China Employment Law Trends

As we enter the final quarter of the year, I was thinking it would make sense to provide a brief summary of the China employment law trends our China employment lawyers are seeing.

We have seen a significant rise in employee terminations by foreign companies in China. This increase in employee terminations has mostly stemmed from employee layoffs and not from any huge rise in the number of terminations because of employee wrongdoing. This increase in employee terminations has included both what I call “true terminations” and contract non-renewals. Most of these terminations are because the foreign company is downsizing or because their China footprint has changed and the employee no longer fits.

Perhaps most importantly, we are seeing a massive increase in problems arising from terminations. Instead of fairly smooth mutual terminations where the employee somewhat amicably agrees to accept a lump sum payment we are seeing a ton of drawn out and contentious employee termination negotiations. The primary reason for this change in the nature of China employee terminations is the change in China’s job market. With China’s job market not thriving as it did in the past, employees are fighting hard for better severance packages or to even to keep their jobs. In the past, most terminated Chinese employees were eager just to get what they could so they could quickly move on to a “better” job. With better jobs difficult to find these days, terminated Chinese employees are a lot more willing to hunker down for long fights. Chinese employees are a lot more willing today than even a year ago to threaten and follow through with legal actions. Our China employment lawyers have gotten more calls this year about actual complaints/labor arbitration cases filed with the authorities than in the previous three years combined. For these reasons, having the right strategy before approaching an employee about termination is more critical than ever.

On the preventive (i.e., employment-related document drafting) front, we have seen more employers taking a more proactive approach to preventing employee disputes. In other words, they are recognizing that things in China have changed and the need to get “out in front” of employee problems has become more important. In concrete terms, this has meant that more foreign employers are coming to us very early on to make sure they have the right set of employment documents before they onboard any new employee. This is obviously good news for my firm’s China employment team and we have drafted more China-centric employment contracts already this year than in any year previously.

We are also experiencing a much greater demand from employers for assistance in making sure their China employer rules and regulations (often referred to as employee handbook/manual) not only fully comply with China’s national and local employer laws but also address the real issues/questions/problems specific to their business in China. I recently attended an employment law seminar where one of the speakers said that when her state first rolled out new family and medical leave laws she thought she could create a nice “one-size-fits-all” policy document she could offer her clients for a flat fee. But she soon came to realize that would not work because each company’s situation, programs, policies, and needs are so different that each company’s family and medical leave policy needs to vary as well, though of course still remaining within the law. The same is even more true for China employee handbooks because in addition to every company having different cultures, programs, policies and rules, the employment laws and practices in China vary by locale. When it comes to China employment law, there is nothing more important than having your employment documents (starting with your employment contracts and your rules and regulations) be appropriate and enforceable and workable for every single location in China in which you have an employee.

Last and certainly not least, we have been conducting China employer audits pretty much non-stop this year as foreign companies strive to stay in full compliance with China’s employment laws and seek to prevent and tamper employee problems. See Why NOW is the Time to Comply with China’s Employment Laws.

China is getting a lot tougher on how foreign companies (especially American companies) in China treat their employees and at the same time our work as China employment lawyers is getting tougher but more rewarding as we work to prevent and resolve our clients’ employment matters. See China’s New Company Tracking System: Comply, Comply, Comply.

Want to learn more about China’s employment laws and how you can prevent China employment law problems? Tune in on Tuesday, October 22 for my webinar.