“The Labor Contract Law of the People’s Republic of China” (hereinafter, the “Labor Contract Law”) was promulgated on June 29, 2007 and came into force on January 1, 2008. This is another milestone in the legal construction of labor and social security. Compared with the former “Labor Law”, the “Labor Contract Law” has made new provisions as well as further improvement and development to the labor contract system.
The “Labor Contract Law” enlarges the applicable range of the labor contract system
According to the “Labor Contract Law”, besides the original domestic enterprises and individual economic organizations, private non-enterprise entities and other organizations have also been taken into the applicable range of the labor contract system. Meanwhile, except civil servants and the staff who are administered by reference to the “Civil Servant Law”, and the employers of the public institutions under the system of employment, the state organs, public institutions, social organizations shall establish a labor relationship with their employees and execute according to the “Labor Contract Law”.
The “Labor Contract Law” strictly requires the execution of written labor contract
The “Labor Contract Law” makes improvement to the problem that the employing entities do not execute written labor contracts, and provides that an employer shall establish a labor relationship with an employee from the date of starting to use the employee; and a written labor contract shall be executed to establish a labor relationship. Meanwhile, it provides that if an employer fails to execute a written labor contract with an employee more than one month but less than one year after the date on which it starts using him, it shall pay to the employee his monthly salary at double amount; if an employer executes a written labor contract with an employee more than one year after the date on which it starts using him, it shall be deemed that the employer has executed a labor contract without a fixed term with the employee.
The “Labor Contract Law” strictly requires the execution of written labor contract
The “Labor Contract Law” makes improvement to the problem that the employing entities do not execute written labor contracts, and provides that an employer shall establish a labor relationship with an employee from the date of starting to use the employee; and a written labor contract shall be executed to establish a labor relationship. Meanwhile, it provides that if an employer fails to execute a written labor contract with an employee more than one month but less than one year after the date on which it starts using him, it shall pay to the employee his monthly salary at double amount; if an employer executes a written labor contract with an employee more than one year after the date on which it starts using him, it shall be deemed that the employer has executed a labor contract without a fixed term with the employee.
The “Labor Contract Law” strictly defines the probation period
The “Labor Contract Law” strictly defines the probation period that if the term of a labor contract is more than 3 months but less than 1 year, the probation period shall not exceed one month. If the term of a labor contract is more than one year but less than 3 years, the probation period shall not exceed 2 months, and If the term of a labor contract is more than three years or it is a contract without a fixed term, the probation period shall not exceed 6 months; for a labor contract based on the completion of a particular task or with a fixed term of less than 3 months, no probation period may be stipulated; an employer can only stipulate one probation period with a same employee. Meanwhile, the “Labor Contract Law” strictly defines that the salary of an employee during the probation period shall not be lower than the minimum salary for the same post of the same entity or not lower than 80% of the salary stipulated in the employment contract, nor shall it be lower than the minimum salary of the place where the employer is located. Besides, the “Labor Contract Law” defines that within the probation period, the employer shall not dissolve the labor contract unless for legal circumstances, while the employee may terminate the contract with a notice three days in advance.
The “Labor Contract Law” clearly provides that only under two circumstances can the penalty for breach of contract of the employee be stipulated
The “Labor Contract Law” restricts the employer to stipulate penalty for breach of contract at ease by exploiting its dominant position, and clearly provided that, except the two circumstances of the violation of the stipulation on the training service period or the stipulation on the non-competition, the employer shall not stipulate for the employee to bear the penalty. Meanwhile, the “Labor Contract Law” limits the amount of penalty for the stipulated training service period to be no more than the training fees, and makes detailed provisions on the applicable target, period (2 years) and scope etc. of the non-competition.
The “Labor Contract Law” provides in details the circumstances for dissolving a labor contract
Compared with the “Labor Law”, the “Labor Contract Law” has, on one hand, enlarged the conditions for the employee to dissolve the labor relationship at any time, such as that the employer fails to pay the social security premiums according to the laws, the contract is invalid and the employer’s rules infringe on the rights of the employees, etc.; and on the other hand, has added the circumstances for the employer to dissolve the labor relationship at any time, such as that the employee simultaneously establishes a labor relationship with other employers and may seriously affect his completion of the tasks of this entity, or he refuses to make a correction though the employer has pointed it out, the contract is invalid, etc. and added the circumstance that the employer can pay one month’s salary to substitute the 30 days’ notice period when dissolving the labor relationship. Besides, the “Labor Contract Law” gives more detailed provisions to the applicable circumstances for the dissolution because of downsizing.
