As the shadow of the COVID-19 pandemic still hangs over the world and continues to have a profound impact across societies and industries, lockdowns are gradually being eased in some countries. In China, businesses are resuming operations, schools are reopening, and in general, all seems to be back to new normal. However, the COVID-19 crisis has catapulted us into a new future with a myriad of challenges, especially for rules and practice in employment, as they are closely connected to people’s livelihoods, state policies and economic developments, which have been badly hit by the epidemic. The traditional employment model. borne out of the industrial age, is outdated and clumsy in the face of platform employment, telework and various flexible employment. The current employment regulatory regimes and rigid identification of “employment relation” lag behind the changing reality and may trigger controversies when applied to new matters. The employment system for enterprises also faces multiple challenges: salary reduction, redundancy and suspension of work may lead to further labour disputes; countless policies, judicial practices vary in different cities push refinement of employment compliance; and new issues like employment discrimination, dissemination by social media, and data privacy etc. cause unforeseeable problems that are deeply troubling Chinese enterprises.
Decrees, orders or guidelines in effect and pertaining to reopening facilities.
In February 2020, the Ministry of Human Resources and Social Security (“MOHRSS”), jointly with the All-China Federation of Trade Unions released Guiding Opinions on Enterprise’s Work Resumption during the Prevention and Control of COVID-19 Pandemic (“Opinion”), which requires enterprises to learn about situations where employees are being quarantined or under emergency measures adopted by local governments, and also inspires enterprises to proactively explore methods of stabilising jobs. Various local governments released protective measures and outbreak responses in the process of work resumption, such as strengthening workplace ventilation, provide protective gear and hand-washing facilities, sterilise workplace, dormitory, and cafeteria, avoid or minimise people gathering and collective activities. As a result, China has entered the “new normal” with more than 26 million rural residents having arrived in the workplace, and employers should pay close attention to the latest reopening policies issued by local governments from time to time.
Optimal approach to keep track of the latest updates.
For latest updates, please refer to the (English version) link of State Council of the People’s Republic of China (“PRC”): http://english.www.gov.cn/news/topnews/202005/30/content_WS5ed2465fc6d0b3f0e949920f.html
 Over 95% of migrant workers resume work, China Daily, available online at: http://english.www.gov.cn/news/topnews/202006/01/content_WS5ed4b216c6d0b3f0e9499332.html
Government subsidies and special relief resources allocated to support employers, and workers, in their efforts to maintain employment and pull through the crisis.
The unemployment insurance contributions may be returned to companies, if such enterprises are qualified and have not had any layoffs or only small-scale layoffs. From February 2020, each province (except Hubei Province) may exempt small- and medium-sized enterprises (SMEs) and micro firms from making contributions to three types of social insurance (pension, unemployment, and work-related injury) borne by employers, for a period up to five months and dividing (by half) the contributions to three types of social insurance borne by large enterprises for a period up to three months. Hubei Province may exempt all types of insured employers from making contributions to three types of social insurance borne by employers for a period up to five months. Enterprises that have material difficulties with their business, may apply to defer their social insurance contributions.
Requirements mandated by law or any official guidance.
It is mandatory for individuals and enterprises to report to nearby medical or disease control and prevention institutions, if a patient becomes infected or is suspected to be infected with the COVID-19 virus. Among other municipal governments, the Shanghai Municipal government issued a guideline for employers for work resumption including preparing protective equipment, setting up a leading team for pandemic control and collecting employees’ information regarding their health and whereabouts during the 14 days before work resumption.
Measures typically implemented by employers and the associated legal risks, limitations, obligations and issues to consider.
Employers resuming operations are required to implement epidemic prevention and control measures such as ventilation and disinfection, temperature monitoring and equipping workers and staff with sufficient protective gear throughout all working facilities. It is inevitable that the employer will collect health and travel information from employees, and therefore, the employer shall keep the personal data collected strictly confidential.
Policies and procedures for telework once the business reopens.
Telework raises challenges for Chinese employment regulatory regimes since they were written in such a way that does not specifically distinguish between work environments. General rules for working hours, employees’ data and health protection still apply in teleworking. Even if employees have flexible work arrangements when working from home, comprehensive or flexible working hour systems would not automatically apply. The employer is obliged to pay overtime salary if overtime work is required, regardless of workplace.
