1Terms and Conditions of Employment
1.1What are the main sources of employment law?
The main sources of employment law in China are laws issued by the National People's Congress and its Standing Committee, with the Labour Law being the most comprehensive one. There are many other laws providing for specific issues, such as the Labour Contract Law (LCL), the Social Security Law, the Law on Trade Unions etc., and many other derivative regulations issued by national authorities or regional governments. Legal interpretations on the application of certain laws issued by the Supreme People's Court and adopted by the Standing Committee have the same effect as laws.
1.2What types of worker are protected by employment law? How are different types of workers distinguished?
In principle, Chinese employment law applies to every type of worker who has established an employment relationship with an employer in China and is qualified as an 'employee' according to the employment law of the PRC.
Based on different criteria, workers can be distinguished into different types, such as full-time and part-time employees, dispatched and formal employees, etc.
1.3Do contracts of employment have to be in writing? If not, do employees have to be provided with specific information in writing?
Employment contracts do have to be in writing except in case of part-time employment, where oral contracts are allowed. LCL provides that the employment relationship starts from the day that the employee assumes duties and therefore a written contract is not a pre-condition for its establishment. However, if the employer and employee do not sign a written contract within the first month of the employment relationship, the employee is entitled to double pay of the salary starting from the second month of the establishment until the date that an employment contract is signed or the end of the first year from the establishment. After that, if there is no a written contract, it shall be construed that the employer and employee have established an open-term contract.
1.4Are any terms implied into contracts of employment?
There are terms implied into contracts of employment. For example, Article 3 of LCL stipulates the principles of lawfulness, fairness, equality, free will, good faith and negotiation for agreement must be observed in the formation of an employment contract.
1.5Are any minimum employment terms and conditions set down by law that employers have to observe?
Employers should not violate the minimum employment terms and conditions provided by laws and regulations. More specifically, there are minimum conditions for local wages (set by local governments), holidays (5 to 15 days/year according to the service years), terms included in the employment contracts, payment of social security premiums and measures for the prevention of occupational risks. Laws set a maximum limit for working hours (8 hours/day and 40/week), overtime work (3 hours/day and 36 hours/month), probation (0-6 months according to the term of employment contract) and use of dispatched employees (in proportion 10% of the formal employees). Finally, employers should sign an open-term employment contract with the employee when the legal requirements are met, and they can dismiss their employees only under the conditions provided by the LCL and following the statutory procedure etc.
1.6To what extent are terms and conditions of employment agreed through collective bargaining? Does bargaining usually take place at company or industry level?
The large majority of collective agreements deal with wages and other issues like work safety or female employees. The bargaining at the company or regional level is more often than at the industrial or national level.
2Employee Representation and Industrial Relations
2.1What are the rules relating to trade union recognition?
All trade union organisations in China are affiliated with the All-China Federation of Trade Unions (ACFTU), which is the highest leading body of the trade unions and under the leadership of the Chinese Communist Party. A trade union must be established according to legal procedure and finally reported and approved by the trade union of higher level.
2.2What rights do trade unions have?
Trade unions represent the employees in collective bargaining or in signing collective contracts. They can supervise employers for their compliance with laws and regulations regarding labour rights and propose amendments or even initiate legal proceedings if the employers continue the illegal behaviours. They have consultation rights in employers' decisions for issues that affect employees' interests and for terminating employees unilaterally. They may also assist employees in signing contracts or pursue their legal rights when employers violate them, and participate in the hearings.
2.3Are there any rules governing a trade union's right to take industrial action?
There are no rules governing industrial action rights. These cases are decided based on their specific facts.
2.4Are employers required to set up works councils? If so, what are the main rights and responsibilities of such bodies? How are works council representatives chosen/appointed?
Chinese laws acknowledge Staff and Worker Representative Congresses (SWRC) which are analogous to work councils. In general, employers are required to establish SWRC. The number of representatives should not be lower than 30 or 5% of all the employees and they are elected by the majority of at least 2/3 of all the employees. Management level employees may participate in the SWRCs of up to 1/5 of all the employees. SWRCs elect or recall employees' representatives at board level; they have consultation rights on issues related to business operations or terms of employment, and co-determination rights in serious matters such as drafts of collective contracts, schemes for the release of employees' bonus or for the contribution and time for payment of housing funds and social insurance premiums, or for the suggestion of employment models etc. Local regulations may grant them more rights.
2.5In what circumstances will a works council have co-determination rights, so that an employer is unable to proceed until it has obtained works council agreement to proposals?
See question 2.4.
2.6How do the rights of trade unions and works councils interact?
