Chinese Employment Law Complexities
Employers in China, (especially foreign employers) face myriad, complicated and hyper technical local employment laws. This often means that one small employer mistake can lead to big and expensive problems. As much as we wish all our employment law clients would first come to us requesting we audit their employment program to bring it into compliance, the truth is that about half the time they come to us only after they’ve been hit with a big (and nearly always expensive) employee problem.
The Importance of Proactivity
Think of that first employee complaint as your canary in your coal mine. The good news is that most who come to us to solve their pressing employee problem realize the benefit of having us work with them to prevent future problems. These are the clients who realize that it makes sense to change their oil every 3,000 miles instead of having to buy a new engine every 40,000 miles. Some clients are convinced (or should I say convince themselves) that their employee problem was just a one-off and that their “relationship” with their other employees means there will be no such problems in the future. About all I can tell them is that my experience and that of every single other China employment lawyer I know says their future odds are not good.
In general, the most effective way to handle any legal issue is through a two-pronged approach that addresses the immediate problem while also roots out its underlying cause to prevent any recurrence.
China Employee Termination Pitfalls
Consider this typical scenario: A foreign employer wants to terminate an employee. When approached, the employee claims they cannot be fired as they’re on an open-term contract. Checking records, the employer finds no signed contract copy. Later, the employee says, “I’ll forget the termination talk if I can keep my job.” The employer agrees and moves on.
Smart move by the employer? NO, NO, NO, a thousand times no. When our China employment lawyers get a matter like this, the first thing we do is try to clarify with the employer why it wanted to terminate the employee in the first place. Was it because there was not enough work? Was it because the employee is incompetent? If there is a legally permissible ground for a unilateral termination, the employee’s consent is not required, and the employer can (and oftentimes should) proceed with the termination. In some cases, especially where the employer is dealing with a problem employee, it will make sense for the employer to initiate a unilateral termination as soon as possible and in doing so be sure to preserve all evidence supporting its claimed basis for the termination for any labor arbitration or litigation in the future. In most cases, if the employer does not wish to retain the employee, the employer should talk with the employee about a mutual termination as soon as possible, even if the employee is an open-term employee.
Broader Implications and Best Practices
If the employer only addresses the single employee without a full review, similar issues will likely arise soon. Employees discuss these matters, and this one may encourage others to demand the same terms. Often by the time we’re engaged, the initial complaint has spread to multiple employees.
Even if the employer retains the employee, it should verify if the employee had an open-term employment relationship. A missing contract doesn’t automatically confirm open-term status. If the employee is not an open-term employee, the employer should still decide whether it wants to use a fixed-term or an open-term agreement with the employee going forward.
If there’s no accurate written contract for the employee:
- The employer should draft one promptly.
- After resolving this issue, review contracts with all other employees for completeness.
Even with contracts for all employees, delays in renewing expiring contracts can cause issues. Employers should also address impending renewals (within 30 days), avoiding the tendency to focus solely on the initial presenting employee.
Prevention is the Best Strategy
Proactively addressing employment issues is not only cost-effective but it also is great at preventing unexpected future complaints. Use your first employee complaint to your advantage to nip impending/future employee problems in the bud.