Appointing employees in China is as complicated as firing them. Foreign employers could easily find themselves on the wrong side of the law if they do not conduct due diligence accurately and follow the Chinese employment law properly.
Regarding the treatment of the employees, China has several laws and regulations such as-
- China Labor Law
- Regulation on Labor Management of Sino-foreign Joint Ventures
- Regulations on Labor Management of Foreign Funded Enterprises
- Regulations on the Control of Resident Offices of Foreign Enterprises
We are providing some of the real-life scenarios that foreign businesses may face while hiring employees in China and their suitable remedies.
When foreign companies appoint an employee who is still working with his old employer. Employee then informed new employer that old employer was angry with him for having left his old employer and was demanding to him to pay old employer damages for the early contract termination.
Remedy- It is advised by the China lawyers to all the new employers to hire an employee who has given his old employee a 30-days written notice and served that. So that if the old employer of your employee sued him and you, both of you could easily prove to the court that since he had served his notice period successfully, the old employer doesn’t have the right to claim any damage and the employee is free to work anywhere and your company is legally eligible to hire him.
A new employer hired an employee, and the old employer claimed that the employee had an education reimbursement agreement that required old employer pay a substantial amount of money for employee’s extensive training in Europe, and the employee had agreed to a 5-year service period in return for this European training. In front of the court the old employer has successfully furnished all the legal documents including producing actual receipts for the training provided to the employee in Europe and the employee had agreed to a 5-year service period in return for this European training. But now he has joined the new employer without completing his five-years of service commitment. The new employer is definitely going to lose this case and have to pay for failing to conduct due diligence on Employee before hiring him.
Remedy- According to the China lawyers, this problem has a very specific solution. Before hiring an employee, a new employer should ask the employee to submit his “Education Reimbursement Agreement” if he has signed any. It has been noted in many cases that your China hire has concealed the truth to you that he had signed any “Education Reimbursement Agreement” and after few days when you received a legal notice from his old employer that he had signed the agreement, you get the truth. But it would be too late for you to redeem yourself from fine and legal harassment. Many employers opt for investigating the background of their China hire through a private investigation agency. China lawyers strictly say no to this move as it is prohibited in China and could lead you to face a legal penalty for harming the privacy right of an individual. Three possible things new employer can do to get out of this trouble-
- First- New employer can ask their potential employees provide such agreements (Education Reimbursement Agreement) before making any hiring decisions.
- Second- With the consent of the potential China hire, the new employer can cross-check the truth about his employee’s old employer. In most cases old employers do provide exact information about the truth.
- Third- Closely review and check the proof of termination of employment relationship of their potential employee.
If you have your own business in China, at some point in time, you may feel the need to hire local Chinese personnel. There are a set of rules that every employer in China has to abide by while considering recruitment of local Chinese or foreign employees.