China Employer Rules and Regulations: Watching the Sausage Get Made

In going through old emails, I came across a number of them from our lead China employment lawyer (Grace Yang) to clients who had retained us to draft their China employer rules and regulations. Our China employment lawyers have been drafting a record number of China employer rules and regulations (a/k/a “employee handbooks”) because foreign companies that are doing business in China have come to recognize the importance of an employee handbook for avoiding both employee disputes and government crackdowns. See yesterday’s post, The Five Keys to China Company Compliance.

These emails are little more than very brief explanations regarding the attached Employer Rules and Regulations, yet they provide a good explanation regarding the importance of these documents and how they should be used. The below is an amalgamation of two of those emails.

Attached please find the first draft of your Employer Rules and Regulations, along with a short bilingual Sign Off Agreement. You should use this Sign Off Agreement to document each employee’s receipt of the employee handbook. Note that what I have enclosed is a form and it needs to be customized to fit the specific employee’s situation (e.g., with the relevant employee’s personal information and the effective date of the handbook). You can add in this information yourself or we can have one of our China law . paralegals do that.

As previously noted, this is a long and complex document that basically constitutes a handbook on China’s/Shanghai’s employment laws. China is not an at-will employment jurisdiction and this document sets out the full set of terms that govern the employment relationship (and specifically, the basis for employee terminations). Much of the content in this document is required by law and is therefore not optional. We can do some further customization of this document, but not much.

We have highlighted in yellow the places that need to be filled in before execution. If you provide us with this information, we’d be happy to insert it for you. We have left blank the effective date of these employer rules and regulations — we can fill this in once we know the commencement date for the initial group of WFOE employees.

In addition, please note that for Article 30, personal days (unpaid), you should set a limit on how many days your employees can take as unpaid personal leave each year. For now, I set the limit as 5 (which is fairly standard for Shanghai) but you can obviously adjust that if you would like. I have also highlighted the relevant part in yellow in the document.

We have carefully reviewed your European Union employee handbook and we have incorporated as much of that as we could into your CHina employee handbook, but only to the extent legal and workable under Shanghai/PRC employment and other laws.

Because your EU employee handbook was written a few years ago, there may be some things in there that may have changed for your company since then and there also may be some things in there that you would like to change now. Please thoroughly review the China employee handbook and let us know if there is anything in there you would like to be removed from the WFOE handbook as no longer applicable. If you wish to make any changes to your EU employee handbook, we can help with that as well, using our Spain or Germany licensed lawyers out of our Spain offices.

For your best protection, the provisions regarding discipline should be clear, simple and to the point, because that is what the Chinese authorities and the Chinese courts both expect and like to see. For example, merely saying that the Company will discipline any employee for certain misconduct (such as harassment) “up to and including termination of employment in appropriate circumstances” is a good start, for this employee policy to be enforceable in Shanghai/China, you should specify 1) the specific disciplinary action your company will impose, and 2) the specific behavior that will lead to termination. Similarly, phrases like “Corrective action may include (but are not limited to) disciplinary action up to and including termination of the offending employee in appropriate circumstances” do not work well for Shanghai/China and you should to specify: 1) the specific corrective action your company will take taken, and 2) the specific circumstances that will lead to termination. The sections on employee disciplines are critical as without them it would be very difficult, if not impossible, to terminate a China employee. We will work with you to strengthen these various discipline provisions. 

Please review and get back to me with any questions/concerns/required changes.

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.