China Employment Contracts: It’s Not Too Late to Check Yours

If you have employees in China, you must have a written employment contract with each and every one of your employees. Employing anyone (Chinese citizen or expat) in China without a current, enforceable, China-centric employment contract puts you at massive risk for financial penalties and worse. Late last month, China’s Ministry of Human Resources and Social Security issued a few (Chinese-language) employment and dispatch sample forms for reference for both employers and employees, emphasizing again the importance of having an appropriate agreement setting forth the respective rights and obligations of both employers and employees in an employment/dispatch relationship.

These government forms are good to have as guidelines but simply copying and pasting or translating them into English for use in China is not advisable because they are just templates that do not account for either the employer’s or employee’s specific situation. Among other things, they have not been localized, they do not work well at all for expats or for high-level employees and they fail to sufficiently protect the employer as they were written with just the employee’s interests in mind.

Perhaps most importantly, these government forms are in Chinese only and that does not work for foreign companies because they should have all of their employment documents in both Chinese and in whatever language all of its managers and HR people completely understand. I say this based on the countless (and expensive) cases our China employment lawyers have seen where a foreign company manager or HR person made a bad employment decision because they did not fully understand their company’s rights or responsibilities because they either had no translation of the Chinese language employment documents or a bad translation.

Our China employment lawyers draft every China-related employment document in both English (or in some other language) and Chinese, even though the Chinese language version will control. We do this so our clients fully understand their employment contracts, company rules and regulations, employee non-compete agreementsemployee trade secret agreements, and whatever other agreements they may have with their employees. It is critical the employer understand each and every agreement it has with its employees so it can be sure to abide by them. Employer-employee disputes are incredibly common in China, particularly for foreign companies doing business in China. Having clearly written employment documents in both Chinese and in English goes a long way towards reducing both the number and the severity of those disputes.

In China, current written employment contracts are required not just for the first year or first employment term but throughout the employment, regardless of whether an employee is on a fixed term or open term. Making sure your employees have an up-to-date employment contract means you need to start thinking about whether to renew an employee’s contract before its current term expires, even if that contract has an automatic renewal provision. If you have an employee with ongoing problems that do not warrant an immediate dismissal per your employer rules and regulations, you should consider proceeding with a non-renewal for that employee (assuming it is legal to do so). Our China employment lawyers are sometimes called in to assist companies with a problematic employee very soon after the employee just signed on for another employment term. This makes things more complicated but it oftentimes may still be resolved with the right approach.

The key is to use an employment contract that works for your specific locale in China. Using a “China” employment contract that has not been localized for your specific China city can get you in trouble, as will using the same employment agreement for all of your China offices. Even worse is using the same employment documents for both mainland China and some other legal jurisdiction, including Hong Kong, Taiwan or Macao. Non-China-centric employment documents invariably contain provisions that violate Chinese employment law and are unworkable for China.

Do you really want to present your employees with an employment contract or other employment document that instantly tells them you do not know how things work in China? What happens is not that the employee will not sign the agreement; rather, they will be happy to sign it and then they will be also be happy to use or threaten to use these bad or illegal documents against you if you try to discipline or terminate them. The employee will not get in trouble for signing an unenforceable employment contract nor will they get in trouble for reporting their employer’s illegal activity to the authorities. This is generally true even when the employee will also be implicated in any wrongdoing. The Chinese authorities are more than willing to let Chinese employees walk away scot-free in return for being able to go after a foreign employer for monetary penalties and more.

With China cracking down hard on foreign companies these days — especially American companies, our China employment lawyers have had a busy year reviewing and advising on employment contracts for legal compliance and for better employer protection. If you are not 100% certain your China employment contracts and your entire China employment program are in great shape you should have a comprehensive document-based employer audit before China’s new company tracking/social credit system goes into full gear. See China’s New Company Tracking System: Comply, Comply, Comply.