China Employment Law Webinar: Questions Answered, Part 2

China VIE

In China Employment Law Webinar: Questions Answered, Part 1, I provided short answers to a number of questions I was not able to get to before the end of my recent webinar on China employment Law: What Your Company Needs to Know. Below is Part 2 of that additional Q & A. I got so many questions there will be a Part 3 soon as well.

Question: I would like to better understand IP requirements for Chinese employees or contractors we hire: do work-for-hire copyright laws apply?

Answer: China does have laws on this, but they are not particularly clear nor well understood by China courts. It therefore is pretty much always much better for you to get this protection by entering into contracts with your employees that make clear your company will own the IP and set out your company’s requirements and expectations regarding the company’s IP. China’s courts understand and enforce well-crafted China-specific contracts. You mentioned contractors in your question and whenever I hear that I feel compelled to mention that there is virtually no such thing as independent contractors in China and believing otherwise is dangerous.

Question: Are there mandatory insurance rules to follow for the employer and the employee?

Answer: Yes. Each locale has different mandatory benefits which include mandatory social insurance. The common types of social insurance include maternity, unemployment, work-related injury, pension and medical insurances. China has recently stepped up its efforts to make sure all foreign companies are paying out all they owe in social insurance, so you do want to be sure you are doing this correctly.

Question: Is there any way to avoid the employer status by contracting the employees’ service? Would a recurring temporary contract work?

Answer: China puts people in jail and fines them a lot of money for treating someone as an independent contractor and for using temporary contracts to avoid China employee and/or tax requirements. China has also gotten incredibly effective at rooting out these violations. So I guess my answer is that you avoid these things unless you get an experienced China employment lawyer to confirm that you can retain someone as a temporary employee.

Question: Labor is a sticky wicket in China. We’ve taken the first step to reduce hours/salary for 90 days. Not without negotiation with each. The employee seems to rule. We may have to go again. How much can we count on FESCO for good information?

Answer: Just to be clear to everyone, FESCO is a well-known third-party hiring agency. They also provide HR-related services. My law firm’s employment lawyers work constantly with FESCO (and with various other third-party hiring agencies) and overall they tend to be fairly good, but this definitely varies by region and even by city. Many of the people at FESCO with whom we interact speak English well, but we sometimes need to “bridge the gap” between our clients and FESCO due to language barriers. Despite what I just said, you should not trust FESCO or any other third-party hiring agency because their only real goal is to do what is favorable for them and often that is harmful for you. I am not surprised that you would say employees seem to rule in China because the government does definitely favor them, but most of the time when employers have problems with their employees in China it is because they failed to lay the proper groundwork in their employment contracts or in their employer’s rules and regulations.

Question: Should employees in China be required to sign an acknowledgment form for Employee Handbook and company policies? What are the best practice suggestions for multinational employers to deal with anti-discrimination and anti-harassment in China?

Answer: As I noted during my talk, you should require your employees in China sign an acknowledgment form (in English/your native language and in Chinese — with Chinese being the controlling language) for your employee handbook and your company policies and potentially various other documents as well. In terms of suggestions to for a strong anti-discrimination and anti-harassment program in China, there is no one-size-fits-all. At minimum, your company policies on anti-discrimination and anti-harassment should both conform to all applicable Chinese national and local laws and also reflect your company’s culture and core values. In our experience, foreign companies usually get in trouble with their employees and with the Chinese government when all they do is translate their non-China-centric company policies into Chinese without modifying them to actually work for China.

Question: We are seeing many Belt and Road Initiative projects delayed due to COVID-19. Will this have long-term impacts on the future development of BRI and Chinese overseas workers?

Answer: I am not really qualified to answer this, but I do not see how it would not.

Question: What happens if an employer does not start the employee contract renewal process within the 6 months before the contract expires? Is there any risk for the employer? Is there any difference if the employment contract has been signed with a foreigner?

Answer: Generally speaking, an employer does not need to start the contract renewal process so far (6 months) in advance, although it usually does not hurt to start early. Normally, an employer just needs to start the contract renewal process a little more than a month before the contract is set to expire, unless there is a clause in the contract requiring the employer start the renewal process earlier. Specific requirements vary by location though and it is important you know what the requirements are for where you and your employee are located. An employer that continues to employ an employee under an expired contract can be subject to all sorts of problems and penalties, including a double wage penalty payable to the employee. There is not much difference if the employment contract is with a foreigner, except generally the foreign employee is not legally entitled to an open-term contract.

Please “stick around” for the final part of this series — Part 3.

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