China, over the last decade or so, has become an economic superpower. China became the world’s manufacturing hub, specializing in the labour-intensive, export-led production of cheap goods that enabled a gradual increase in product complexity. In a nutshell, its growth strategy was to assemble and sell cheap goods to the world.
The Chinese have a style of business that can be very different from the Americas, Europe or the rest of Asia. The ever increasing business interest with this country makes it highly important to understand Chinese culture, negotiation process and most importantly employment law of China.
In China, the Labor Law of the People’s Republic of China, effective since 1995, and the Labor Contract Law of the People’s Republic of China, effective since 2008, both provide as the primary source of employment law. However, in order to further encourage growth and maintenance of healthy businesses for the long-term success of the economy, reasonable amendments have been changed for the continuous improvement and effectiveness of the relevant employment laws in China.
The new amendments in the employment law focus mostly on adjudicating labor disputes more comprehensively and effectively on the consistent basis. The new changes in the Beijing employment law have brought in not to project Beijing as an employer-friendly jurisdiction, but rather, to increase uniformity in the law across the different courts within the municipality of Beijing. Further complicating things is that each district within a particular city may have different requirements. This means you need to contact the appropriate authorities within your particular district to determine the specific local employment rules that apply.
Here are few specific circumstances in which employment contract become unenforceable in Beijing-
- In the circumstances where an employers is declared bankrupt, revoked of its business license, ordered to close or stop operations, or decides to dissolve prematurely.
- If the employee reaches the statutory age of retirement at the time of litigation and arbitration.
- The employment contract expires during the arbitration or litigation, and there are no circumstances requiring execution of an open-ended employment contract as provided by Article 14 of the Employment Contract Law.
- In the circumstances where the employee has been employed by another employer.
- The previous position held by the employee is irreplaceable and unique to the business of the employer, such as general manager or CFO.
- During the arbitration and litigation, the employer sends a reinstatement notice to the employee requesting continued employment, but the employee declines.
- Other circumstances in which the employment contract is unenforceable.
In spite of the new rules, it is advised by the Chinese business lawyers to the foreign employers to act with extreme caution when it comes to terminate an employee. According to them, there are two ways that are still considered to be the most safe in sacking an employee-
- Claim release of an employee without any legal disputes
- Mutual termination of an employee with proper settlement agreements
Chinese authorities have taken few praiseworthy measures for the foreign companies to do business over here with less hassle. But the onus is on the foreign companies to fully comply with all those rules and regulations for a seamless business operation in China.