Understand the Legalities that Govern Overtime in China

China continues to be a challenging market in which to do business, but remains one with great growth potential. To succeed, multinational employers entering into and doing business in China must sharpen their employment-related business strategies to leverage opportunities and mitigate risk.

Overtime regulations in China are typically regulated in the People’s Republic of China Labor Law. Many foreign companies find it really complex and hard to understand. Often Chinese employees litigate overtime claims to their employers, therefore, it is really important for the China employer to understand the legalities that govern overtime in China in order to avoid potential discrepancies with the law.

In the jurisdictions like Beijing where the law is highly favorable to the employees, if an employee claims that he/she has not been paid for the overtime, the onus is on the employers to prove the claim is false. In the view of the prominent Chinese lawyers, the courts of Beijing has the perception that employers often deliberately conceal the evidence that a worker has done overtime in order to save money.

 Under PRC Labor Law and regulations, overtime pay is clearly specified:

  • Any work that exceeds 8 hours per normal work day must be paid at 1.5 times of the employee’s contractually agreed to hourly wage.
  • Any hours worked on a weekend day must be paid at 2 times the employee’s contractually agreed to hourly wage.
  • Any hours worked on a Chinese statutory holiday must be paid at 3 times the employee’s contractually agreed to hourly wage.
  • The number of overtime hours is also regulated by law and is limited to no more than 3 hours per regular work day and no more than 36 hours per month.

According to the Chinese law firms, the current emphasis on mediation in labour disputes reflects a shift towards mediated settlements in China’s judicial system as a whole, but more specifically it is a response to the sudden upsurge in arbitration and labour rights legal cases that followed the implementation of the Labour Contract Law and Labour Dispute Mediation and Arbitration Law in 2008. Both laws gave workers additional ability and incentive to seek legal redress for labour rights violations.

Chinese business lawyers suggest China employers should think strategically about how to document the employment relation- ship to maximize their flexibility and minimize costs and legal risks. Written employment contracts can include key terms such as probationary periods, working time arrangements, wages and benefits.

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NNN Contracts, Arbitration and Litigation in Chinese Courts

Chinese and Vietnamese lawyers get asked several questions, among which one of the most important ones is- “what to put in the Chinese NNN contract and the Vietnamese contract for doing business there?” This questions pertains to the selection of venue most of the times. The western clients are confused most of the times regarding the rules and laws for business in this Asian land. In fact, here are some points regarding the same:

  • Lawsuit in the courts of the home country of the western client
  • Vietnamese lawsuit in their court
  • Vietnamese arbitration
  • Mediation outside Vietnam

Each of these situations have their pros and cons and that is why picking the exact venue actually depends on the particular situation. This is true for both China and Vietnam.

Pros and Cons of Each Situation

The pros and cons for each situation has been explained below:

  • Lawsuit filed at the home country has the advantage of prevailing above the others. Lawsuit filed from America, Australia and Europe also need huge upfront filing fee or arbitration fee. However, the cons outweigh the pros which is the fact that neither China nor Vietnam enforces the court judgments of most of the foreign countries. Therefore, if you are suing any Chinese company and you prevail, even in that case, it will not be enforced in the respective country. You should also bear in mind that it filing lawsuit is the most expensive option.
  • The biggest advantage for litigation in the Chinese or Vietnamese court is that the courts are best to enforce monetary judgments; they do not enforce laws on intellectual property rights. These courts are not well equipped to handle commercial matters and are mostly biased regarding home companies. Vietnam is worse in this case than China.
  • The biggest advantage of Vietnamese or Chinese Arbitration is that there are good chances that an English arbitration can be enforced. The biggest negative is that there is an absence of good arbitrators. The cost is very high for doing it in Chinese or Vietnamese. Moreover, hiring translators is also a difficult task. It is advised that the arbitration is properly documented by a Chinese lawyer.
  • The biggest benefit for arbitration outside China and Vietnam is that you can choose any of their states and you will get almost good arbitrators. The biggest negative involved in this is that, the foreign arbitration takes lot of time to be pulled off. However, you have to bear in mind one thing, that is foreign arbitrators are not allowed in China arbitration. Their laws prohibit Chinese arbitration.

The Chinese law firms have prepared a huge number of contracts providing all the above mentioned provisions. There are no hard and fast rules regarding any of these, but there are conventions regarding Chinese laws, rules and regulations. Sometimes, facts are published which create lot of confusion. However, most awards are settled instead of being enforced. Sometimes, the courts do not do anything; they just stay mum and that hurts the entire system.

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