On July 25 2011 the Shanghai Jing'an District Court reportedly rejected an employee's claim for overtime payments, based on his senior management status and the provision on flexible working hours in his employment contract.

Mr Jiang's employment contract with a cosmetics company stated his position as "supply chain manager" and his monthly salary as Rmb25,000. The employment contract also provided that Jiang was subject to the flexible working hours system - and therefore not entitled to overtime pay - based on his senior management status.

The company had obtained approval from the local labour bureau for "senior management" to be subject to flexible working hours. In response to the employee's claim that he was not a senior manager, the court ruled that the employee had failed to provide sufficient evidence of this, and commented that he should not be regarded as a regular employee, given the amount of his monthly salary and his job level. The court also relied on the fact that the employment contract stated that Jiang was a senior manager.

The definition of the term 'senior management' for the purposes of flexible working hours is unclear under national law. Often, approval certificates issued by the labour bureau do not detail all positions within the company that may be covered. A few local regulations, such as those applicable in Shenzhen, provide that the definition should follow the narrow definition under the Company Law, which applies the term to the general manager, the deputy general manager and the chief financial officer. Many local labour bureau officials informally hold the same position. However, in this case the court adopted a broader definition of 'senior management' for flexible working hours purposes, based on salary, job level and the wording in of the employee's employment contract.

Wherever possible, companies should check that employment contracts with personnel who may qualify for flexible working hours status are properly worded to ensure that the employee is exempt from overtime.

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 (andreas.lauffs@bakermckenzie.com or jonathan.isaacs@bakermckenzie.com).