Trade unions and SWRCs are closely related and trade unions are the executing organs of the daily operations of SWRCs. They communicate with the employees, prepare the agenda of SWRCs meetings, nominate candidates, propose plans and organise elections for SWRC representatives etc.
2.7Are employees entitled to representation at board level?
The representation of employees on the board of directors is compulsory for a limited liability company (LLC) that is established by 2 or more state-owned enterprises or other state-owned investors and optional for any other LLC or a joint stock limited company. Employees' representation at the board of supervisors is compulsory for both types of companies at a proportion of 1/3 or more if the articles of associations stipulate so.
3.1Are employees protected against discrimination? If so, on what grounds is discrimination prohibited?
Employer should not discriminate against employees due to their nationality, race, gender, religion, health situation or other reasons that are provided in different national and local regulations or departmental rules.
3.2What types of discrimination are unlawful and in what circumstances?
If an employee can substantiate that they were not hired or they were dismissed or treated unequally during their employment due to discriminatory reasons, then the employer's practice is unlawful. Moreover, job advertisements and employer's brochures should not have any discriminatory content. Finally, the principle of equal pay for equal work applies also in China which means that employees occupying similar positions and with the same qualifications should receive a similar salary.
3.3Are there any defences to a discrimination claim?
The employer may be exempted from liability if the different treatment is provided by laws and regulations. For example, it is not allowed for women or carriers of specific contagious diseases to be occupied in certain positions due to enhanced protection granted to female employees or for public health-related reasons. Regarding claims of equal pay for equal work, employers may prove the different salary is attributed to reasons related to the employees' different qualifications or performance.
3.4How do employees enforce their discrimination rights? Can employers settle claims before or after they are initiated?
Disputes on employment discrimination are handled by the People's Court at first instance except if it relates to substantial labour rights like a claim of equal pay for equal work, which is heard first by an arbitration committee. Both parties can reach an agreement on the settlement of the dispute at any time.
3.5What remedies are available to employees in successful discrimination claims?
Candidates or employees may ask the employer to bear civil liabilities for any direct material loss or harm to their legal interests.
3.6Do "atypical" workers (such as those working part-time, on a fixed-term contract or as a temporary agency worker) have any additional protection?
Employees' legal rights are not affected by the term of their contracts according to LCL.
Part-time workers can be dismissed at will and without compensation, which is not allowed with the termination of full-time employees.
Dispatched workers are entitled to equal pay for equal work even in the accepting unit.
4Maternity and Family Leave Rights
4.1How long does maternity leave last?
Maternity leave lasts for 98 consecutive days, and it may start 15 days before the delivery. 15 additional days are granted for difficult labour and 15 more days for each child in case of multiple births.
Local regulations may stipulate for additional days off. For example, Beijing and Shanghai provide for an extra 30 days of maternity leave for a late birth, i.e. after 24 years old.
Female employees who have a miscarriage are entitled to 15 or 42 days of maternity leave according to whether the miscarriage happened before or after the first 4 months of their pregnancy respectively.
4.2What rights, including rights to pay and benefits, does a woman have during maternity leave?
An employer cannot reduce a female employee's salary because of their pregnancy. If an employer has paid maternity insurance contributions for its employees, the female employees are entitled to full maternity insurance benefits while the unemployed spouses of male employees are entitled to maternity medical benefits in accordance with national regulations, which are reimbursed by the maternity insurance fund. Maternity insurance benefits include maternity allowance and maternity-related medical fees which are calculated and paid based on average monthly wages of the company during the previous year.
4.3What rights does a woman have upon her return to work from maternity leave?
Basically, an employee can resume her original duties after maternity leave unless certain statutory conditions for the employer to unilaterally change the employee's position are satisfied. The period after the end of maternity leave until the child/children become(s) one year old is considered as the lactation period and employees are entitled to spend one hour of their working time per child for breastfeeding. It should not be arranged for female employees to work night shifts or overtime within the lactation period.
4.4Do fathers have the right to take paternity leave?
Paternity leave is not provided in nationally applicable laws or regulations but this issue may be regulated locally.
4.5Are there any other parental leave rights that employers have to observe?
Employers should comply with local regulations that provide for other parental rights. For example, female employees in Shanghai may, under certain conditions, apply for a pre-natal leave of 2.5 months after their 7th month of pregnancy or a 6-month leave during the lactation period.
4.6Are employees entitled to work flexibly if they have responsibility for caring for dependants?
Female employees enjoy a few rights during the lactation period (see question 4.3) and after the 7th month of their pregnancy, they should not be ordered to work overtime or night shifts. Also, from the very start of their pregnancy, the employer should reduce the workload or change the position of those employees who can provide a medical certificate and prove that it is not suitable for them to deal with the original workload or position.
