Throughout 2019, Chinese authorities passed a series of legal reforms in the area of employment that stand to have profound affect on businesses, employee working conditions and the dynamics of the Chinese workplace.
Specifically, legal amendments and guidances were adopted that brought changes to employee-related social insurance policy, a prohibition to all discrimination surrounding the hiring of women and the creation of protections that make it less likely for employees to violate trade secrets.
In addition, new employment regulations and court judgments were adopted in several cities and provinces across China that some analysts consider breakthroughs in employment law reform.
Social insurance policies
As a result of regulatory changes, tax authorities are now the only body responsible for the collection of social insurance premiums — which is a reform that was designed to streamline the insurance payment process. Furthermore, in a move that has been well received by business, social insurance premiums have been reduced in areas such as pension payments, work-related injury insurance and unemployment insurance.
Also, an October 29 guidance issued by the Ministry of Human Resources and Social Security made certain employees (students over 16 years of age on work internships and workers over retirement age but not yet receiving pension benefits) eligible for work-related injury insurance. These reforms were adopted in one Chinese province, and the Human Resources ministry is now encouraging other provinces to adopt this regulation and provide injury coverage to its interns and older workers.
Adopting this policy will reduce legal and financial risks for any accidents that occur in the workplace. However, because not all student and retirement-aged workers are eligible for insurance, companies are urged to take out commercial plans for all remaining uninsured personnel.
Gender equality law
In addition, a new national law was adopted that prohibits sexism in hiring policies and employee relations. The law states that a company cannot make hiring decisions or establish preferences based on gender. This law is aimed at protecting women’s rights in the hiring process.
When applying for jobs, women cannot be questioned about their marital or childbearing status. Also, an employer cannot insist that a woman take a pregnancy test as part of a pre-employment physical examination. Once on the job, an employer cannot place restrictions on when a woman can become pregnant. Furthermore, employers cannot establish recruitment standards for women that are more rigorous or different than those applying to men.
If a company or office in China is found to have breached any of these gender-protection regulations, it must correct its action and pay a fine of between RMB 10,000 and RMB 50,000.
Trade secret protections
In it’s April 2019 amendment of the Anti-Unfair Competition Law, the government implemented key changes that make employees more accountable for protecting trade secrets. Specifically, the amendment broadens the scope of confidentiality agreements affecting both employees and former employees of a company or office. Under the amended law, directors who have left a company without signing a comprehensive confidentiality agreement are still obliged to respect their previous employer’s trade secrets.
Also, under this new amended law, the scope of what is considered a trade secret has been extended. Before, only technical and operational information were considered secrets. Now, however, secrets include a company’s commercial information.
For anyone accused of violating a trade secret in civil litigation, the rights holder of the secret must provide proof of a violation and sufficient evidence to identify the accused as being responsible for the infringement. The company must be able to prove that this employee or former employee had access to the secret in question. Although the court will hear any specific evidence (e.g. documents, witness testimony) linking the accused to the infringement, the law places the burden of proof on the accused who can either argue that the information shared does not meet the definition of a trade secret or provide evidence exonerating them of guilt.
By placing the burden of proof on accused infringers, employees and former employees must now conduct themselves with far greater care in order to reduce the risk of prosecution. Before this amendment was passed, 60% of those companies that brought civil-litigation charges of trade-secret violations to the courts lost their cases due to their inability to provide sufficient evidence against the accused.
By shifting the burden of proof to the individual accused of infringement, companies are now in a better position to protect intellectual property.
Anyone found guilty of violating trade secrets can be liable for both civil and administrative damages and fines of up to RMB 5 million (USD 710,000) in both areas.
Dynamic changes in local regulations
In 2019, regulatory changes were made at the local and provincial level that impact employment relations. On March 1, the province of Shandong adopted Measures on Labour Protection on Female Employees. And in the Zhejiang, Shandong, Anhui, and Jilin provinces and Dongguan City in Guangdong province, the courts handed down key interpretations that affect dispute resolutions, the definition of employment relationships, non-competition authorisations and the drafting of definite-term contracts.
In Zhejiang, the Guide for Opinions on Optimising the Employment and Labour Services under New Innovative Industry was issued on November 5, which contains what some analysts consider important labour law reforms. Reflecting the ascendency of eCommerce in the Chinese economy, the regulation allows for the recognition of electronic employment contracts. In addition, regulations restricting temporary or auxiliary employees to 10% or less of a company’s total work force have been eliminated.
Also, Zhejiang companies now have greater flexibility to adopt special work-time systems to accommodate this varied workforce. Companies also have more flexibility in the type of relationships they establish with employees and the ability of certain types of employees, such as part-time workers, to participate in social-insurance programmes.
If other provinces and major industries adopt these dynamic changes, the workplace of the entire Chinese economy could change and reflect the complexities and nuances of the global market.