Saturday, September 22, 2007
Wednesday, August 8, 2007
Confidentiality and Non-competition under new Employment Law
The Employer and the Employee can reach agreement on confidentiality and non-competition in the employment contract.
For the Employee who has the obligation of confidentiality, the Employer can include clauses of non-competition in the employment contract or confidentiality agreement. In such agreement, the Employer shall be liable for compensation for the Employee on a monthly basis during the non-competition term which starts from the termination of employment contract. In case the Employee violates agreement on non-competition, he shall pay penalty to the Employer.
The Employee with obligation of non-competition is limited to senior management personnel, senior technicians or other employees with obligation of confidentiality.
With regards the term of non-competition, according to the new Employment Law, within 2 years upon termination of employment contract, the Employee with obligation of non-competition shall not seek employment in other Employers who manufacture or engage in like product or business and have competitive relationship with the Employer, or start his own business on manufacturing or engaging in like product or business.
For the Employee who has the obligation of confidentiality, the Employer can include clauses of non-competition in the employment contract or confidentiality agreement. In such agreement, the Employer shall be liable for compensation for the Employee on a monthly basis during the non-competition term which starts from the termination of employment contract. In case the Employee violates agreement on non-competition, he shall pay penalty to the Employer.
The Employee with obligation of non-competition is limited to senior management personnel, senior technicians or other employees with obligation of confidentiality.
With regards the term of non-competition, according to the new Employment Law, within 2 years upon termination of employment contract, the Employee with obligation of non-competition shall not seek employment in other Employers who manufacture or engage in like product or business and have competitive relationship with the Employer, or start his own business on manufacturing or engaging in like product or business.
Tuesday, July 31, 2007
Service Term
Service Term means the term the Employee promises to work for the Employer in case the Employee receives special treatment from the Employer.
If the Employer provides training for the Employee at its own cost, the Employer can enter into agreement with the Employee and have a service term in such agreement.
In the event the Employee violates the service term, he shall pay penalty to the Employer, which shall not be more than the training expense. Furthermore, the penalty the Employer requires the Employee to pay shall not exceed the part of training expense which is the rest of the training expense according to the term left.
If the Employer provides training for the Employee at its own cost, the Employer can enter into agreement with the Employee and have a service term in such agreement.
In the event the Employee violates the service term, he shall pay penalty to the Employer, which shall not be more than the training expense. Furthermore, the penalty the Employer requires the Employee to pay shall not exceed the part of training expense which is the rest of the training expense according to the term left.
Sunday, July 29, 2007
Probation Period
In the new Employment Law, the probation period has direct link with the employment term. In case the employment term is more than 3 months but less than one year, then the probation period shall be no more than 1 month; If the employment term is more than one year (including one year) but less than three years, the employment term shall be no more than 2 months; if the employment term is more than three years (including three years) or the employment contract is an open term contract, then the probation period shall be no more than 6 months.
The same Employer can only be allowed to have probation period with the same Employee for one time.
No probation period is allowed if the contract is a task completion-based contract or the employment term is less than three months.
The probation period shall be included into the employment term. That is to say, if the employment term is 6 months and the probation period is 1 month, then the 1 month shall be part of the 6 months.
With regards the salary for probation period, according to the new Employment Law, the Employee’s salary for probation period shall be no less than the minimum salary for the same position in the company or no less than 80% of the salary as agreed in the employment contract.
During the probation period, the Employer is not allowed to terminate the contract except:
a) The Employee is proven not up to the requirements for recruitment during the probation period;
b) The Employee seriously violates the Employer’s disciplines or the rules;
c) The Employee causes great losses to the Employer due to serious dereliction of duty or engagement in malpractice for selfish ends;
d) The Employee meanwhile enters into employment relationship with other employer(s), which brings serious impact to the task which the Employee needs to complete for the Employer, or for such situation, the Employer has pointed it out but the Employee refuses to rectify;
e) The employment contract is concluded or modified by one party against the other party’s true intentions through the use of fraud or coercion or exploitation of the other party’s unfavorable position, which makes the contract null and void;
f) The Employee is investigated for criminal responsibility;
g) The Employee is unable to take up his original work or other work assigned by the Employer after expiry of his medical treatment term for illness or non work-related injury;
h) The Employee is unqualified for his work and remains unqualified even after receiving training or an adjustment of job position.
In case the Employer terminates the contract during the probation period, it shall explain the reason to the Employee.
The same Employer can only be allowed to have probation period with the same Employee for one time.
No probation period is allowed if the contract is a task completion-based contract or the employment term is less than three months.
The probation period shall be included into the employment term. That is to say, if the employment term is 6 months and the probation period is 1 month, then the 1 month shall be part of the 6 months.