5.1On a business sale (either a share sale or asset transfer) do employees automatically transfer to the buyer?
According to LCL, an employer's change of name, legal representative, key person-in-charge, or investor does not affect the fulfilment of the labour contracts. In case of a merger or split of the company, the contracts with the original employer still remain valid and they are performed by the new employer who succeeds the rights and obligations of the original one.
In the case of asset transfer, employees are not automatically transferred to the purchaser unless they agree so.
5.2What employee rights transfer on a business sale? How does a business sale affect collective agreements?
On a shares sale, the rights of the employees remain unaffected.
In the case of a merger or split of a company, employees who are transferred to a new employer for reasons not attributable to them, can require their working time for the original employer to be consolidated with their working time for the new employer for compensation reasons. However, if the original employer has already compensated employees for their working time there, the new employer shall not consider their working time in the original employer when calculating the compensation for termination.
On an asset transfer, the rights of employees who are transferred depend on the agreement reached by all parties involved.
The Collective Contract Provisions promulgated by the Ministry of Labour and Social Security stipulate that a collective contract or special collective contract may be modified or rescinded where the employer undergoes merger, dissolution or becomes insolvent, thus rendering their performance impossible to continue.
5.3Are there any information and consultation rights on a business sale? How long does the process typically take and what are the sanctions for failing to inform and consult?
According to PRC Company Law a company shall solicit the opinions of its trade union and its employees through the SWRC or any other way in order to make a decision on restructuring or any important issue relating to business operations, or formulate any important bylaws. The laws and regulations do not have clear stipulations about the liabilities of an employer which fails to follow this procedure, and this issue remains at judicial organs' interpretation.
5.4Can employees be dismissed in connection with a business sale?
Employees cannot be dismissed just because of a business sale, but this depends on whether the statutory conditions for unilateral termination are satisfied according to LCL.
5.5Are employers free to change terms and conditions of employment in connection with a business sale?
In general, both parties should obey the existing employment contracts and employers are not free to change their terms and conditions without employees' consent.
6Termination of Employment
6.1Do employees have to be given notice of termination of their employment? How is the notice period determined?
Employees must be given a notice of termination. A written notice of one month before the termination or payment of one month salary in lieu of notice is required in cases where unilateral termination without fault initiated by the employer is allowed. This can happen only for the following reasons:
a.the employee is sick or injured due to a non-work related reason and cannot be occupied in the original position after the expiry of the medical treatment period or in any other position as arranged by the employer.
b.the employee is incompetent for work and still does not meet the position requirements even after the employer has arranged training or another position for this employee; and
c.the performance of the contract is impossible due to a considerable change of the objective situations on which the conclusion of the contract was based, and both parties cannot reach a consensus for amending the content of the contract.
A notice to the trade union or all employees is required in cases of mass layoff 30 days in advance (see question 6.9).
In other situations, employees are terminated upon the employer's notice.
6.2Can employers require employees to serve a period of "garden leave" during their notice period when the employee remains employed but does not have to attend for work?
The employer may send the employee to 'garden leave' if it pays the employee their full remuneration during this period.
6.3What protection do employees have against dismissal? In what circumstances is an employee treated as being dismissed? Is consent from a third party required before an employer can dismiss?
Employers have no right to terminate employees at will since LCL sets strict conditions for termination and employees are protected against illegal termination.
An employee is treated as dismissed when the employer terminates them unilaterally either because they are at fault or without fault.
According to LCL, the employment relationship expires in cases where: the term of a fixed-term employment contract has been completed; the employee has begun to receive pension benefits or has died or been declared as dead or missing by a judicial decision; the employer is under bankruptcy; the employer's business licence is revoked; the employer is ordered to close or is closed; or the employer decides for dissolution in advance.
Consent from a third party is not necessary but an employer should notify the trade union before an employee's unilateral termination. The trade union has the right to point out any issues that are against laws and regulations and ask the employer to make the relevant rectifications, but the employer needs only to consider these opinions instead of adopting them.
6.4Are there any categories of employees who enjoy special protection against dismissal?
According to the LCL, special protection against dismissal is given to employees who:
1.are exposed to occupational hazards and have not undergone the necessary occupational medical exams before termination, or have probably contracted an occupational disease or are under medical observation;
2.had an occupational disease or a work-related injury during the execution of their duties and it is confirmed that they lost their capacity to work in whole or in part;
3.suffer from a non-work related injury and are within the statutory medical treatment period;
4.are pregnant, on maternity leave or during the lactation period; and/or
5.have been working for the employer for 15 consecutive years or more and are less than 5 years from statutory retirement age.
