On December 31st, 2014, Ministry of Human Resources and Social Security (“MOHRSS”) issued a notice to solicit public opinions on the draft Regulations on Personnel Cutbacks by Enterprises (“Draft Regulations”). The Draft Regulations set out detailed implementing rules for “mass layoffs” (defined under the Labor Contract Law as being a layoff of more than 10% of the workforce or more than 20 employees) and, if adopted in their current form, will further complicate the process for conducting reductions in force in China.

Under the Draft Regulations, employers are required to take measures to prevent or reduce the number of cutbacks before conducting a layoff, including on-job training, reduction of working hours and adjustment of salary, etc. The measures taken will also need to be submitted to the local counterparts of MOHRSS as part of the application documents required for layoff reporting. Employers taking effective measures to prevent or reduce the number of cutbacks will be entitled to subsidies from MOHRSS.

The Draft Regulations also set more detailed procedures for employers to follow in the event of mass layoff:

  1. If a layoff is still needed after the employer has taken measures to prevent or reduce the layoff, the employer needs to inform the labor union or all employees 30 days in advance of the proposed layoff, failing which the labor union or employees may require the employer to redo the process. The information to be provided to employees includes the reasons for layoff and supporting operation materials or other relevant materials, the extent of impact on the operation and details of the measures taken to reduce layoff.
  2. The employer then needs to propose a preliminary layoff plan which includes (1) legal basis; (2) scope, number and percentage of layoff; (3) standards to choose employees subject to layoff; (4) timeline and measures for layoff; and (5) severance.
  3. The employer must publish the final layoff plan and list of employees subject to layoff consulting with the labor union or employees and making necessary amendments to the layoff plan and must then submit a layoff report to the local counterparts of MOHRSS.
  4. The employer is allowed to proceed with the layoff 10 days after the layoff filing with MOHRSS.

The Draft Regulations also provide that 30 days’ advance notice to the labor union or all employees and a report to the local MOHRSS is needed if the number of employees subject to mutual termination exceeds 20. Although some localities in China have promulgated local rules requiring similar reporting in this regard, employers often choose to negotiate mutual terminations with their employees to skip the time-consuming mass layoff reporting process and there is no national requirement.

The Draft Regulations impose penalties for non-compliance of between RMB 2000-RMB 20,000. Some commentators have objected that these penalties are too light to be effective.

The period for public consultation on the Draft Regulations ended on January 31st, 2015. As yet, there is no indication of when the final regulations will be issued or any amendments that may be made to them.

Revision of Part-Time Employment Act in Japan

The revised Act on Improvement, etc. of the Employment Management for Part-Time Workers (the so-called “Part-Time Employment Act”) went into effect on April 1st this year as a measure to treat part-time employees equally with full-time regular employees.

Before the revision of the Act, discriminatory treatment was prohibited only against the part-time employees (defined as employees with less work hours than full-time regular employees) (i) whose duties are equal to those of full-time regular employees, (ii) to whom the same HR system applies as that of full-time regular employees (such as transfer of duties, relocation, etc.) and (iii) whose employment contracts have undetermined terms. After the revision, however, a requirement (iii) above is deleted, and, if requirements (i) and (ii) above are satisfied, employers are obliged to treat part-time employees, including contract (fixed term) employees, equally with full-time regular employees.

In addition, “Principle concerning part-time employees’ treatment” which are broadly applied to parttime employees was newly established in the Part-Time Employment Act, and under the principle, differences, if any, in treatment between part-time employees and full-time regular employees should not be unreasonable in light of their duties, HR system and other conditions.

Furthermore, the revised Act obliges employers to explain to the newly hired part-time employees, upon hiring, the improvement measures that they actually take with respect to the part-time employees’ employment management. The revised Act also provides for employers’ new obligation to establish and maintain a system for responding to consultations from part-time employees.

In Japan, unstable employment and lower wages, caused by an increasing number of so-called “nonregular employment” (the current percentage of contract employees exceeding 20% of the total number of employees), are serious social problems. The purpose of the revisions is to improve working conditions of the part-time employees who meet the certain requirements. Because a majority of part-time employees are contract employees, exclusion of undetermined-term requirement is one step forward. However, effectiveness of the revision will still be limited because it is uncommon for the part-time employees’ employment contracts to have a provision for unilateral relocation order by employers.