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Which issues would you most highlight to someone new to your country?
Chinese employment law provides comprehensive and stringent rules covering everything from hiring to termination, and there is little room for the parties in an employment relationship to create new mechanisms in addition to these statutory mechanisms. In addition, the following characteristics of Chinese employment law are notable for companies doing business in China:
- The majority of regulations pertain to individual labour relationships.
- At present, collective labour relationships do not play a vital role in employment law.
- The regulations are fairly simple, but the authorities have significant power.
- Local legislation has a significant influence on employment relationships.
What do you consider unique to those doing business in your country?
Chinese employment law is characterised by:
- a stringent termination system;
- local regulations, which vary on the same legal issues; and
- arbitral tribunal and court interpretations of the law, as well as awards and judgments, which vary on the same legal issues.
Is there any general advice you would give in the employment area?
Multinational corporations must localise their global employment policies and relevant practices in view of the special requirements of Chinese employment law.
Emerging issues/hot topics/proposals for reform
Are there any noteworthy proposals for reform in your jurisdiction?
In 2018 China adopted the revised Individual Income Tax Law in an effort to pursue fairer income distribution. The new law provides that the minimum threshold for personal income tax exemption will be raised from Rmb3,500 to Rmb5,000 per month or Rmb60,000 per year. The law adds special expense deductions for specific circumstances including:
- elderly care;
- education of children;
- continuing education;
- treatment for serious diseases; and
- housing loan interest and rent.
More detailed implementation rules are expected to follow soon. Among other things, foreign expatriates, if they are recognised as Chinese tax residents, may also enjoy the expense deduction benefits which apply to Chinese citizens under the new law.
What are the emerging trends in employment law in your jurisdiction?
Government officials have realised that the inflexible modes of employment and the stringent termination system in China have, to some extent, impeded the country’s economic development. As a result, the relevant laws and regulations are likely be amended in the near future. It has been suggested that Chinese employment law can be improved by:
- increasing the flexibility of the various modes of employment in order to meet employment requirements; and
- relaxing the stringent restrictions applicable to termination.
In addition, employees have recently become more aware of various employment issues and consequently there has been a gradual development of collective employment relationships.
The employment relationship
Country specific laws
What laws and regulations govern the employment relationship?
The main laws governing employment relationships in China are:
- the Labour Law;
- the Labour Contract Law;
- the Union Law;
- the Law on the Mediation and Arbitration of Labour Disputes;
- the Collective Contract Regulations;
- the Work Safety Law; and
- the Social Security Law.
Local regulations made pursuant to these laws and Supreme Court judicial interpretations are also important in this regard.
Who do these cover, including categories of worker?
These laws cover all workers and employers, as long as their relationships are considered labour relationships.
Are there specific rules regarding employee/contractor classification?
There are no specific rules regarding employee or contractor classification in China.
Must an employment contract be in writing?
Yes – the Labour Contract Law provides that in order to establish a labour relationship, an employment contract should be concluded in written form. An exception to this rule is that oral agreements are acceptable for part-time employment.
Are any terms implied into employment contracts?
There are many such terms. For example, the Labour Contract Law provides a comprehensive list of scenarios in which employers can terminate an employment contract. Even where such terms are not included in an employment contract, the employer can still rely on these statutory clauses in order to terminate the contract.
Are mandatory arbitration/dispute resolution agreements enforceable?
The Labour Contract Law does not grant the parties to an employment contract the right to agree on any arbitration or dispute resolution agreements other than those which are mandatory by law. Awards by the competent labour arbitral commissions and court judgments are enforceable.
How can employers make changes to existing employment agreements?
Under the Labour Contract Law, employers and employees can modify the provisions of an employment contract if they agree to do so after consultation. Modifications to an employment contract should be made in writing.
Is a distinction drawn between local and foreign workers?
In addition to the abovementioned laws, which apply equally to both Chinese and foreign workers, foreign nationals working in China must abide by other regulations specially designed for them and apply for work permits before they can be hired by employers in China.
Foreign persons working in China must participate in the Chinese social security system in the same way in which Chinese workers do, subject to some exceptions.
What are the requirements relating to advertising positions?
