On 1 December 2014, the Amended Workplace Safety Law issued by the National People’s Congress ("NPC") of the People’s Republic of China ("PRC") became effective. This revision builds on the basic principles set out in the 2002 Workplace Safety Law and unveils tougher rules and harsher penalties for workplace accidents.
The Amended Workplace Safety Law sets forth: (1) comprehensive rules that employers in China must follow to guard against accidents in the workplace; (2) a requirement that employers develop a "responsibility system" - delegating responsibilities for safety to specific internal safety units; (3) significantly increased fines for work-related accidents and for any non-compliance; and (4) liability for "responsible persons."
It is significant that the amendment has been issued by the NPC as this shows the focus of the PRC government at the highest level on safety issues for workers. The new law is also very likely a response to the apparently growing number of serious and much publicized work-place accidents and incidents which have occurred in the last year across China, resulting in significant numbers of injuries and deaths.
The key feature of the Amended Workplace Safety Law is that it reemphasizes and makes clearer the obligations and responsibilities of employers in China to provide a safe and healthy working environment for employees by establishing a comprehensive workplace health and safety program and developing a clear "responsibility system". The purpose of the "responsibility system" is to organize and delegate responsibilities as they relate to workplace health and safety.
These responsibilities are delegated to the organization’s "safety unit". The safety unit, which comprises of "leading members of production and business units", is required to:
- formulate rules and implement a work safety plan;
- establish and test an accident response protocol;
- ensure that existing facilities and any new facilities comply with the Amended Workplace Safety Law; and
- supervise and inspect work safety at the respective business and production units.
In addition, the amended law sets out higher penalties and fines for failure to follow and meet these requirements.
As well as developing a "responsibility system" and implementing a work safety plan, employers must provide all necessary safety equipment, including goggles, hard hats and protective or other clothing, and ensure that all employees receive proper education and training on health and safety standards in the workplace.
Finally, employers are required to allocate funds specifically for work safety issues. In the case of insufficient funds being provided to meet requirement, managers and decisionmakers can be held accountable and liable. Our understanding of this provision is that it is designed to show that lack of funding (or adequate budgeting for this purpose) is not an excuse for an unsafe workplace or ineffective safety program. The funds set aside could cover any aspect of work safety, including checking, modifying or replacing existing equipment and facilities, and buying protective equipment or clothing. The fact that responsible individuals may be held personally liable for accidents that arise significantly ups the stakes and means that individuals cannot necessarily shield themselves
behind the company.
The Amended Workplace Safety Law reiterates various other PRC laws and regulations and provides employees with various rights relating to workplace health and safety. For example, it specifies that all labor contracts must clearly identify and cover work safety issues, including references to measures to prevent occupational hazards and details of any statutorily required insurance program relating to industrial injuries. In addition, employees have a right to:
- prior notification of any dangerous conditions in their workplace;
- notification of preventive or precautionary measures relating to dangerous conditions;
- regular medical examinations at the employer’s expense (for those in dangerous occupations or exposed to hazardous substances);
- refuse to carry out what they believe to be an unsafe procedure; and
- relief from the labor authorities in the event of a violation of the Amended Workplace Safety Law.
Penalties and Liabilities
The Amended Workplace Safety Law provides significantly higher fines for employers (and adds that employers may also be exposed to criminal liability) in relation to noncompliance and workplace accidents. "Responsible persons" may also have personal liability in the form of fines for workplace accidents that occur under their supervision.
Workplace accidents and the related penalties are broken into four categories based on severity. Little guidance is offered on the precise mechanism as to how to determine which category a workplace accident will fall into, but it is our understanding that the factors considered will probably include the number fatalities and serious injuries, as well as the damage and economic loss caused.
The table below sets out the categories and the range of the revised fines:
Click here to view table.
In addition to the fines above, the person or persons who are primarily responsible for “control over work safety” of a company or business unit (the “responsible persons”) can be liable to fines and penalties for workplace accidents. There is no clear definition of responsible persons, but it is our understanding that this would include designated managers, supervisors and safety officers overseeing the part of a business in which non-compliance or an accident occurs. In addition, it could include very senior management staff such as the general manager or the legal representative.
Responsible persons may be dismissed or demoted from their position if an accident occurs. The “responsible person” may also be liable to fines of between 30% and 80% of his/her previous year’s income.
If a “responsible person” is found to have failed to take prompt and appropriate action or to make immediate emergency arrangements in the event of an accident that causes injury or death, then he/she may also be liable to a fine of 60% to 100% of his/her previous year’s income.
The intention seems to be to put pressure on both companies generally, but also specific individuals within those companies to ensure that work safety is a priority and that procedures are correctly implemented and followed.
On 4 December 2014, just three days after the Amended Workplace Safety Law became effective, Xiaoshan Daily newspaper reported that a Hangzhou company was fined RMB 30,000 for failure to affix precautionary signs warning employees of a dangerous workplace condition. This seems to demonstrate not only the greater regulatory emphasis on and scrutiny of work safety in practice, but also indicates an expectation that preventative measures must be considered and that fines may be imposed even if no accident actually occurs.
In many ways the Amended Workplace Safety Law simply builds on the existing broad principles of the 2002 Workplace Safety Law. While it still lacks the level of detail required for complete clarity and understanding, companies should take note of the general trend: the regulatory authorities seem to expect more attention to this area and are willing to impose penalties for failure to do so. As such, companies should check and update their safety programs to comply with the new law. This includes having clear procedures and responsibilities, as well as a financial budget for safetyrelated items.
We also recommend that foreign companies in particular implement comprehensive worksafety training and accident prevention protocols. While PRC law applies equally to both foreign and domestic companies, in practice foreign companies are often held to a higher standard. The cost of providing a safer workplace and proper systems and equipment is likely to be less than fines under the Amended Workplace Safety Law and the impact on reputation that normally accompanies such situations.