Based on Shanghai’s local regulations and judicial practices, this article centers on the remuneration, job reassignment, and labor dispute issues of female employees undergoing pregnancy, confinement or lactation (hereinafter referred to as “employee undergoing three periods” or “employee”) and other practical matters that would likely confuse employers. 

Q1. How is an employee paid during her maternity leave? 

According to national policies on maternity insurance, employees are entitled to maternity insurance benefits during their maternity leave.  The specific standards are as follows: 

1) for employees already covered by maternity insurance, the insurance fund will provide maternity allowance and a one-time medical fee subsidy.  The allowance is assessed based on the previous year’s average monthly wage of all employees working at the employer’s firm.  In principle, maternity allowance is paid entirely by the maternity insurance fund.  However, the employer must cover any shortfall under the following circumstances: 

  •  the maternity insurance fund is only responsible for up to 300% of Shanghai employees’  average monthly wage of the previous year.  If the average monthly wage at the  employer’s firm in the previous year is higher than this number, the employer must make  up the difference.
  • under all circumstances, when the allowance received by employee is lower than her wage prior to maternity leave, the employer must cover the shortfall to ensure that the employee’s compensation during maternity leave is no worse than that before her leave

2) for those without maternity coverage, their wages during maternity leave must be paid according to the standard before their leave. 

Regarding compensation during maternity leave, employers should also pay attention to the following issues in practice:

Firstly, the standard for an employee’s compensation before maternity leave is mainly determined according to Article 4 of the Provisions on Composition of Gross Wages. Under this article, compensation should include hourly wage, piece-rate wage, bonus, allowance and subsidy, overtime pay and wages paid under special circumstances. Therefore, we suggest that employers determine the standard for their employee’s wage before maternity leave based on the gross wages she receives for normal job attendance before maternity leave.

Secondly, according to Finance and Taxation [2008] Notice No.8, maternity allowance and onetime maternity medical fees paid by the maternity insurance fund are exempt from personal income taxation. However, the notice, other regulations, and judicial opinions do not specify whether the part paid by the employer is also exempt, and tax authorities have varying opinions on this matter. We therefore advise employers to confirm this issue with their tax collector in advance to minimize risk.

Q2. Can the employer reassign an employee undergoing the three periods?

Generally speaking, the job reassignment should be agreed between the employee and employer. Unless one of the following circumstances applies, the employer must not unilaterally reassign the employee without cause:

Firstly, reassignment is allowed under some legally permitted circumstances. According to the Measures of the Shanghai Municipality for Protection of Female Employees, whereas (1) a female employee’s work requires frequent bowing, climbing, squatting, lifting, carrying, and other work that would likely lead to abortion and premature birth, or (2) the employee provides proof, from medical organizations of district, county or higher levels, that she is unfit to perform her previous duties, the employer must temporarily arrange other suitable work for the employee or reduce her workload. However, if the employee is not qualified for her original position or if the original contract cannot be performed due to a major change in circumstance,  the employer may unilaterally reassign the employee. 

Secondly, an employer may wish to reassign an employee due to operation and management needs under circumstances not stipulated by law.  In practice, Shanghai’s judiciary is inclined to support a job reassignment if the employer demonstrates that the reassignment is reasonable. 

For any unilateral job reassignment, the employer must prove that it is either done under a circumstance stipulated by law or based on reasonable grounds. Otherwise, the reassignment may be voided by an arbitral or judicial body. Of special interest is the fact that arbitral and judicial bodies apply greater scrutiny to determine the legitimacy and reasonableness of the reassignment of an employee undergoing three periods than that of ordinary employees. Thus, employers should be prudent in deciding on a reassignment, especially under circumstances not stipulated by law, which involves a substantial risk of violation. In addition, arbitral and judicial bodies tend to hold the view that reassignment of an employee undergoing three periods should not result in a reduction in her compensation.

Therefore, an employer should first ensure that the conditions for unilateral reassignment are met before reassigning the employee to a new position. If yes, it should then make sure that the employee’s compensation remains the same before and during the three periods. Otherwise, the labor administrative department may order the employer to pay the difference to the employee. Furthermore, if the employee proposes to terminate her labor contract on the ground that the employer illegally reduces her compensation, the employer may be liable for economic damages.

Q3. Can an employer terminate the labor contract of an employee undergoing three periods? When would a termination of labor contract be considered unlawful?

China’s Labor Contract Law sets restrictions on an employer’s unilateral termination of the labor contract of an employee undergoing three periods. Specifically, even if an employee is terminable for reasons enumerated in Articles 40 and 41 of the Labor Contract Law (such as incompetence, mass layoff, etc.), the employer may not unilaterally terminate her labor contract if she is undergoing one of the three periods.

Besides, if the employee’s labor contract is to expire during the three periods, the expiration date should be postponed to the end of the periods in accordance with the law.

If the employee undergoing three periods is at fault (such as failing to meet employment requirements during probation period or seriously violating workplace rules), the employer may unilaterally terminate the employee’s contract. But an arbitral or judicial body will examine the termination with relatively strict scrutiny in case the termination is disputed by the employee. 

In labor disputes (especially cases involving employees undergoing three periods), arbitral and judicial bodies are generally pro-employee. Thus, employers run a higher risk of being found liable for illegal termination. In practice, most employees undergoing three periods prefer to resume their labor relationship and claim lost wages and benefits during the period of their labor dispute. And if their termination is found to be illegal, the employee’s request would usually be granted by the arbitral or judicial body. Therefore, we suggest that employers be more cautious when considering terminating an employee undergoing three periods.

Q4. Can an employee resume the labor relationship with her employer if she is found to be pregnant after termination of their labor contracts?

If an employer illegally terminates the contract of an employee undergoing three periods, the employee’s request to resume labor relationship would usually be granted by an arbitral or judicial body. However, where the employee requests to resume a legally terminated contract, the judgment might differ depending on the reason for termination, as seen in practice:

First, if the labor contract is terminated by employee’s resignation or by the parties’ mutual agreement, the arbitral or judicial body would tend to believe that the termination reflects the parties’ true intent and not grant the employee’s request to resume labor relationship on pregnancy ground; 

Second, when the employee requests to resume the labor relationship based on pregnancy after her labor contract expires, the result would depend on the date of pregnancy. If pregnancy occurs before the contract’s expiration date, the arbitral or judicial body would generally be inclined to resume the labor relationship. Otherwise, the request for resumption would not be granted.

Q5. In a labor dispatch relationship, can the employing unit return a worker undergoing three periods to the dispatching unit?

In a labor dispatch relationship, the employing unit face certain restrictions in returning a worker undergoing three periods. A dispatched worker undergoing the three periods may not be returned if:

1)a major change in circumstances, the non-occurrence of which is an assumption on which the contract is made, makes performance of the dispatch work impossible;

2)the employing unit implements a mass layoff in accordance with law;

3)the labor dispatch agreement between the employing unit and the dispatching unit expires.

However, the worker undergoing three periods may be returned upon (1) her serious disciplinary violations or other faults and (2) the employing unit’s bankruptcy, business license revocation, shutdown, cancellation, liquidation, or business period expiry. This is reflected by the judiciary’s opinion, as seen in practice, that the special protection granted by China’s labor law to employees undergoing three periods is not unbounded. But note: arbitral and judicial bodies would apply greater scrutiny in deciding this type of cases. Therefore, employing units are advised to handle these matters with care.