These employees can only be dismissed if they are at fault as stipulated by the LCL.
6.5When will an employer be entitled to dismiss for: 1) reasons related to the individual employee; or 2) business related reasons? Are employees entitled to compensation on dismissal and if so how is compensation calculated?
In China, unilateral termination of employees initiated by the employer can be distinguished into termination for fault or termination without fault.
I) Termination for fault is allowed only if the employee:
a.does not meet the recruitment requirements within the probation period;
b.seriously violates the employer's internal policies;
c.seeks personal benefit or seriously neglects their duties, thus causing serious damage to the employer;
d.has established at the same time an employment relationship with another employer and it seriously affects the completion of their job tasks assigned by the employer that asks for termination or the employee does not rectify the situation after the employer's reprimand;
e.is under investigation for criminal liabilities; and
f.when the contract of employment is fully or partially invalid because the employee forced the employer to sign a contract against his/her real will by using coercion or deception or taking advantage of the employer's difficulties.
II) Termination without fault is permitted only in the cases described in question 6.1.
An employer is also entitled to dismiss employees when the statutory conditions for mass layoff are satisfied as stipulated by the LCL.
Employees must be given compensation in cases of termination without fault and mass layoff, which is calculated based on the employee's number of service years for the employer at the rate of one month's salary for each full year of work. Any period between six months and less than one year is counted as one year while that of less than six months is counted as half a year. However, if an employee's salary is higher than three times the amount of the local average monthly salary as it is issued by local authorities, then the calculation basis for this employee's compensation is capped at this limit, i.e. three times the amount of the local average monthly salary, and accordingly the maximum limit for service years to be compensated is 12 years.
6.6Are there any specific procedures that an employer has to follow in relation to individual dismissals?
The employer must give a prior written notice or a month's salary in lieu of notice when it is necessary (see question 6.1) or notify the trade union for unilateral termination (see question 6.3). Further requirements must be followed in few cases, such as in case of incompetent employees, where employers should first arrange training or another position for them and if they remain incompetent after this stage, then termination is allowed, or in cases of mass layoff where a certain procedure is required (see question 6.9).
6.7What claims can an employee bring if he or she is dismissed? What are the remedies for a successful claim?
In case of illegal termination, an employee may choose one of the following claims: either the payment of compensation for illegal termination or reinstatement of the employment relationship. If the first claim is successful, then the employer should pay the employee compensation for illegal termination, equal to the double amount of compensation for legal termination (see question 6.5). If the employee chooses the second claim and it is successful, then the employer should accept back the employee and pay them the salary retrospectively from the date of termination. However, if the employer claims that reinstatement is no longer possible, then compensation for illegal termination should be paid.
6.8Can employers settle claims before or after they are initiated?
Employers and employees are encouraged to settle any claims by negotiation, even after they are initiated and before a final arbitral award or court's decision is issued.
6.9Does an employer have any additional obligations if it is dismissing a number of employees at the same time?
LCL allows mass layoffs under certain conditions and through a certain procedure. Firstly, mass layoff refers to the termination of 20 employees and over, or 10% or more of the employer's full workforce. Secondly, mass layoff is accepted only under certain conditions: the employer is under restructuring according to Enterprise Bankruptcy Law; or encounters serious difficulties in production and business operations; or switches its production line or has undergone a technological upgrade or changes its business operations and still needs to dismiss this number of employees even after having changed the content of the employment contracts; or the performance of employment contract cannot continue due to considerable changes of the objective economic situation on which the contract was concluded. Thirdly, if these conditions are met, the employer should explain the situation to the trade union or all the employees 30 days before termination solicit their opinions and report the final redundancy plan to the labour administrative bureau. Fourthly, employers should take into consideration the service years of the employees, the term of their contracts and their family needs when they decide about the employees to be terminated. Finally, the employer shall pay employees compensation according to the law (see question 6.5).
6.10How do employees enforce their rights in relation to mass dismissals and what are the consequences if an employer fails to comply with its obligations?
Employees who think that the employer does not comply with the statutory requirements about mass dismissals have the same rights that they have in illegal individual dismissals (see question 6.7). In some cases, employees organise collective protests or strikes and attract the public attention in order to put pressure on employers' decisions.
7Protecting Business Interests Following Termination
7.1What types of restrictive covenants are recognised?
The LCL recognises confidentiality, non-competition agreements and service agreements.
The non-competition agreements apply only to senior managers, senior technicians or employees who have a duty of non-disclosure.
Service agreements may be signed when an employer pays the expenses for employees' special technical training in order to specify the employees' service period after training with the employer and a penalty for breach of contract within the legal scope.
