Working Abroad in China: Termination of Employment Relationship

Working Abroad in China

Termination of Employment Relationship

Author: Normand Gauthier

Working in China as a foreign national is a great experience for many. However, when employment issues arise, it can quickly become a nightmare. Over the years, I have noticed that the misunderstandings and questions are recurring. Thus, I created this series “Working Abroad in China” which explores and discusses some key matters foreign employees should know. All good things come to an end, therefore in this third article of the series the ABCs of termination will be explained.

An employee who desires to end his employment relationship can do so by notifying his employer in writing 30 days in advance. An employee is free to leave with a 30 days notice with the only exception being a training agreement which may include a service period and a penalty for breach. It is also possible for the employer and employee to agree on ending the employment relationship.

An employee can also leave immediately when the employer is in major violation of labor law. Specifically, if the employer:[1]

1. fails to provide labor protection or work conditions as stipulated in the labor contract;

2. fails to timely pay the full amount of remunerations;

3. fails to pay social security premiums for the employees;

4. rules and procedures set up by the employer are contrary to any law or regulation and impair the rights and interests of the employees;

5. the labor contract is invalidated due to deception or coercion; or

6. (…) If an employer forces any employee to work by the means of violence, threat, or illegally restraining personal freedom, or an employer violates the safety regulations to order or forces any employee to perform dangerous operations that endanger the employee's personal life…

For those who read my previous article The basics, these clauses from the Labor Contract Law are general. As an illustration, judgment by the labor arbitrary committee or the court on invalid company’s rules and procedures can vary greatly per location across the country.

When it comes to unilaterally terminating an employee however, it becomes more restricted. For the employer to terminate without notice:[2]

1.It is proven that the employee does not meet the recruitment conditions during the probation period;

2.The employee seriously violates the rules and procedures set up by the employer;

3.The employee causes any severe damage to the employer because he seriously neglects his duties or seeks private benefits;

4.The employee simultaneously enters an employment relationship with other employers and thus seriously affects his completion of the tasks of the employer, or the employee refuses to make the ratification after his employer points out the problem;

5.The labor contract is invalidated due to deception or coercion; or

6.The employee has criminal liabilities according to law.

The first point debunks a common misunderstanding that an employee can be terminated without a reason during probation. Whilst it is easier to terminate a labor contract during the probation period, it is not at-will termination. The work tasks and Key Performance Index (KPI) must be established and proven that the employee does not meet them. The second point is the most important of all, serious violation of a company’s rules. The employee handbook is the main tool for companies to manage employees and justify unilateral termination. This is why it is crucial to ask for the employer’s rules before signing a contract. Otherwise, the foreign employee might be halfway in his visa process with a high cost of backing down only to realise his employer is a despotic boss who takes away two hours of wage for leaving one minute early. The fourth point, risk-savvy employers write directly in their employment contract that the employee cannot have another employer. Although both parties can agree on a simultaneous employment, in the case of foreign nationals this would be illegal employment of an alien.

For the employer to terminate with 30 days notice or payment in lieu:[3]

1. The employee is sick or is injured for a non-work-related reason and cannot resume his original position after the expiration of the prescribed time period for medical treatment, nor can he assume any other position arranged by the employer;

2. The employee is incompetent to his position or is still so after training or changing his position;

3. The objective situation, on which the conclusion of the labor contract is based, has changed considerably, the labor contract is unable to be performed and no agreement on changing the contents of the labor contract is reached after negotiations between the employer and the employee.

In both the first and second point, any changes of position must also be aligned with the Work Permit and would require informing the authorities, rendering this option difficult if not impossible. Termination on the ground of incompetency rarely happens in practice. As such cases take a long time to prove incompetency, provide training, and prove incompetency again. Most employees realise it is better to find new opportunities and do so during the process. To invoke change of objective situation the employer has to go through several statutory procedures; it also requires causal link of significant changes to the objective situation to the impossibility of performing the labor contract.

For the conditions above requiring 30 days notice or payment in lieu, there are some protected employees that cannot be terminated and the contract should remain ongoing even if it expires:[4]

1. Engaging in operations exposing him to occupational disease hazards and has not undergone an occupational health check-up before leaving the position, or is suspected of having an occupational disease and is under diagnosis or medical observation.

2. Confirmed as having lost or partially lost his capacity to work due to an occupational disease or a work-related injury during his employment with the employer.

3. Contracted an illness or sustained a non-work-related injury and the proscribed time period of medical treatment has not expired.

4. Female who is in her pregnancy, confinement, or nursing period.

5. Working for the employer continuously for not less than 15 years and is less than five years away from legal retirement age.

…

The problem with most of these protected employees is that upon the Work Permit expiration, the labor relationship will no longer be recognised, thus invalidating the protection. The most realistic and used protection by foreign nationals is for female employees.

This article demonstrates how difficult termination can be for employer. However, employees should still remain careful and read the company’s internal rules, amongst other things. Even in doing so, there remain challenges on the applicability of the protected employee’s status for foreign nationals.

[1] Labor Contract Law of the PRC (2012 Amendment), Article 38

[2] Labor Contract Law of the PRC (2012 Amendment), Article 39

[3] Labor Contract Law of the PRC (2012 Amendment), Article 40

[4] Labor Contract Law of the PRC (2012 Amendment), Article 42

This article is a vulgarization of laws and regulations and does not constitute legal advice. The author is not responsible for any loss caused by using any information provided in this article. For more information please contact Normand@Laodongfa.com.

For all intent and purpose, the term China in this article refers to the People’s Republic of China.