China Employee Problems: If You’ve Got One You’ve Got Many

As regular readers of this blog should know, employers in China, (especially foreign employers) face myriad, complicated and hypertechnical local employment laws. One little employer mistake can lead to big and expensive problems. As much as we wish all our employment law clients would first come to us requesting we audit their employment program to bring it into compliance, truth is that about half the time they come to us only after they’ve been hit with a big (and nearly always expensive) employee problem.

The good news is that most who come to us to solve their pressing employee problem realize the benefits of having us work with them to prevent future problems. These are the clients who realize that it makes sense to change their oil every 3,000 miles than to buy a new engine every 40,000 miles. Some clients are convinced (or should I say convince themselves) that their employee problem was just a one-off and that their “relationship” with their other employees means there will be no such problems in the future. About all I can tell them is that my experience and that of every single other China employment lawyer I know says that their future odds are not so good.

In general, the best way to deal with just about every legal problem (in China and everywhere else) is to do both what you can to solve that one and to search out and remedy the root cause of that problem so that the same sort of problem does not recur. This all just seems so obvious to me.

Consider this hypothetical based on one of the two or three most common China employment law issues we see. Employer wants to terminate an employee and approaches the employee to discuss a severance package. The employee responds by saying, “You can’t terminate me because not only do you not have any legal basis to do so, I am also on an open-term contract.” The employer then seeks to check the employee’s contract but cannot find a signed copy of it. Now let’s suppose the employer then has a face-to-face meeting with the employee where the employee says: “I like working here so I will forget about what you said about my termination.” The employer replies, “Great. We appreciate your cooperation.” and then goes on about its business.

Smart move by the employer? NO, NO, NO, a thousand times no. When our China employment lawyers get a matter like this, the first thing we do is try to clarify with the employer why it wanted to terminate the employee in the first place. Was it because there was not enough work? Was it because the employee is incompetent? If there is a legally permissible ground for a unilateral termination, the employee’s consent is not required and the employer can (and oftentimes should) proceed with the termination. In some cases, especially where the employer is dealing with a problem employee, it will make sense for the employer to initiate a unilateral termination as soon as possible and in doing so be sure to preserve its evidence backing up its claimed basis for the termination for any labor arbitration or litigation in the future. In most cases, if the employer does not wish to retain the employee, the employer should talk with the employee about a mutual termination as soon as possible, even if the employee is an open-term employee.

Even if the employer continues to employ the (almost terminated) employee it should do what it can to determine whether the employee was indeed on an open-term employment. Not having a written employment agreement does not necessarily mean the employee has become an open-term employee. If the employee is not an open-term employee, the employer should still decide whether it wants to use a fixed-term or an open-term agreement with the employee going forward.

If there truly is no written employment contract between the parties that accurately reflects the employee’s specific situation, the employer should seek to enter into a written employment contract with this employee as soon as possible. Once the issues concerning this employee have been resolved, the employer should then see what sorts of current employment contracts it has with all of its other employees. Even if the employer does have contracts with all its employee that still will not suffice if the contracts are not current. If there are any imminent employment contract renewals due to an employee’s contract expiring soon (i.e., within 30 days) the employer needs to not delay in dealing with those also. In other words, it must not lose sight of any other employee because of this one employee.

If the employer in the above hypothetical executes an appropriate new employment contract with this one employee but does nothing more we can expect it will have similar employment matters with its other employees soon enough. China employees talk with their fellow employees about these things (just like pretty much everywhere else in the world), and trust me, this one employee will soon be telling your other employees how he or she got a great deal from you and they should too and if they have any shot at all they will try. It is not uncommon for our China lawyers to have to deal with a situation where one employee has complained about an employment contract problem and even before the employer has had time to sign our fee agreement, it is now dealing with three or four employees with the same complaint.

It is nearly always much cheaper to deal with your employment issues proactively and not wait until they come “from nowhere” in the form of a complaint. Think of that first employee complaint as your canary in your coal mine and use it to your advantage to nip impending/future employee problems in the bud with an employer audit.

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.