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I. Introduction

On 1 January 2008, the Labor Contract Law of the People's Republic of China (LCL) became effective, leading to changes in the workplace is widespread for all companies and other organizations concerned. As with the legislation in China, many details were for the resolution in the implementation of the regulations, which in this case, the implementation of the Regulations for the Labor Contract Law of the People's Republic of China (rules) were to comment in May, and then promulgated and are effective (in modified form) on 18 September 2008.

a. Scope: applicability to partnerships and foundations

In the LCL, employers have been defined as "enterprises, economic organizations, non-governmental organizations and companies, private organizations and other entities".

Regulations for further clarification "" Partnerships, such as companies and law firms, and foundations, and branches and offices of companies that have a business license or certificate, as part of the definition of employer.

II end of the contract laboratory

a. Failure to comply with Final Written Labor Contract:

i. Mandatory Employer: written contract or dismissal (art. 5)

If a work is not concluded within one month after the commencement of employment, then, within that period, the employer must also: i) written notice of this obligation, and ii) the written employment contract, the workers not to sign the relevant labor contract upon written notice by the employer.

This means that the burden of proof is on employers to:

i) in general with the LCL;

ii) provide written notice to the employees of the obligation to comply with the LCL, the requirement for written contracts and

iii) if a worker is not, then end the work relationship in writing;

Subject of further liability on his part (see below).

If the employer terminates the employee, in accordance with this notion, but there is no liability for the severance.

ii. Double reward liability: one month to one year (art. 6)

If an employer is not to conclude a written contract for 1 month after start of employment, then the employee is responsible for the doubling of the wages due to the duration of 1 month to the day after the day on which the contract is signed.

If the employee refuses to sign a contract of employment in this period (more than one month but less than one year), the employer is entitled, subject to the additional requirement for severance.

iii. As an open-ended contract laboratory with more than one year (Article 7)

If an employer does not have to sign a written employment contract with an employee within one year after the start, it is assumed, have a permanent contract with the work of the employee. The relevant beginning (of the open laboratory contract) is the day after the period of one year after the start of employment and the employer is still required for a job contract with the workers.

b. As a 10-year open-ended Labor Contracts: The calculation of the time

i. Prior to the implementation of the LCL (art. 9, 10)

In general, the LCL provides that if an employee for an employer for a continuous period of ten years, as employers, on the recommendation of staff, must opt for the conclusion of a permanent labor contract.

In this context, the regulations clarify that the time for calculating the ten-year period begins before the effective date of the LCL at the time of commencement of employment.

The regulations additionally, in an effort to prevent international society with a view to avoid this rule, including those working for the original employer, in which workers are not reasons to him / her.

ii. Proposal for Open-ended laboratory contracts (Art. 11)

Presumably in an effort to prevent abuse by the employer if an employee a new open-ended contract in the context of: i) ten consecutive year rule, ii) SOE restructuring, if an employee has opted for the employer for ten years and ten years or less from retirement, or iii) the completion of two fixed-term contracts, the regulations provide that the negotiations in this case must be based on the "legality, justice, equality, free will, negotiated consensus and good faith ".

c. Termination clauses Outside LCL Void (Art. 13)

The regulations that employers and workers may not require terminating outside the events referred to in Article 44 of the LCL. Given the fact that Article 44 contains a very large "basket clause" also "as provided by law or other provisions, this clause is not clear. Unless such a clause is to foreign interests, we can infer that the legislative intent was to ensure strict compliance with the LCL and labor and other regulations, so that the cessation clauses outside its scope as invalid or unenforceable.

d. Minimum Wage: Location of the application and performance (Art. 14)

When work and policy (minimum wages, labor protection, working conditions, protection against risks, etc.) differ from place of registration and performance, then the place of performance of the contract.

However, if the place of registration is effective for employees and employers and workers agree that these provisions, then the policy in this region. (Of course, the integration of the latter possibility using the favorable policies for the workers on the legislative preference for the use of such low standards.)

e. wages during trial (art. 15)

The LCL provides that the wages during the probation period shall not be less than that: i) minimum wage for the same position with the same employer, ii) 80% of post-probationary wages and iii) minimum wage in the area in which the employer has its seat.