Management of quarantine, childcare and medical leave for employees affected by COVID-19.
For employees who are confirmed to be infected, an asymptomatic carrier, suspected of infection or having close contact with the COVID-19 virus, employers shall pay them their normal salary during their quarantine or medical observation period. After the end of quarantine, if the employee remains sick and fails to return to work, the medical treatment period-related regulations shall apply. The Beijing Municipal Government released a policy regarding paid parental leave, allowing one employee per family to work remotely in order to care for children under 18 years old, and requiring the employer to pay the salary based on their normal attendance during the remote work period. However, this policy was formulated when school openings had been postponed, and is likely outdated since schools began to gradually reopen in May.
Employees who fear infection and refuse to work.
In the absence of any compulsory obligations imposed on employers as to how to handle such employment relations in this situation, it is advisable that employers negotiate with employees to reach an amicable solution, such as arranging for work from home, paid annual leaves, beneficiary leaves, or non-paid leaves. In addition, according to a judicial opinion released by the Beijing High People’s Court, where the employee fails to return to work for a relatively long period, the employer may pay the employee’s basic living fees from the second salary payment cycle, normally, the second month.
Disclosure of employees who are infected.
Under PRC Law on Control and Prevention Infectious Disease, if employers should identify an infected employee, they should report it to the relevant medical institution. However, employers shall not publicise or disseminate employees’ personal data without authorisation, which may infringe the individual’s legitimate interests as protected by the PRC Civil Code. Only the State Council, health administrative department at provincial level and government, at or above county level, have the right of publicise the relevant information.
To what extent can employers implement the following cost-reduction strategies as a result of COVID-19, and what are the primary limitations on each?
Chinese law does not recognise the concept of suspension. Employers may refer to regulations on “Suspension of Work and Production” and negotiate with employees who fail to provide labour after using up all leaves, according to the salary standards of Suspension of Work and Production, that is, in the first salary payment cycle, normally, the first month, the employer pays their normal salary; from the second month, the employer may pay basic living costs (equal to or less than the minimum monthly salary) according to local regulations.
- Salary reductions.
Guiding Opinions issued by High Court of Shanghai Municipality stressed that during this special period to combat the COVID-19 pandemic, employers may reduce the salary after reaching an agreement with their employees through democratic consultation with the staff representatives’ congress, trade union, or staff representatives. Otherwise, the employer can only reduce salary with the employee’s consent.
Redundancy only applies to the four situations specified under Article 41 of PRC Employment Contract Law and where more than 20 or 10% of the total employees are dismissed. In any event, the employer shall complete the consultation procedures and file the redundancy plan with the local labour administration authority.
- Facility closure.
An early dissolution of a legal entity is statutory cause for an employer to terminate the employee’s employment contract. Under this scenario, the employer’s shareholder shall resolve the termination, file the liquidation committee, and conduct liquidation and deregistration, afterwards.
Tips, recommendations and common pitfalls.
In first quarter of 2020, the Chinese government adopted policies to restrain social activities and advocated for employers to arrange for employees to work from home, for pandemic prevention purposes. Some employers attempted to permanently arrange for supportive employees to work at home afterwards, as they accumulated telework experience during this period. There is no official guidelines or mandatory rules to cope with employment under this scenario. In this regard, updating the company’s internal policies and procedures is essential in order to respond to potential legal risks. First, the employer shall determine positions that will implement telework and address them as such in employee handbooks or the employment contracts. Second, the employer shall set up detailed management rules specifically for employees working from home, such as rules of timely reporting working hours and progress, rules of overtime application, etc. Third, employees’ personal data and privacy protections as well as protections for employers’ trade secrets shall also be considered. It is therefore advisable that employers obtain written consent before collecting, storing, or using employees’ personal data and formulate a confidentiality policy for personal computer and mobile phone usage. Lastly and highly controversial, involves identification of an employee’s work-related injury while he/she is working at home, whether employers may require employees to confirm the safety of their environment in writing, from time to time, and whether they may evaluate the same periodically.
If you have any questions, please contact the following representative:
Carol Zhu, Partner
Zhong Lun Law Firm
+86 6061 3081