With regards the salary for probation period, according to the new Employment Law, the Employee’s salary for probation period shall be no less than the minimum salary for the same position in the company or no less than 80% of the salary as agreed in the employment contract.
During the probation period, the Employer is not allowed to terminate the contract except:
a) The Employee is proven not up to the requirements for recruitment during the probation period;
b) The Employee seriously violates the Employer’s disciplines or the rules;
c) The Employee causes great losses to the Employer due to serious dereliction of duty or engagement in malpractice for selfish ends;
d) The Employee meanwhile enters into employment relationship with other employer(s), which brings serious impact to the task which the Employee needs to complete for the Employer, or for such situation, the Employer has pointed it out but the Employee refuses to rectify;
e) The employment contract is concluded or modified by one party against the other party’s true intentions through the use of fraud or coercion or exploitation of the other party’s unfavorable position, which makes the contract null and void;
f) The Employee is investigated for criminal responsibility;
g) The Employee is unable to take up his original work or other work assigned by the Employer after expiry of his medical treatment term for illness or non work-related injury;
h) The Employee is unqualified for his work and remains unqualified even after receiving training or an adjustment of job position.
In case the Employer terminates the contract during the probation period, it shall explain the reason to the Employee.
Friday, July 27, 2007
The Employment Term
According to the new Employment Law, there are fixed-term employment contract, open term employment contract and task completion-based employment contract.
Fixed-term employment contract means the contract has an expiry date. The fixed-term employment contract can be concluded by the Employer and the Employee on the basis of consultation.
Open-term employment contract means the contract has no definite expiry date.
Open-term employment contract can be reached by the Employer and Employee on the basis of consultation. However, in the following situations, if the Employee puts forward or agree to renew or conclude the employment contract, an open-term employment contract shall be concluded except the Employee proposes to conclude a fixed-term contract:-
1. The Employee has been working for no less than 10 years for the Employer;
2. When the Employer adopts the employment contract system for the first time or state-owned enterprise is reorganized and reenters into employment contract with the Employee, the Employee has been working for no less than 10 years for the Employer and there is less than 10 years before he/she retires;
3. The fixed-term employment contract has been concluded for consecutive two times, and no following situations exist when reentering into the contract:-
a) The Employee is proven not up to the requirements for recruitment during the probation period;
b) The Employee seriously violates the Employer’s disciplines or the rules;
c) The Employee causes great losses to the Employer due to serious dereliction of duty or engagement in malpractice for selfish ends;
d) The Employee meanwhile enters into employment relationship with other employer(s), which brings serious impact to the task which the Employee needs to complete for the Employer, or for such situation, the Employer has pointed it out but the Employee refuses to rectify;
e) The employment contract is concluded or modified by one party against the other party’s true intentions through the use of fraud or coercion or exploitation of the other party’s unfavorable position, which makes the contract null and void;
f) The Employee is investigated for criminal responsibility;
g) The Employee is unable to take up his original work or other work assigned by the Employer after expiry of his medical treatment term for illness or non work-related injury;
h) The Employee is unqualified for his work and remains unqualified even after receiving training or an adjustment of job position.
If the Employer does not sign written employment contract with the Employee and such condition has last for over one month starting from the date when the Employee carries out the work but less than one year, the Employer shall pay double salaries each month to the Employee.
In the event the Employer does not sign written employment contract with the Employee and such condition has last for one year, the Employer is deemed to have entered into open term employment contract with the Employee.
If the Employer violates the law and refuses to sign open term employment contract with the Employee, the Employer shall pay double salaries to the Employee from the date when the open term employment contract shall be signed.
Task completion-based employment contract means the contract comes to an end when the task is completed.
Task completion-based employment contract can be concluded between the Employer and the Employee on the basis of consultation.
Fixed-term employment contract means the contract has an expiry date. The fixed-term employment contract can be concluded by the Employer and the Employee on the basis of consultation.
Open-term employment contract means the contract has no definite expiry date.
