees.

In a mass layoff or in the process of formulating company rules and regulations, the trade union should be consulted properly. There is a trend of an increasing number and scale of industrial actions, which is being used by the employee more and more often as a tool to assert its legal rights or negotiate better terms of employment. Where the employees start a strike because of incompliance on the part of the company in relation to employee benefits and rights, PRC judicial bodies are usually protective of the employees and often uphold claims of termination without legal cause if the employer terminates the employees for organising or participating in the strike.

Meanwhile, it would be helpful to understand the stance taken by the PRC judicial bodies in the absence of clear statutory guidelines in different scenarios. Such information should be stored within the territory of China local storage , and where such information and data have to be provided abroad for business purposes, security assessments must be conducted security assessment. However, it seems very likely that future legislation will extend the local storage and security assessment requirement from CII operators to all network operators, which are defined very broadly under the Cybersecurity Law as the owners or managers of the network and the providers of the network service.

This area should be monitored by companies within its group exporting its internal data, which involves personal information collected and generated in the course of its operation in China. Additionally, some employers monitor the electronic devices, such laptop or cell phone, of their employees.

Where the electronic devices belong to the company, it may usually be assumed quite often it is also provided in writing that the mobile device will be used only for business purposes, and therefore the company has the right to take, copy and read the data held on the electronic device. Moreover, some employers install CCTV in their office. We have seen a labour dispute in Hangzhou in which an employee claimed that the employer infringed his privacy right by installing CCTV in the office space. The exponential development of instant messaging and online payments in China has made correspondence through QQ or WeChat, Alipay payment records, and communication via company chatting software one of the main forms of evidence in labour disputes.

Although these types of evidence are admissible in a PRC labour arbitration or trial, in practice a company may not keep a good record of such evidence and sometimes the communications are carried out by senior staff on behalf of the company through their own mobile devices. This has created new issues for companies in the collection and preservation of evidence. Under PRC labour law, foreigners working in China are also required to make social insurance contributions. However, lots of expatriates, who have the intention of returning to their home country, are also concurrently paying social insurance contributions back in their home country.

More fundamentally, some Chinese academics oppose the whole practice of setting new, higher labor standards. One must wonder what good results from having high labor standards on paper which virtually nobody enforces. Certain negative consequences of such an arrangement seem clear though, such as decreasing respect for the rule of law.

Labour relations in China: Some frequently asked questions

There is increasing recognition that if unions are not inspired by workers and created in a bottom-up manner, they will remain toothless. In one conversation with the author, Dong Baohua was emphatic that rights should be given to the workers, who should then choose whether to transfer these rights to unions of their own creation. Even if some are not sympathetic to the actual positions advanced by these American corporations, the means by which they are promoting them are noteworthy. In March , once a draft was ready, the NPC not only made it public but invited the public to comment on it.

The two organizations submitted written comments to the NPC consistent with the established procedure. Representatives of various U. The overworked and understaffed NPC was very much seeking the opinions and advice of outside labor experts and these multinational companies offered their suggestions. Moreover, whatever the Chinese legislature finally decides — whether it adopts their suggestions or not — few have doubted that these companies will then comply with the new regulations. Such participation is far preferable to what most Chinese companies are doing.

Insiders suggest that many Chinese companies view passing this law as a government priority and fear that voicing any criticism or opposition to the draft would threaten their relationships with top officials. Therefore, they say nothing about this law that hurts their interests, and instead, if the law is passed, they plan to rely on their government relationships to evade any new requirements.

Thus, they will not participate in the democratic exercise of seeking to draft a good, fair law, but will work to undermine the whole exercise by refusing to enforce whatever standards are eventually agreed upon. Such a rosy picture of U. Starting with the latter, AmCham has denied that these people actually represent the organization in any official capacity.

It does seem a bit surprising that AmCham would be preparing a forty-two-page written response to the NPC and simultaneously sanction such a rash and brazen action.

Important things to know about Chinese Labor law - part 1

As for the more subtle threat, in which U. Corporations will always migrate to the country with the most favorable economic conditions. To pretend that labor standards do not matter in this calculation would be misleading. Thus, it seems fair to make this an element in the debate over the LCL. Those involved in the drafting process have suggested that the current draft was basically written by the ACFTU and pro-labor academics.

The content of the LCL suggests this is likely.

It seems appropriate that somebody voice the concerns of the business community as well. Whatever the legislature decides to do in the end, the Chinese government would be grossly negligent if it were not at least thinking hard about how any new legislation would impact the foreign investment which is responsible for so many Chinese jobs.

Now that a revised draft of the LCL has been completed, it seems that the comment process helped to improve the clarity and structure of the draft law. Instead of having a few scattered sections that address labor brokerage, the revised draft has a chapter of 11 sections that sets stricter regulations on these companies, delineates the legal relationship between and relative responsibilities of labor brokers and the employing companies, and clarifies the rights of the workers in such arrangements for instance, affirming their right to join unions.

For example, the ceiling on penalties for non-compete clauses was removed, but the scope of their use was limited to senior managers and technicians and the two-year maximum remains. The revised draft allows employers to require a period of employment for workers that receive one month of training instead of six , but it also explicitly requires that workers receive appropriate wage raises during the training period.

Many provisions of the revised draft actually seem even more pro-worker than the original.

1. Can you hire employees in China without a legal presence?