China Overtime Laws and Employee Terminations

Many foreign (especially U.S.) employers operating in China expect their China-based employees to work overtime whenever needed to “get the job done.” Though imposing these sort of work hours usually makes sense in their home countries, this mindset is at odds with China’s laws. It gets even worse in China when the employer intends to discipline or even fire the employee for refusing to work what the employer views as mandatory overtime. Can you fire someone in China for refusing to work overtime? It really just depends.

China’s laws on overtime are fairly strict and inflexible. In most China provinces and cities, most employees can work only under the standard working hours system. This means they are limited to 8 hours of work per day, 40 hours per week, and anything beyond these hours is considered overtime under China’s labor laws. This means if you make an employee working under the standard working hours system work 9 hours on a workday, you must pay for such overtime, even if you are able to make arrangements so that the employee works only 31 hours the rest of the week. China also restricts how much overtime an employer can require an employee to work. For instance, an employer cannot order an employee to work 5 additional hours on a workday. Also, the employees must either be compensated for the time worked or get comp time.

What is the right way to incur employee overtime in China? The employer needs to give the employee prior notice and get the employee’s consent to work overtime. Unless an exception applies.

What if an employee refuses to give her consent and therefore does not work overtime as directed? Can the employer discipline or fire her for failing to abide by company orders? The national law for this in China is clear: the PRC Labor Contract Law provides that employers cannot force their employees to work overtime unless an exception (I will get to this below) exists. But like just about everything else related to China employment law, the practice varies from place to place. Still, the majority view is that because employers cannot generally force their employees to work overtime, an employee in China who refuses to work overtime has not done anything wrong and therefore cannot be disciplined or fired for having done so. So a termination decision made solely on the basis of an employee refusing to work overtime will usually be held to have been unlawful and the employer will likely need to rehire the employee, pay the employee back wages, and pay damages for unlawful termination.

As noted above, there are though a few exceptions to the general rule on China employer’s not being able to force their employees to work overtime:

• Emergencies, such as natural disasters, accidents or other reasons that threaten the working environment safety and the health of workers and others.
• Damages to public transportation and facilities, which affect normal production and public activities, and thus urgent repair is required.
• Other circumstances as stipulated by the law and regulations.

So in other words, an employer may require its employees in China to work overtime during an emergency and in those limited circumstances it may also discipline the employee for failing to do so. However, if the employer does not have a well-crafted and China appropriate set of rules and regulations (aka an employer manual) already in place, any disciplinary action it takes will likely be deemed illegal because it will have had no legal basis for that action.

We sometimes hear from our clients that “overtime is common in China and employers do it all the time without getting caught, but that has certainly not been true of foreign employers in the last few years. Our China employment lawyers deal with a steady stream of matters where foreign (mostly American) employers have gotten caught and punished by the government for not following China’s (or even local) overtime rules. Even more common though is the terminated employee (and plenty of those who leave completely voluntarily as well) who brings and prevails on a claim for overtime pay. Good, bad and indifferent employees in China virtually never have any compunction about pursuing back wages for overtime after they leave their employ and as we so often have written, the foreign employer virtually always loses on employee claims. See Avoid China Labor Arbitration. It’s A Sucker’s Game And You Will Be The Sucker.

So I cannot stress the following enough when it comes to having your employees work overtime in China:

1. Overtime remains an often-litigated area, and it’s important that your rules and regulations reflect all applicable legal requirements. At minimum, you must pay all overtime.
2. If you don’t have a section in your rules and regulations or a separate document that communicates your company’s overtime policies and procedures, you need one right away. If you don’t have a China-centric (and in Chinese) set of rules and regulations, you will have difficulty disciplining or terminating a China employee for any reason, not just for refusing to work overtime.
3. Think long and hard before you terminate an employee.

Not sure if what you are doing complies with China’s overtime or other employment laws? NOW is the time to check.

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.