Change your mindset for China employment contracts.
If you have or are going to have any employees in China, you need a China-centric written employment contract with each of your employees. Around once a month, one of our China employment lawyers will get a company asking us to “translate our existing employment agreements into Chinese for our China office.”
Our response to this request is always the same: “Sorry, we cannot do that because the end result will not work at all for China. You need a China specific employment agreement and our translating what you are using (in the United States or the UK or Canada or Australia or Spain or France or wherever) is not going to work.”
An employment agreement not written specifically for China will contain provisions that do not comply with China’s employment laws or are unworkable in your specific locale in China. It also will not contain provisions necessary for China or for the locale in China where your employees will be located. For these same reasons, our unwillingness to “just translate a contract into Chinese” extends to every contract we do. See Translate Your Contract For China? Not Gonna Do It.
The most common example our China employment lawyers see in foreign employment agreements of something that will not work under China’s employment system and that can be harmful is a provision stating that the employment is at-will. Under an employment at-will system, an employer is said to be able to terminate an employee for good reason, bad reason or no reason at all, but in China, terminating a China employee almost always requires specific cause allowed under both China’s national and local employments laws and under your employer rules and regulations. Putting an at-will employment provision in your employment agreements will not help you but it can hurt you by making your China management team believe they can fire their China employees for any or no reason at all. We have seen many wrongful termination actions brought by employees terminated by managers who believed they could do so at-will.
If you now think that merely eliminating any references to at-will employment will solve the translation problem, you’re dreaming. China’s entire employment law system is very different from those in Western countries and this necessitates very different employment contracts across the board. This at-will example is just one of literally dozens our China employment lawyers have seen that caused massive problems for foreign employers.
Take overtime pay as another example. If your China-based manager is working under the standard working hours system (this usually means 8 hours on a work day and 40 hours in a week), you must pay or otherwise compensate him or her for any overtime incurred. See China Employee Working Hours. If your manager has been approved by the government to work flexible hours, you may be able to avoid paying overtime, but not always. The foreign country managerial contracts we see usually contain a provision making clear there will be no overtime. If one of your China managers sues you for unpaid overtime in China, you should expect this provision will be Exhibit 1.
Many foreign companies have their own policies on how much notice their employees must give when resigning and these sort of notice requirements are often put into their employment agreements. China though has its own very strict notice requirements and an employer that seeks to require resignation notice longer than China’s own minimum requirements is just asking for legal trouble.
We have also found that using a non-China centric employment agreement causes companies to lose sight of what most matters for China. Seniority, for example, is a huge issue for China employees as it is tied to other important employee benefits, such as statutory vacation days, and statutory severance. It is therefore important as a China employer that you deal extensively and clearly with this issue in your China employee contracts. But because this issue is usually not covered or covered very differently in foreign employment agreements, your using your foreign employment contract as your template for your China employment contracts will mean you either fail to address this critical issue or you will do so very badly. Either way, this will end up hurting you if/when you are sued.
This is not to say that what you have in your existing employment contracts is wholly worthless in formulating your China employment contracts. My firm’s China employment lawyers will often review our clients’ existing employment contracts before drafting their employment contracts for China. We want to see those contracts not because we intend to translate them or even because we intend to use them as a template for the China contracts. Rather, we want to see them just because they often broadly outline what is important to our client in its employer-employee relationships.
In terms of your own thinking though, it is best for you to start from scratch. China employment laws are that different and that local and so what you know from Madrid or Minneapolis or Monterrey may not matter or may just get you in trouble.