Employers cannot publish untrue or false recruitment ads. Where employers contravene this rule, the labour administrative authority may order the employer to correct its behaviour and impose a fine of up to Rmb1,000. If such untrue or false ads cause damages to the parties concerned, the employers should also compensate their losses.
What can employers do with regard to background checks and inquiries in relation to the following:
(a) Criminal records?
Employers can request employees to provide a copy of their criminal record for positions where, under the law, no criminal history is a prerequisite. Otherwise, there are no explicit legal grounds for employers to request an employee to provide a copy of his or her criminal record.
(b) Medical history?
In general, it is impractical to obtain an employee’s medical history. However, it is normal practice to ask an employee to provide a recent medical report.
(c) Drug screening?
Although seldom required by employers in China, employees can be required to undergo drug screening.
(d) Credit checks?
Employers can obtain publicly available information concerning dishonest people (ie, people who have refused to perform court judgments). Other credit information must be provided by the employee.
(e) Immigration status?
Employers can ask employees to provide a copy of their residency permit, identity card or passport, among other things.
(f) Social media?
Employers can search for employees on Microblogging, WeChat and all other social media platforms.
Employers can ask employees to provide references or recommendations from previous employers.
In addition to the above, when recruiting new staff, employers can, in practice, verify a candidate’s basic personal information, education, work experience, reputation, credibility and other relevant information.
Further, employers can, among other things:
- conduct their own investigation;
- employ an external agency to conduct the investigation; or
- request employees to provide relevant information or documents.
In practice, requesting staff to provide relevant information or documents and getting them to declare their authenticity can help to reduce the risk for employers and enable them to recruit effectively.
Wages and working time
Is there a national minimum wage and, if so, what is it?
Yes – there is a minimum monthly wage for full-time employees and a minimum hourly wage for part-time employees. Local governments adjust the minimum wage standards annually, taking into account:
- the cost of living;
- average wage levels; and
- the level of economic development in the relevant region.
Are there restrictions on working hours?
Yes – under the Regulation on Employee Working Hours, working hours cannot exceed eight hours a day or 40 hours a week.
Hours and overtime
What are the requirements for meal and rest breaks?
As there are no special requirements concerning meal and rest breaks, this is up to an employer’s discretion. However, employers are expected to be reasonable in this regard.
How should overtime be calculated?
The Labour Law states that employers can extend working hours following negotiations with trade unions or employees due to production and management needs. Overtime generally cannot exceed one hour a day. In special circumstances, overtime can be up to three hours a day, but it cannot exceed 36 hours a month.
What exemptions are there from overtime?
Under the Labour Law, it is possible to extend working hours in certain circumstances without the aforementioned constraints in the event of:
- natural disasters, incidents or other reasons which threaten employees’ lives, health or property and require emergency management;
- the malfunction of production facilities, transport lines and public facilities which affect production and the public interest and require timely repair; and
- other circumstances, as stated in the law and administrative rules and regulations.
Is there a minimum paid holiday entitlement?
Under the Regulations on Paid Annual Leave of Employees:
- employees who have worked between one and 10 years are entitled to five days’ annual leave;
- employees who have worked between 10 and 20 years are entitled to 10 days’ annual leave; and
- employees who have worked for more than 20 years are entitled to 15 days’ annual leave.
What are the rules applicable to final pay and deductions from wages?
Employers must withhold or deduct personal income tax, social security contributions and housing funds before paying an employee’s salary.
What payroll and payment records must be maintained?
Employers must record in writing the amount of wages paid, the date on which they were paid and the recipient’s name and signature. These records must be saved for more than two years for future reference. When paying wages, employers must provide employees with a list of their earnings to date.
Discrimination, harassment & family leave
What is the position in relation to:
The statutory employment period is 16 years of age to the statutory retirement age, which is:
- 60 years for men;
- 55 years for women in management or professional technical positions; and
- 50 years for women in non-management or non-professional technical positions.
Under the Labour Law, employees should not be discriminated against due to their ethnicity, race, gender or religious beliefs.
Discrimination against disabled persons is prohibited. The government must guarantee the employment rights of disabled persons and make an overall plan at all levels regarding the employment of disabled persons in order to create suitable employment conditions for such persons. Employers cannot discriminate against disabled persons during the employment process.
