China Employment Arbitration: Good Luck With That

China employment arbitration

China employment arbitration is usually a losing battle.

Every few weeks one of our China employment lawyers will get an email from a foreign company (usually a WFOE) seeking help with a dispute involving one or more of their China employees. They usually are surprised to be in the dispute because they are of the view they did nothing wrong. They often believe hiring my law firm will involve us spending an hour or two reviewing the facts and the law and then telling them they did nothing wrong and then making the case go away.

It most emphatically does not work that way. In fact, in almost all instances when we have been brought on to help foreign companies involved in an employee dispute, our advice is to reach an agreement with the employee and then memorialize that agreement with a Chinese language settlement agreement to make sure there will be no future problems with that employee.

I was cc’ed on an email recently that describes how difficult and expensive these cases can be:

I think it important I be upfront on how we view China employment arbitration cases. We view them as typically un-winnable and nearly always not worth the money to fight.

Take your Qingdao matter. For us to sort through the factual and legal issues could end up costing you $10,000+. And once we sort through all that, the odds are good that the best we can tell you is that you have some of chance to prevail on a few of them, virtually no chance to prevail on most of them, and absolutely no chance to prevail on some of them. Employers only very seldom win against their China employees, foreign employers even less so. And with the recent downturn in China’s economy, the odds for foreign employers have gotten even worse. And if you did anything wrong in shutting down your office (and the odds are good that you did), your chances will be even lower.

And then there is the cost of preparing for the arbitration and arbitrating.

So what we suggest our clients do in these situations is try to settle with all employees as quickly and cheaply as possible. We have always succeeded in settling such cases, usually for about half of what the employees were originally seeking. Generally, Chinese employees want quick money and want to get on with their lives, believing they can (and often already have) get another job. The down economy may impact this thinking somewhat, but interestingly enough, past downturns have really not. So if you were to retain us, the first thing we would do is some quick research on the issues. Not anything approaching the $10,000 worth of research necessary to make arguments to an arbitration panel, but just enough to be able to have a good idea of the employees’ weaknesses we can highlight in settlement talks. And then we work to settle and then when we settle we document the settlement in such a way as to ensure the employees do not return.

We would also want to look into the issues with your other employees at your other locations as well, to try to nip potential problems there in the bud. The earlier you can resolve these sorts of issues with employees the better. We have handled a number of office closings, including in Qingdao, and we like to settle with the employees before the closing even happens, when they have a few more months even to work and are feeling safe. I assume we are too late to do that here with your Shenzhen office, but the sooner we deal with the other employees, the less this is going to cost you.

If you agree with the above approach, we should talk some more. Either way, I wish you the best with this difficult situation.

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