Open-term employment contract can be reached by the Employer and Employee on the basis of consultation. However, in the following situations, if the Employee puts forward or agree to renew or conclude the employment contract, an open-term employment contract shall be concluded except the Employee proposes to conclude a fixed-term contract:-
1. The Employee has been working for no less than 10 years for the Employer;
2. When the Employer adopts the employment contract system for the first time or state-owned enterprise is reorganized and reenters into employment contract with the Employee, the Employee has been working for no less than 10 years for the Employer and there is less than 10 years before he/she retires;
3. The fixed-term employment contract has been concluded for consecutive two times, and no following situations exist when reentering into the contract:-
a) The Employee is proven not up to the requirements for recruitment during the probation period;
b) The Employee seriously violates the Employer’s disciplines or the rules;
c) The Employee causes great losses to the Employer due to serious dereliction of duty or engagement in malpractice for selfish ends;
d) The Employee meanwhile enters into employment relationship with other employer(s), which brings serious impact to the task which the Employee needs to complete for the Employer, or for such situation, the Employer has pointed it out but the Employee refuses to rectify;
e) The employment contract is concluded or modified by one party against the other party’s true intentions through the use of fraud or coercion or exploitation of the other party’s unfavorable position, which makes the contract null and void;
f) The Employee is investigated for criminal responsibility;
g) The Employee is unable to take up his original work or other work assigned by the Employer after expiry of his medical treatment term for illness or non work-related injury;
h) The Employee is unqualified for his work and remains unqualified even after receiving training or an adjustment of job position.
If the Employer does not sign written employment contract with the Employee and such condition has last for over one month starting from the date when the Employee carries out the work but less than one year, the Employer shall pay double salaries each month to the Employee.
In the event the Employer does not sign written employment contract with the Employee and such condition has last for one year, the Employer is deemed to have entered into open term employment contract with the Employee.
If the Employer violates the law and refuses to sign open term employment contract with the Employee, the Employer shall pay double salaries to the Employee from the date when the open term employment contract shall be signed.
Task completion-based employment contract means the contract comes to an end when the task is completed.
Task completion-based employment contract can be concluded between the Employer and the Employee on the basis of consultation.
Wednesday, July 25, 2007
The rights that Employees enjoy when concluding an employment contract
During the course of concluding employment contract, the Employees have the right of knowing . The Employer shall faithfully inform the Employees of the job content, job condition, working address, work-related danger, safety production condition, remuneration and other issues that the Employees want to learn about.
The employer is not allowed to detain the Employees ID or other certificates, or ask for guarantee from the Employee as a means to keep the employment.
Written employment contract shall be concluded. In case the employment relationship has been set up but no written employment contract was ever signed, the contract shall be signed within one month upon establishment of employment relationship. If the contract is signed before the Employee carries out the work as assigned by the Employer, the employment relationship shall be deemed to be established when the work is carried out.
The employer is not allowed to detain the Employees ID or other certificates, or ask for guarantee from the Employee as a means to keep the employment.
Written employment contract shall be concluded. In case the employment relationship has been set up but no written employment contract was ever signed, the contract shall be signed within one month upon establishment of employment relationship. If the contract is signed before the Employee carries out the work as assigned by the Employer, the employment relationship shall be deemed to be established when the work is carried out.
Wednesday, July 4, 2007
China Promulgated the new Employment Contract
The new Employment Contract law was passed by the 28th Secession of Standing Committee of NPC on June 29, 2007. The new Law increases penality to the employer who violates the Law and refuses to sign written employment contract with the employee. Also when disputes arise, the old procedure i.e. arbitration first and then litigation, is expected to be modified. This new Law will become effective on January 1, 2008.
Double salary shall be paid in case no written employment contract is signed
According to the Law, the employer shall sign a written employment contract with the employee. If no such contract is signed during the term starting from the next month of employment to expiry of one year of employment, the employer shall pay double monthly salary to the employer during such term; In case no written contract is signed after expiry of one year, besides the double monthly salary to be paid, it is deemed the employer has entered into non-fixed term contract with the employee.
The Probation term shall be no more than six months
With regards the probation term, if the employment term is over three months but no more than one year, the probation term shall be no more than one month; if the employment term is over one year but no more than three years, the probation term shall be no more than two months; if the employment term is over three years or the contract is a non-fixed term contract, the probation term shall be no more than six months.
In addition, the employee's salary during the probation term shall be no less than 80 % of the salary as agreed in the contract or no less than the minimum salary for the same position in the company.
Double salary shall be paid in case no written employment contract is signed
According to the Law, the employer shall sign a written employment contract with the employee. If no such contract is signed during the term starting from the next month of employment to expiry of one year of employment, the employer shall pay double monthly salary to the employer during such term; In case no written contract is signed after expiry of one year, besides the double monthly salary to be paid, it is deemed the employer has entered into non-fixed term contract with the employee.
The Probation term shall be no more than six months
With regards the probation term, if the employment term is over three months but no more than one year, the probation term shall be no more than one month; if the employment term is over one year but no more than three years, the probation term shall be no more than two months; if the employment term is over three years or the contract is a non-fixed term contract, the probation term shall be no more than six months.
In addition, the employee's salary during the probation term shall be no less than 80 % of the salary as agreed in the contract or no less than the minimum salary for the same position in the company.
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