Gender discrimination is prohibited. The government must ensure that women enjoy equal labour rights to men. Employers cannot refuse to recruit women or increase the thresholds for recruiting women based on gender, unless the job in question has been classified as unsuitable for women. Where employers recruit female employees, the employment contract cannot restrict female employees from getting married or bearing children.
(e) Sexual orientation?
The Labour Law contains no special provisions concerning sexual orientation.
Under Article 12 of the Labour Law, employees should not be discriminated against because of ethnicity, race, gender or religious beliefs.
Health-based discrimination is prohibited and employers cannot refuse to recruit candidates for being infectious pathogen carriers. However, infectious pathogen carriers and suspected infectious pathogen carriers who have been verified by doctors will be prohibited from working while awaiting treatment or medical clearance due to the likelihood of them spreading the infectious disease in question.
Discrimination based on domicile is prohibited. Rural employees who travel to cities in search of employment must enjoy equal labour rights to those of urban employees.
Family and medical leave
What is the position in relation to family and medical leave?
Family leave does not apply to all types of employer. Under the Regulations on Employee Benefit for Visitations, which apply to employees of government agencies, people’s organisations, enterprises owned by the people and public institutions, ‘family leave’ refers to the benefit enjoyed by employees who:
- have worked for at least one year in a state agency, people’s organisation or public enterprise; and
- do not live with their spouse and are unable to meet with their spouse on public holidays.
Employees who do not live with their parents and cannot meet with them on public holidays are also entitled to leave to visit them. However, employees who can meet with one of their parents on a public holiday are not entitled to this benefit.
‘Medical leave’ refers to leave taken by an employee to rest or treat an ailment or injury which is not work related and has been checked and verified by a medical professional, where this has been approved by the employer’s managerial department or the employee’s supervisor.
Employees on sick leave are entitled to a sickness subsidy. Local regulations vary, but in most areas such subsidy should be no less than 80% of the local minimum wage.
What is the position in relation to harassment?
The Law on the Protection of Rights and Interests of Women clearly prohibits sexual harassment against women. Sexual harassment may result in an administrative punishment and civil damages.
What is the position in relation to whistleblowing?
There are no special provisions concerning whistleblowing.
Privacy in the workplace
Privacy and monitoring
What are employees’ rights with regard to privacy and monitoring?
There are no special rules concerning the collection and use of employees’ personal information. However, individuals’ personal information is generally protected under various laws and regulations and the collection and use of an individual’s personal information is subject to the notification and consent of the individual.
To what extent can employers regulate off-duty conduct?
There are no special rules concerning off-duty conduct. However, an employee will likely breach his or her employment contract and be terminated if he or she:
- has a concurrent labour relationship with another employer which may affect his or her existing employment; and
- refuses to correct this behaviour.
Are there rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?
There are no special provisions concerning the protection of social media passwords or the monitoring of employee social media accounts.
Trade secrets and restrictive covenants
Who owns IP rights created by employees during the course of their employment?
The Patent Law stipulates that an invention made by a person in the course of executing tasks for his or her employer or by taking advantage of the employer’s material or technical means will constitute a service invention. The right to apply for patenting a service invention remains with the employer, which – after the application has been approved – will be the patentee.
Where an employee develops an invention by taking advantage of his or her employer’s material or technical means and the contract between the employer and the inventor or designer concerns the right to apply for and the ownership of a patent, the contractual stipulations will prevail.
The Copyright Law stipulates that where a work is created according to the intention and under the supervision and responsibility of a legal entity or another organisation, such legal entity or organisation will be the author of said work.
The Copyright Law also stipulates that a work created by a citizen when fulfilling the tasks assigned to him or her by a legal entity or another organisation will be deemed to be a service work. The copyright of such a work will be enjoyed by the author, but the legal entity or organisation has a priority right to exploit the work within the scope of its professional activities. For two years after the work’s completion, the author cannot, without the consent of the legal entity or organisation, authorise a third party to exploit the work in the same way as the legal entity or organisation can.
