China’s Proactive Employment Law Foreign Employers Must Understand

A foreign employer must follow all the legal responsibilities stated in the China employment law. It is a piece of golden advice to all foreign employers to keep an experienced China attorney by their side all the time for proper understanding and compliance with China employment law.

China’s Patent Law

China has a proactive employment policy to make sure the unemployment rate is within a socially tolerable range. From hiring to termination, China’s employment law covers everything. Foreign companies need to understand the Chinese employment law thoroughly before taking on any decisions regarding their China employee.

China employment law basically involves the following areas

  • Employment Contracts
  • Remuneration or Salary
  • Workplace Safety
  • Procedures for Negotiations
  • Labor Disputes
  • Working Hours
  • Protection from Discrimination
  • Compensation or Wage Regulations
  • Training
  • Social Insurance

 

On February 7, 2020, the PRC Ministry of Human Resources and Social Security has issued the Opinions on Stabilizing Employment Relationship during the Period for Prevention and Control of the Novel Coronavirus-infected Pneumonia Epidemic to Support Enterprises in Resuming Work and Production (the “Opinions”). Local regulators have issued various similar notices in this regard in Shanghai and Guangdong provinces. A foreign employer must follow all the legal responsibilities stated in the China employment law. The two China employment laws that all foreign investors must consider before commencing a business in the country are:

 

  • 1995 Labor Law of the People’s Republic of China
  • 2008 Labor Contract Law of the People’s Republic of China

 

Few key points of China employment law

  • In China, labor relationships may be reinstated even after termination– employers may be forced to re-hire terminated employees.
  • The Chinese labor law is primarily based on employment contracts. Oral assurance and offer letters are not valid documents to establish labor relationships.
  • The severance pay structure in China is quite peculiar. Sometimes a senior manager’s severance cost is lower than a junior employee’s.
  • PRC lifts restrictions on wholly foreign-owned HR service companies and the Ministry of Human Resources and Social Security issues notice on electronic employment contracts.
  • China takes steps to reduce employers’ contributions to disabled persons’ protection funds and Guangzhou issues guiding opinions on employment disputes.

 

In spite of not being willing to violate China’s overtime laws, many foreign companies frequently break it largely because the China labor laws are incredibly complicated and most English language translations of them are woefully inadequate. Appointing a trusted China business lawyer can solve this problem. It is a piece of golden advice to all foreign employers to keep an experienced China attorney by their side all the time.

 

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Why NNN and OEM are the Two Most Important Agreements to Sign for China Manufacturing

China has become the world’s leading manufacturing base, it is quite obvious that businesses from all over the world want to make the most of it. NNN and OEM agreements could prove to be the most effective tool in order to carry on seamless business operations in China.

Decoding the Term Attorney-Client Privilege in China

The highly advanced product manufacturing sector and quality control make China the go-to place for industrial and consumer components and products. Often businesses come up with the idea or design of the product but they do not have the capital to manufacture the product on a wide scale. Most of the time they lack the resources required to produce the items. This is where the value of NNN and OEM agreements come into picture.

 

NNN Agreement in China

Instead of drafting a pure NDA agreement, foreign companies should be opting for a Non-Disclosure, Non-Use and Non-Circumvention agreement (NNN) that includes the normal protections of a NDA including non-disclosure and non-use provisions but in addition to those, also non-circumvention protection. China NNN agreement prevents your Chinese manufacturer the distribution of your IP to 3rd parties. It stops Chinese suppliers from using your IP for any purpose other than manufacturing the product in question for you and prohibits a supplier from selling direct to your clients.

 

Must have Provisions in a China NNN Agreement

  • NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant.
  • It will need to be written in English and Chinese and we will need to be able to make slight edits (such as changing the supplier’s name in English and Chinese) so you can re-use the document (for the same product) but for different suppliers.
  • An NNN agreement must include a sum certain contract damage provision that a Chinese court can and will enforce by ordering seizure of the defendant’s assets.

 

 

OEM Agreement

The abbreviation “OEM” stands for original equipment manufacturer. The OEM definition can be misleading, as an OEM manufacturing does produce the product or components but they are created based on the design specifications produced by the original company. So if you have given your product’s technology and signed an OEM contract with the Chinese manufacturer, you can be sure that you will get the product according to your product specification.

 

The Following is a Checklist of OEM Agreement:

  • Materials– The kind of material the CM is going to use must be clearly mentioned in the contract. Be sure the contract manufacturer you’re considering has adopted quality standards – such as the ISO 9001:2008 – which provide guidelines to ensure the contract manufacturer’s products and services are consistently meeting customer requirements.
  • Manufacturing– Review consignment terms, contract, and Standard Operating Procedures (SOP)
  • Price– Request to know the provider’s pricing formula and activity or service rates with current your product.
  • Order placement– How are orders to be placed? Purchase order or by forecast? Also, be sure and state the liability where necessary. The agreement must also define the list of products, performance criteria, tooling list and purchase order.
  • Quality control and quality assurance- Foreign companies need to have the right, after a 24-hour notice, to inspect, audit or examine the manufacturer’s operation, record, system, and facilities to ensure compliance with the OEM agreement.
  • Term– The parties will determine an appropriate term for their contract, and may make the agreement renewable on request by the buyer.

 

NNN and OEM agreements could prove to be the most effective tools in order to carry on seamless business operations in China. It is important that the right China supplier is selected at the very beginning to make sure you are getting the best product without the fear of losing your IP.

 

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