China Employment Laws: The Cultural Disconnect Goes Both Ways

Last week, I attended a lecture on China labor law by our own Steve Dickinson. The thrust of Steve’s speech was that China’s employment laws have changed, they are being enforced against foreigners, and they are very different from U.S. employment laws. In a nutshell, the biggest differences are that written contracts with all employees are required in China and firing an employee in China generally must be for cause. Neither of these are true in the United States.

Judging from the audience questions (and this was an extremely sophisticated audience), many were surprised by this and many had trouble understanding the full import.

A few days later, Steve and I were talking about this with a group of Chinese lawyers in Qingdao with whom we are working on a couple of international litigation matters. In explaining to them some of the cases we have handled for American clients who got themselves into trouble by improperly laying off Chinese employees, it soon became apparent to Steve and me that the Chinese lawyers were not grasping why these American companies were making these mistakes. They would ask questions like, “how could these American companies really believe they could lay off 100 people without first securing their approval and that of the government as well?” When Steve and I told them about US employment laws, the Chinese lawyers found them so bizarre, they actually laughed.

We told them of how there is a saying in the United States that one can fire an employee “for good reason, bad reason, or no reason at all, just so long as the reason for firing is not one prohibited by law (such as racial or gender discrimination).” We talked about how one might fire an employee for wearing a green shirt. We told them of how most employees in the United States do not work under written contracts and how companies generally prefer not to use employment contracts. It took at least half an hour for us to give a basic explanation of employer-employee relations in the U.S. Even then, it was pretty clear these exceedingly bright international lawyers were still nonplussed.

It was a good exercise for Steve and me as it helped reinforce American companies (Europe’s employment laws are not so wildly different from China’s) so often act on Chinese employment law matters based on completely false assumptions as to how things are really done there.

What are you seeing out there?