In the following cases, the author of a service work will enjoy the right of authorship, while the legal entity or organisation will enjoy other rights included in the copyright and may reward the author with:
- drawings of engineering and product designs, maps, computer software and other service works, which were created mainly with the materials and technical resources of the legal entity or organisation while under its responsibility; and
- service works, of which the copyright is – in accordance with the laws or administrative regulations or as agreed in the contract – enjoyed by the legal entity or organisation.
What types of restrictive covenants are recognised and enforceable?
Restrictive covenants regarding confidentiality, non-compete clauses and IP rights protection are generally recognised and enforceable.
Are there any special rules on non-competes for particular classes of employee?
The Labour Contract Law clearly stipulates that employers which require an employee to maintain their commercial secrets:
- can include non-compete clauses in the employee’s contract or require him or her to sign a non-compete agreement; and
- must provide monthly compensation to the employee during the non-compete period after the dissolution or termination of his or her contract.
An employee who breaches a non-compete clause will be liable to the employer according to the terms of the clause.
Under the Labour Contract Law, non-compete clauses are restricted to senior management personnel, senior technicians and other personnel who must protect their employer’s secrets.
Discipline and grievance procedures
Are there specific laws on the procedures employers must follow with regard to discipline and grievance procedures?
Under the Labour Contract Law, employers must discuss with affected employees the formulation, revision or implementation of rules or major matters concerning their vital interests, including with regard to:
- working hours;
- rest periods and leave;
- health and safety;
- insurance and welfare;
- staff training;
- discipline; and
- quota administration.
Such matters must be discussed with the employee representatives‘ congress or all staff to obtain their opinion. The employer must then carry out discussions with the trade union or employee representatives before making any changes.
During the decision-making process and the subsequent implementation of rules, the trade union or staff will have the right to raise any concerns with the employer and such concerns must be addressed and remedied through negotiation.
Employers must notify employees of any decisions which will directly affect employees' vital interests.
Unions and layoffs
Is your country (or a particular area) known to be heavily unionised?
Although China has not previously been heavily unionised, in recent years the All-China Federation of Trade Unions has actively sought the establishment of trade unions at the enterprise level and, as such, an increasing number of unions have been established. These unions are all members of the federation.
What are the rules on trade union recognition?
The Trade Union Law stipulates that a basic-level trade union committee should be set up in enterprises, institutions or government departments, if there are 25 or more employees. If there are fewer than 25 employees:
- a basic-level trade union committee may be separately set up by the employees;
- they may jointly set up a basic-level trade union committee with employees of other entities; or
- they may elect an organiser who can organise relevant activities.
If the number of female employees is relatively high, a trade union committee for female employees may be established under the leadership of the equivalent level trade union. If the number of female employees is relatively low, female employee members may be included in the trade union committee. Towns, townships and urban districts with a relatively high number of enterprise employees may establish an association of basic-level trade unions. A locality at the county level or above must establish a local all-level federation of trade unions. Several enterprises in the same industry or in industries of a similar nature may establish a national or local industry-specific trade union, depending on their requirements. The All-China Federation of Trade Unions must operate uniformly at the national level.
What are the rules on collective bargaining?
According to the Labour Contract Law, enterprise employees and their employer may conclude a collective contract on the following matters through negotiations:
- working hours;
- rest periods and leave;
- health and safety; and
- insurance and welfare.
A draft collective contract must be submitted to the employee representatives congress or to all the employees for discussion and adoption. A collective contract must be concluded between the trade union representing employees and their employer. Where an employer has not established a trade union, the higher-level trade union will guide the representatives elected by the employees to conclude a collective contract with the employer.
Under the Regulations for Collective Contracts, when conducting a collective negotiation and agreeing on a general or special collective contract, parties must:
- comply with the law, statutes, regulations and relevant national rulings;
- have mutual respect and equal negotiation power;
- practise integrity, sincerity and fair cooperation;
- consider the legal rights of both parties; and
- refrain from extremist actions.
Are employers required to give notice of termination?
What are the rules that govern redundancy procedures?
