On May 1 2011 it became a criminal offence for a company intentionally to fail to pay wages. Both the company and its responsible managers are liable to criminal prosecution following an amendment to China's criminal law by the National People's Congress. This is a significant departure from the administrative penalties which previously applied in such cases.

In order to prove an offence, it must be shown that the employer avoided paying wages by transferring assets, going into hiding or simply refusing to pay despite having the means to do so. In addition, the amount involved must be relatively large and the offender must have refused to pay despite receiving an order to do so from the competent government authorities.

The individuals who control an offending company and those directly responsible for the crime will be punished. The amendment provides that offences are punishable by up to three years' imprisonment, a fine or both. However, particularly serious offences may result in a three to seven-year prison term, plus a fine. A legal entity that is found to have committed a crime will be fined.

The law offers a broad definition of the term 'wages'. Employers might face criminal liability for matters such as unpaid overtime wages if they refuse to pay after being order to do so by the authorities. However, it remains to be seen how the criminal courts will interpret this provision.

For further information on this topic please contact Andreas Lauffs or Jonathan Isaacs at Baker & McKenzie's Hong Kong office by telephone (+852 2846 1888), fax (+852 2845 0476) or email ([email protected] or [email protected]).