(“Draft”) (《企业裁减人员规定(征求意见稿)》)

The Employment Contract Law (“ECL”) establishes a scheme under which employers can terminate more than 20 employees —or fewer than 20 employees if they account for more than 10% of the employer’s workforce— under statutory circumstances (“Mass Layoffs”).

The Draft specifies the conditions and procedures employers must meet and introduces the following provisio

  • Employers must take necessary measures to avoid or reduce Mass Layoffs, and they must negotiate these measures with the trade unions or the employee representatives. 

The Draft provides guidelines on measures employers can take to avoid or reduce Mass Layoffs —such as reducing working hours and salaries with the consent of the trade unions or employee representatives— which it encourages by granting government subsidies.

  • The Draft provides the information that the employer must give trade unions or all employees before Mass Layoffs: 
  1. Statutory reasons for the layoffs.
  2. Scope, number and percentage of layoffs.
  3. Criteria for selecting employees to be laid off.
  4. Schedule and steps for terminating the employment.
  5. Methods and standards for determining the economic compensation to be paid to employees laid off.
  • The Draft specifies the materials relating to Mass Layoffs that must be filed with the local Ministry of Human Resources and Social Security for its review, including documents explaining employers’ circumstances to trade unions and measures that have been taken to reduce the layoffs.
  • The Draft adds “family dependants of martyrs, former soldiers and other persons established by laws and administrative regulations,” which is not specified under the ECL, as employees that should be given priority to remain employed in Mass Layoffs.
  • The Draft requires employers to follow relevant procedures for Mass Layoffs with the trade unions, the employees and the labor authorities, regardless of whether the employees are terminated by mutual agreement or bilateral layoff, making it impossible for employers to avoid the authority’s scrutiny.

If the Draft is enacted in its current form, employers will be subject to more complex procedures and stricter responsibilities when laying off a significant number of employees.

Date of issue: December 31, 2014. Deadline for comment: January 30, 2015.