7.2When are restrictive covenants enforceable and for what period?
For the enforcement of confidentiality agreements, the employer should prove that it has trade secrets that need to be protected. The scope of trade secrets is generally provided in the Anti-unfair Competition Law but the employer should specify the company's trade secrets. They are valid from the day when the employee gains access to employer's trade secrets until they enter the public sphere.
Non-competition agreements can be enforced only if both parties have explicitly agreed on this and their term is up on both parties' negotiations but no more than two years after termination.
A service agreement is enforceable if it is effectively established by both parties and the employee dissolves the employment contract before the expiration of the service period agreed by both parties.
7.3Do employees have to be provided with financial compensation in return for covenants?
Financial compensation is provided only for employees with a non-competition duty. It is given on a monthly basis after termination and the amount is determined between the parties but it should not be lower than the local minimum wages and 30% of the employee's average monthly wages during the 12 months before termination. Local regulations that provide for a higher amount of compensation prevail.
7.4How are restrictive covenants enforced?
Employees breaching their non-competition duty should pay a penalty stipulated in the agreement and the employer can ask an arbitration committee or court to order the employee to continue performing their non-competition duty, while in cases of service agreements, a penalty for breach of duties may be stipulated between parties.
8Data Protection and Employee Privacy
8.1How do employee data protection rights affect the employment relationship?
The employer has the right to know an employee's basic information and the employee should provide it faithfully when an employment relationship is established. However, the employer can inquire about details which are directly related to the labour contract, but they must be kept confidential and not published without the employee's written consent or otherwise it may bear tort liabilities for any damage caused.
8.2Do employees have a right to obtain copies of any personal information that is held by their employer?
Generally, the employee may have access to information held by the employer if the employee's request is reasonable and does not violate other employees' rights to privacy.
8.3Are employers entitled to carry out pre-employment checks on prospective employees (such as criminal record checks)?
Employers can do pre-employment checks only for these details which are closely connected with position's requirements, excluding criminal record checks.
8.4Are employers entitled to monitor an employee's emails, telephone calls or use of an employer's computer system?
There are no clear regulations about this issue. However, employers may establish internal rules that forbid employees to use the employer's communication systems for private affairs, and set the terms for breach of privacy. Therefore, employees violating these rules may be subject to disciplinary sanctions or termination, according to employer's policy.
8.5Can an employer control an employee's use of social media in or outside the workplace?
In general breach of privacy is forbidden. However, employers may provide in their internal rules for reasonable disciplinary sanctions in case employees make use of social media for personal affairs during working time; regarding use of social media outside the workplace, reasonable disciplinary sanctions may be taken if it can be substantiated that employee's use of social media causes damages to the employer.
9Court Practice and Procedure
9.1Which courts or tribunals have jurisdiction to hear employment-related complaints and what is their composition?
Employees may initiate the proceedings for a labour dispute before an arbitration committee at the place where the contract is performed or the employer is located. If any party contests an arbitration award, it may file a legal action with the People's Court unless otherwise provided by law. A labour dispute arbitration commission adopts an arbitration tribunal system for hearing the cases and it is composed of 3 arbitrators, with one of them acting as the presiding arbitrator, or a single arbitrator in case of simple disputes.
9.2What procedure applies to employment-related complaints? Is conciliation mandatory before a complaint can proceed? Does an employee have to pay a fee to submit a claim?
A written application for arbitration must be submitted within one year from the day that the party knew or should know the violation of their employment rights or, in some cases, the date of termination. If the legal requirements for acceptance of the case are met, the arbitration committee notifies the applicant and sends copies of the application to the other parties involved within 5 days.
Conciliation initiated by both parties is not mandatory. In the arbitration stage though, the arbitration tribunal shall first mediate between both parties before making an award.
The submission of application in arbitration is for free.
9.3How long do employment-related complaints typically take to be decided?
If the submission of the application becomes accepted by the arbitration committee, an arbitral award should be given within 45 days or 60 days if the case is complicated, otherwise the parties may file a lawsuit at the people's court.
9.4Is it possible to appeal against a first instance decision and if so how long do such appeals usually take?
According to Chinese law, in certain cases arbitral awards are final unless the employer can appeal against them by proving that the procedure was illegal, or the committee did not have jurisdiction or did not apply the laws correctly, etc. However, employees always have the right to appeal at the People's Court within 15 days after receiving the arbitral award. A People's Court may issue a decision within 3 months if the case is rather simple or 6 months if the ordinary procedure for trial hearing is used, where an extension of 6 more months is allowed when the case is complicated.