BUSI 3001 SBLC Week 8(10), Spring 2010 New Labor Contract Law BUSI 3001 SBLC Week 8(10), Spring 2010 Charles Mo & Company April 26, 2010

Background Issued on June 29, 2007, effective January 1, 2008 Improve basic worker rights amid widespread complaints of withheld wages Unpaid overtime Worker abuses Applicable to all domestic and foreign companies Established standards for Labor contract Probationary period Severance Mass layoff Non compete clause Penalty for violation

continued Before this law, workers are poorly treated. Majority don’t have contracts, withhold wages, demand excessive overtime, dismiss workers anytime, First draft presented December, 2005 to the Standing Committee of NPC Made public for input from March 20, 2006 to April 20, 2006 The draft has sparked heated controversy and debated throughout China 190 000 response were received. European Chamber and Amcham submitted input

Law of PRC Employment Contract General Provision Conclusion of Employment Contracts Performance and amendment of Employment Contracts Termination of Employment Contracts Special Provisions Monitoring Inspection Legal Liability Supplementary Provisions

General Provision Principles Defines the rights and duties of the employer and employee Applicable to organizations inside China whether incorporated or not

Employment Contracts 劳动合同的订立 Article 7-employer/employee relation begins when the employer start the worker for assignment. Article 9- employer may not withhold employee ID card/other ID document or demand a security deposit or money or a guarantor Article 10- Written employment contract must be established within one month of start date. Article 12- 3 types of employment contract Fixed Term Open ended term Term to expire upon completion of project.

Fixed Term Labor Contract There is an ending date of the contract Date of expiration is agreed between the employer and employee

Article 14-Open Ended Term Contract Agreed between employer and employee, anytime can sign open ended term contract Unless employee choose to fixed term labor contract, otherwise open ended term contract must be signed if: Employee worked for 10 consecutive or more years For first timer instituting employment contract system employer or state enterprise changing status, 10 consecutive or more years of employment and is less than 10 years away from legal retirement Renewing the employee contract follows 2 consecutive fixed term employment contract If no written contract is provided and the employee worked for a year, the contract is treated or deemed as open ended

Employment contract with a term to expire when a job is completed Employment contract ends when the project is completed

Article 17 – items included in the employment K 1.Name, domicile, legal representative or main person in charge of the employer. 2. Name, domicile, resident ID card or other paper of worker 3. Term of the employment contract 4. Job description and place of work 5. Working hours and vacation 6. Compensation 7. Social welfare insurance 8. Labor protection and working conditions 9. other requirement by laws 10. May include probation, training, confidentiality of trade secrets

Probation Period (A 19) Employment term Probation allowed 3 to 12 months 1 month 1 year < Term < 3 years 2 months Term > 3 years or Open Ended 6 months 1 probation only Project completion or less than 3 months, No probation

Probation Wage must be higher than (A20) Lowest wage level of the same job 80% of the agreed upon wage in contract Minimum wage in that locale (province, township)

Employer provided training (A22) Liquidated damage agreed in the contract can be recovered from the employee: If employee leaves before the agreed service term Damage may not exceed the actual cost of training Damage is allocated to the extent of unfilled service time

Non Compete Clause (A23) Employer must pay the worker to keep confidentiality after contract expired. If the worker(employee) breaches the non compete clause, the worker must pay liquidated damage. A24 Only applicable to senior management, senior technicians and personnel have knowledge of trade secrets Term of non compete cannot exceed two years.

A25 Other than training and non disclosure clause, no other dollar damage may be assessed to the employee

A26 Invalid Contract Deception Coercion Taking advantage of the other party’s difficulty Contrary to the party’s real (true) intent Employer disclaim its responsibility or denies worker’s right Violated administrative law

A27 Partial Invalidity of the employment contract does not affect the remaining provisions of the rest of the contract

Employee to terminate contract A37 Worker may terminate employment by a written notice 30 days in advance During probation, a 3 day advance verbal notice is adequate for terminating employment contract

A38 Verbal Notice by Employee for Terminating contract Failure to provide safety Failure to pay wages Failure to pay social welfare Failure to comply with law Employer commits deception and coercion

A39 Employer can terminate an employee During probation, does not qualify for the job Materially violate company policies and procedures Material negligence, graft, causing financial losses to the employer Worked for another employer Material misrepresentation when signing the contract Involved in a Felony (differ from civil violation)

A 40 Terminate with 30 day notice or one month wage After the period the medical care prescribed by the hospital due to illness or non work related injury, the employee cannot fulfill the job duty of his original position, or the job responsibility of another position assigned by the HR Department The employee cannot fulfill the job duty after training or change of duty. Circumstances at the time of contract signed changed rendering the employment contract not implementable or executable, no agreement can be reached

A41 Employee Reduction in Force Reduction of 20 employees or 10% of workforce Explain to labor union or all employees 30 days in advance Notify the plan to Labor Bureau Pursuant to bankruptcy law Severe production issue Change in enterprise structure, production technique, still needs to reduce employees Other circumstances changed rendering contract not executable Priority to retain the employee Employees with longer term fixed contract Employees with open end term contract Employee is the only wage earner and needs to support older parents Layoff under bankruptcy. If rehiring starts within 6 months. Those laid off should be rehired first

A 42 Cannot terminate under other termination A40 or layoff A41 Engaged in occupational disease related line of duty or being diagnosed for occupational related disease. Confirmed harmed by an occupational disease Still within the prescribed medical care period due to an illness or injury Female employee pregnant, during delivery, or nursing time 15 year tenure and within 5 years of legal retirement age Other laws prohibited circumstances

A44 Labor contract terminates upon Contract expires Employee starts to draw basic government pension Employee died or declared dead or missing by the court Employer bankrupt Employer is dissolved, revoked business license, ordered to be closed by government Other administrative law order to end the contract

A46 Compensation for terminating contract A38 Failure to pay and provide safe working conditions A40 Employee sick, incompetent, change in circumstance A41 Bankruptcy, reduction in production Consensus Termination A44 if offered the same contract or better, no agreement is reached, contract expires A44 employer license revoked, bankrupt, ordered to cease business

A47 Severance Pay One month per year Less than 6 months 0.5 year, more than 6 months, 1 year Highly paid employee, 3 times the average of company employee

A 50 Administration of Termination File On the date of termination Employer must issue a proof of termination or ending of the employment contract Within 15 days Arrange the social welfare transfer and employee personnel file transfer Agreed time frame Duty transfer Severance pay For two years Keep the termination file

A74 Monitoring and Inspection State Council’s Labor Administration is responsible for inspection Labor administration at the county level oversees the implementation of employment contract