In the process of handling labor dispute cases for foreign clients in the past few years, we have often been asked some questions repeatedly. In order to help you understand some of the key questions, we listed the ten most frequently asked questions below and gave a brief answer. Of course, Chinese law allows employers and foreign employees, in some circumstance, to make agreements that are different from those stipulated by the law. Therefore, the following content is only for those cases where the two parties have not made any special agreement.

  1. Should I sign a labor contract? What happens if there is no labor contract?

You should sign a labor contract, and it should be in writing.

If there is a labor relationship and the labor contract is not signed, the results are different depends on who is the party that is unwilling to sign the labor contract:

If it is the employee who is unwilling to sign the labor contract, the employer should terminate the labor relationship immediately according to the law.

If it is the employer who is unwilling to sign the labor contract, the employer shall pay the employee twice the labor remuneration from the second month of the labor relationship. Also, it shall be deemed that both parties have entered into an open-ended labor contract that is with no termination date / fixed term from the day when the labor relationship hits one full year without a proper labor contract signed.

  1. Whatare the usualmethods I can use to handle a labor dispute?

We usually recommend that employees first negotiate with their employers. This is not only to solve the problem, but also to find opportunities to collect more evidence, such as recording and video recording the negotiation process. Of course, lawyers can be hired to intervene in these negotiations, such as providing legal advice to employees or sending a lawyer’s letter to employers.

Another low-cost method is to report the employer’s illegal behavior to the Labor Inspection Board. This approach is usually effective only when the employer’s illegal conduct is clear and uncontroversial. In this case, the Labor Inspection Commission, which is a government agency, will conduct an investigation and may impose penalties on the employer.

If labor disputes do exist and cannot be resolved through negotiation or reporting, you usually need to initiate labor arbitration. In China, the law stipulates that the parties of labor disputes must first obtain labor arbitration awards before they can file a lawsuit in the court.

  1. Under what circumstances should the employer pay compensation for terminating the labor contract? Under what circumstances should damages be paid?

In general, when the labor contract expires and the employer does not provide better terms for renewal than the original labor remuneration, or if the employee voluntarily resigns without any fault, the employer needs to pay the employee labor compensation after the labor relationship terminates.

When the termination was made unilaterally by the employer and not based on any legitimate reason, such as an employ’s fault or the end of the contractual term, such termination shall be deemed to be an illegal termination, and in this case the employee shall be paid double labor compensation as damages.

  1. What is the calculation method of compensation and damages?

The law stipulates that the calculation method of labor compensation is the number of years the employee actually worked for the employer before the termination of the labor contract multiplied by the employee’s average monthly remuneration in the twelve months before the termination of the labor contract. For example, if Charles has worked for his employer for three years and seven months and his average monthly remuneration is 20,000 yuan, his labor compensation is:

4*20,000=80,000 RMB.

Note that if the fraction of the actual working years is less than half a year, it is calculated as 0.5 years, and if it exceeds half a year, it is calculated as 1 year. Therefore, three years and seven months should be calculated as 4 years. The average monthly remuneration for twelve months should be obtained by dividing the total remuneration (including not only wages, but also benefits, allowances, etc.) the employee received from the employer in the twelve months before the employee leaves the job by twelve.

The amount of damages is twice the labor compensation.

  1. If my labor contract is illegally terminated, what rights can I claim?

Under normal circumstances, you can request the restoration of labor relations, provided that (1) the employer still exists, and (2) your previous position or similar position of the employer still exists.

Or, instead of requesting the restoration of labor relations, you may require your employer to pay you damages for the illegal termination of the labor contract, that is, twice the labor compensation. In addition, you can also claim wages, benefits, and allowances that have not been paid in full, and ask your employer to compensate you for untaken annual leave.

6.What are the common reasons an employer can use to legally terminate a labor contract?

Under normal circumstances, employers can legally terminate the labor relationship for reasons including: (1) The employee has seriously violated a certain provision of the labor discipline issued by the employer (usually, such provisions need to be reasonable and should not only for a minor fault, such as “making loud noise at work” or “eating at work”), (2) The employee’s serious dereliction of duty, or malpractice, causing serious losses to the employer, or (3) The employee received criminal penalties for criminal offenses.

  1. What kind of employment regulations/ disciplinescan be recognized as effective documents and used as the basis for punishing employees?

Under normal circumstances, such regulations / disciplines need to meet two conditions: (1) before the employers formally promulgate these rules and regulations, they need to discuss with employees or employee representatives, listen to their opinions, and deal with the feedback and make records of such discussion, (2) these rules and regulations have been effectively delivered to employees before the employees commit violations. The delivery can be proved by the employee’s signed receipt or the received e-mails.

  1. After the labor relationship is terminated, how to compensate for the untaken annual leave?

The law stipulates that the untaken annual leave will be calculated by multiplying the number of untaken days by the average daily remuneration of the employee. Specifically: The law stipulates that the number of working days in a year is 250 days. Therefore, the average daily remuneration should be the total annual remuneration of employees (not only wages, but also benefits, allowances, etc.) divided by 250 days, and then multiplied by untaken annual leave days.

  1. Regarding the probation period, how does the law stipulate?

(1) Any probation period shall not exceed six months.

(2) If the term of the labor contract is more than three months but less than one year, the probation period shall not exceed one month;

(3) If the term of the labor contract is more than one year but less than three years, the probation period shall not exceed two months;

(4) If the term of the labor contract is more than three years or is open-ended / no fixed period, the probation period shall not exceed six months.

(5) The probation period shall be included in the term of the labor contract.

(6) The probation period cannot be counted out of the labor contract, that is, the labor contract is signed after the probation period expires. If the labor contract only stipulates the probation period, the probation period shall not be established, and such period shall be deemed as the period of the labor contract.

(5) The same employer and the same worker can only agree on one probation period for one type of work.

10.Regarding the training service period and non-competition agreement, how is the law stipulated?

The law stipulates that employers can agree on service periods with employees, specifically: when employers provide employees with some kind of training (usually those expensive professional training) and bear the costs and expenses of the training, they can agree with the employees for employees continue to work for the employers for several years after the training, and if employees leave early, they need to compensate employers for liquidated damages. Note that the liquidated damages shall not exceed all training costs and expenses borne by the employers at most.

The law stipulates that employers can agree with employees on restricting employees to work in certain industries or conduct business in certain industries on their own for a maximum of two years after leaving their jobs. In this case, after resignation, employees shall be paid a monthly compensation of not less than 30% of the original salary for the period of restriction. If the employer decides that it is not necessary for the employee to continue to perform the non-competition obligation, it can stop paying the compensation. If the employee violates the agreed agreement, he will need to pay the employer liquidated damages accordingly.