China’s Labor Contract Law defines a “mass layoff” (“经济性裁员”) as one of the following:
- An employer reduces its workforce by twenty or more employees, or
- An empolyer reduces its workforce by greater than 10% of its entire workforce.
Under China’s Labor Contract Law, an employer may initiate mass layoffs only under one of the following four circumstances:
1. The employer reorganizes in accordance with China’s Enterprise Bankruptcy Law.
2. The employer experiences significant difficulties in its business operation.
3. The employer switches production, adjusts its business model, and modifies its labor contracts, but still must lay off employees.
4. The employer experiences other significant changes that modify the economic circumstances which formed the basis for its having signed the labor contracts, and it is unable to perform under the contracts.
For purposes of Chinese employment law, a mass layoff is treated as termination without cause. This means the employer must comply with the applicable provisions for such a termination, including the prohibitions against terminating certain employees, such as those pregnant or nursing.
At least thirty days before initiating a mass layoff, the employer must present its layoff plan to the labor union or to all of its employees. The employer must then consider any comments it receives and revise and improve the plan accordingly, and file a report with the relevant government authorities.
During a mass layoff, the employer must consider keeping an employee who:
1. Has a relatively long-term fixed-term labor contract;
2. Has an open-term labor contract; or
3. Is the only one working in the household and needs to support elderly or minor dependent(s).
If the employer wishes to bring new employees on board within six months after it has gone through a mass layoff, it must notify and give preference to its former employees in hiring.
