When Your China Employee leaves….

Generally speaking, a China employee must be employed under a written employment contract. Such a contract may be for a fixed or an indefinite term. When it comes to unilaterally terminating the employment contract, China employment law does not treat the employee and the employer as equal parties; the employee has much more power than the employer. An employee in China can usually leave his or her company without any penalty simply by providing an advance notice of the intent to leave. Furthermore, China employees may terminate their employment contract without even having to give advance notice under any of the following circumstances:

1. The employer fails to provide labor protection or labor conditions in accordance with the employment contract.
2. The employer fails to pay in full or on time.
3. The employer fails to pay social insurance.
4. The employer Rules and Regulations do not comply with relevant laws or regulations, damaging the employees’ rights and interests.
5. The employment contract is invalid because of any of the following: (a) the employer used deception or coercion, or took advantage of the employee’s difficulties, to cause the employee to conclude the labor contract, or to make an amendment thereto, that is contrary to the employee’s true intent; (b) the employer disclaims its statutory responsibilities and precludes the employee’s rights, or (c) the employment contract violates mandatory provisions of the laws or administrative regulations.
6. Other circumstances provided by China’s laws or administrative regulations that permit the employee to unilaterally terminate an employment contract.

China’s Labor Contract Law makes clear that if an employer forces an employee to work by resorting to violence, intimidation or illegal restriction of personal freedom, or if it gives instructions that violate China rules or regulations, or if it orders an employee to perform a hazardous operation that endangers the employee’s personal safety, the employee may unilaterally terminate the employment contract immediately without having to provide notice to the employer.

Note that if your employee terminates the employment contract under one of the circumstances above, (even though your employee initiated the termination) you as the employer must pay statutory severance according to Chinese law.

Number 1 above — “The employer fails to provide labor protection or labor conditions in accordance with the employment contract” — is broader than most foreign employers imagine and it is the one that most often gets foreign companies in trouble. For example, if you as an employer require one of your employees to stop working or to take a vacation, it may be treated as failing to provide labor conditions in accordance with the employment contract.

You may also be deemed to have failed to provide labor conditions under the employment contract if you unilaterally change your employee’s position, and yes even by a promotion. Our China lawyers often see something like the following: a foreign employer modifies an employee’s position and changes the employee’s salary to reflect this. The employee thinks the employer’s decision is unreasonable and refuses to take up the duties of the new position. Either the employee terminates the employment contract and demands statutory severance, claiming their resignation is due to employer abuse, or the employer terminates the employee for failing to follow the employer’s orders or for failing to abide by the employer’s Rules and Regulations.

In either of these situations, the employer must be able to answer this important question: Was the change lawful? The employer (and not the employee) has to answer this question because the employer (and not the employee) bears the burden of proof. In other words, the employer must prove that its change was lawful.

An employer must usually be able to prove that it fulfilled a number of conditions to “walk out free” from monetary punishment or being required to reinstate the terminated employee, and like just about everything related to China employment law, these conditions vary depending on the locale. For example, in Guangdong Province, the employer must be able to prove ALL of the following to be able to avoid sanction: (1) the employment change was necessary for the employer’s operations, (2) the employee’s salary remained roughly the same as his or her pre-adjustment salary (whatever that means!?), (3) the adjustment of the employee’s job status was not of an “insulting or punishing nature,” and (4) the employer did not otherwise violate any applicable law and regulations.

When we work with employers in Guangdong (and everywhere else in China, for that matter) we also recommend that their employment contracts have a provision clearly stating that the employer has the right to adjust the employee’s position according to the employer’s business needs.

Bottom line: Your employee is not “stuck” with you just because he or she signed an employment contract, though the same is not true for you as the employer. There are a number of circumstances under which your employee can choose to leave your employ without giving prior notice. And if he or she alleges their leaving your employment was because of employer abuse and you cannot prove otherwise, you will face adverse consequences.

In China, that’s just the way things go….

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.