Under the Labour Contract Law, employers must alert and seek the opinion of their trade union or all of its employees 30 days in advance if the employer needs to retrench 20 or more employees – or where the number of employees to be retrenched is fewer than 20 but comprises 10% or more of the enterprise’s total number of employees – due to any of the following circumstances:
- the employer is undergoing restructuring pursuant to the Enterprise Bankruptcy Law;
- the employer has serious production and business difficulties;
- the enterprise is undergoing production changes, significant technological reform or a change to its mode of operation and, on varying its employment contracts, a need for retrenchment remains; or
- the objective circumstances on which an employment contract was concluded have undergone significant changes and, as a result, the contract can no longer be performed.
The employer may carry out retrenchment after reporting the retrenchment scheme to the labour administrative authorities.
Are there particular rules for collective redundancies/mass layoffs?
The following personnel must be prioritised in a retrenchment exercise:
- workers who have entered into a fixed-term employment contract of a certain length with the employer;
- workers who have entered into a non-fixed-term employment contract with the employer; and
- workers whose family members are unemployed or who need to support elderly or young family members.
If an employer rehires employees within six months of carrying out retrenchment, it must notify the retrenched personnel, whose employment under the same conditions must be prioritised.
What protections do employees have on dismissal?
Subject to limited exceptions, economic damages will be paid to dismissed workers based on their years of service and are generally calculated as one month's wage for each completed year of service. Where the period of service is between six months and one year, it will be deemed a completed year of service. Where the period of service is less than six months, the employer must pay half a month's wage to the worker in economic damages.
Where a worker’s monthly wage (ie, the average wage of a worker more than 12 months before the rescission or termination of his or her employment contract) is more than three times the preceding year’s local average monthly wage, according to the municipal people's government of the municipality (either centrally administered or divided into districts) where the employer is located, economic damages will generally be calculated at three times the average monthly wage. The years of service for which economic damages will be paid cannot exceed 12 years.
In addition, where an employer rescinds or terminates a employment contract in violation of the Labour Contract Law and the worker asks for the employment contract to be continued, the employer must continue the contract. Where the worker does not ask for the employment contract to be continued or where it cannot be continued, the employer must pay compensation pursuant to the above criteria.
Jurisdiction and procedure
Which tribunals or courts have jurisdiction to hear complaints?
The Labour Dispute Mediation and Arbitration Law provides that a labour dispute arbitral commission will be responsible for labour disputes that occur in its jurisdiction. A labour dispute arbitral commission at the place of the performance of an employment contract or the employer’s place of residence will have jurisdiction over the dispute. Where the two parties apply to an arbitral commission where the employment contract is performed and the employer is resident, respectively, the commission located where the contract is performed will have jurisdiction to hear the dispute. If either party is dissatisfied with the arbitral award or the commission fails to render an arbitral award within the statutory timeframe, the dispute can be submitted to a competent local court for judgment.
What is the procedure and typical timescale?
According to the Labour Dispute Mediation and Arbitration Law, the limitation period to apply for the arbitration of a labour dispute is one year. The period for arbitration will be counted as of the date when a party knows or should know that its right has been violated.
The arbitral commission will render an award for each labour dispute case within 45 days from the date on which an application for arbitration is accepted by a labour dispute arbitration commission. Where a case is complicated and requires an extension of the above prescribed period, an extension may be granted with the approval of the chair of the labour arbitral commission. The parties will be notified of the extension in writing. Such extension cannot exceed 15 days.
What is the route for appeals?
A party that disagrees with an arbitral award in any labour dispute may bring an action in the people's court within 15 days from receiving it. Where an action is not brought on the expiration of the above prescribed period, the arbitral award will take effect.
Employers cannot bring an action before the courts concerning an arbitral award that was rendered in a dispute regarding:
- the recovery of labour remuneration, medical expenses for a work-related injury, economic indemnity or compensation, in an amount not exceeding the 12-month local monthly minimum wage level; or
- working hours, breaks and vacations or social insurance, among other things, which arose from the execution of state labour standards.
However, employees can bring an action before the courts concerning an arbitral award that was rendered in a dispute regarding the above matters.
If an arbitral award is brought before a court, the court should render a judgment within six months from acceptance of the case. Subject to the approval of the president of the court, this limitation can be extended for another six months. Either party may appeal the court judgment to a higher court, which must render a judgment within three months or a longer period, where approved by the president of the higher court.