The regulation clarified that the wages during the probation period shall not be less than 80% of the minimum wage for the same position with the same employer, in addition to repeating the same requirements set out in Article II) and III).

f. Training: The calculation of the cost of training (art. 16, 17)

Special education costs are included in the Regulation as "training, travel expenses during the internship, and other direct costs of training, such as the revenue."

If the original work is before the additional training necessary agreement term of service, then the work contract is renewed.

III. Duration and termination of employment

a. Termination of employee labor contract (Art. 18)

[No changes in LCL.]

b. Employer termination of the laboratory contract (Art. 19)

[No changes in LCL.]

c. Calculation of one month wages in lieu of notice (Art. 20)

If an employer is paying for one months wages in lieu of notice to its termination, the wage is calculated on the basis of wage trends, which in the previous month.

d. Expiration of Labor Treaty on reaching statutory retirement age (art. 21)

The regulations, labor contracts that expire on employee reaches retirement age. Read in conjunction with the requirements for written work and associated liabilities, the employer must make sure the retirement-age employees, and must again work to sign contracts with persons who have reached retirement age.

e. Termination: Contents (Art. 24)

The regulations provide that the termination should include the following information: duration of employment, the date of termination or expiration, function and workers' years of service.

f. Mutual exclusivity: Severance compensation or punishment (Art. 25)

If the employer terminates the employment relationship, in violation of the LCL and pays compensation to employees in accordance with Article 87 (LCL) (two times redundancy payments for employees), then they will not pay severance to the employees.

g. Penalty: Extension of applicability (Art. 26)

Under Article 25 of the LCL, liquidated damages will be situations in which the work / service contract after the training is for employees, and in situations where a breach of confidentiality and non-competition clause obligations.

Article 26 of the Regulation, that liquidated damages be paid in the following situations in which the labor contract of service must be terminated by the employer because:

1. the employee against the employer substantially the rules and regulations;

2. the employee commits serious breach of duty or practices graft, thus considerable damage to the employer;

3. the employee has a working relationship with another employer, which substantially affect the completion of its tasks with the original employer, or he refuses, the question of repairing the same is brought to its attention by the employer;

4. the work is established or modified against the true intention of the employer as a result of deception, coercion and the use of the favorable situation of workers, or

5. the employee is criminally in accordance with the law.

h. Calculation of Severance (art. 27)

The regulations provide that the basis for the calculation of the monthly wage is total compensation, including wages, bonuses, allowances and subsidies in the twelve months immediately prior to the termination. (If the employee has less than twelve months, the total amount of compensation during the actual working hours in order to determine severance money.) Further, if the wage paid was less than the minimum wage, then the monthly salary must be in accordance with this amount .

Employers now have to carefully calculate severance pay, taking into account all aspects of monetary compensation.

IV liabilities

a. Failure to maintain compliance with list of employees (Article 33)

Employers who do not wish to a list of the laboratory staff can manage or update to such a register in a given period. If the employer not to do so, they must be fined between RMB 2,000 to RMB 20,000.

b. Double wages (art. 34)

Employers who fail to pay double the wages (for non-compliance with the completion of a written work with employees) may be ordered by the Labor administration to be done.

c. Placement company (Art. 35)

When accepting units against the law under the mediation agreement, the labor-management can correct. If the circumstances are serious, then the acquiring entity will be fined between RMB 1,000 to RMB 5,000 for each employee. If the employee suffers injury, then the staffing and the head unit will be jointly and severally liable for the damages.

Gregory Sy is an Of Counsel at Grandall Legal Group, a law firm in China. Mr. Sy is a corporate / commercial lawyer with a specialization in working with foreign companies in their investments in and about China. Gregory is active in all aspects of their investment, from tax planning, corporate structuring, IP protection, due diligence, partner selection / negotiation, site purchase / lease, employment and settlement of disputes (excluding litigtion ). Representative clients include the Consulate of the United States of America in Shenyang, the Embassy of Brazil, Bancomext, various publicly traded companies (NYSE, LSE (AIM), DAX, BSE), together with many other SMEs, in a broad spectrum of industries. You can go back to Gregory gregsy@grandall.com.cn