Failure to Follow Offer Letter with Promised Written Employment Contract Leads to Court-Ordered Penalty
Andreas Lauffs and Jonathan Isaacs, Baker & McKenzie, China Employment Law Group, Hong Kong/Shanghai/Beijing
A company reportedly was ordered by the Putuo District People's Court in Shanghai to pay approximately RMB 13,000 as double salary for its failure to sign a written employment contract with an employee after promising to do so in an offer letter. The court did not agree with the company's argument that the offer letter specified the salary and position and therefore should be deemed as an employment contract.
According to the report, in June 2010 the employee and the company signed an offer letter specifying the employee's position, salary, probationary period, and also stipulating that the company and the employee would sign an employment contract after the probationary period. Several days later, the employee proposed resignation but the company successfully persuaded the employee to stay, until May 2011 when the employee left the company for reasons not specified in the news report. The parties had never signed an employment contract even though the probationary period had expired.
The court opined that, according to the PRC Employment Contract Law, the company and the employee should have signed a written employment contract and should not have just continued to rely on an offer letter, particularly since the offer letter clearly specified that the company and the employee would sign an employment contract after the probationary period.
First Comprehensive Law on Employment of Foreign Nationals Approved
Jeffrey Wilson, Jun He Law Offices, Shanghai
The first comprehensive law concerning the entry, stay, and employment of foreign nationals in China, the Exit and Entry Administration Law, was approved by the National People's Congress Standing Committee June 30, 2012. The law takes effect July 1, 2013. Supporting regulations are expected to be issued before the law becomes effective.
The law also includes rules regarding the entry and exit of PRC nationals.
The key points of the law relating to the employment of foreign nationals are:
- Foreign nationals may work only after they have obtained both work authorization (i.e., work permits or expert certificates) and resident permits.
- The Ministry of Human Resources and Social Security and the State Administration of Foreign Expert Affairs are charged with drafting catalogs listing the positions available for the employment of foreign nationals.
- Maximum fines on employers that illegally employ foreign nationals are increased from RMB 50,000 to RMB 100,000
- Maximum fines on foreigners who are illegally employed are increased from RMB 1,000 to RMB 20,000. In "serious circumstances," foreign nationals who are illegally employed may be detained for 5-15 days.
- Foreign nationals who are illegally employed may be deported and barred from entering China for up to ten years.
- A "talent" visa will be created. This visa will likely cover certain types of skilled employees and grant them immigration preferences. Further regulations are expected to be issued governing this type of visa.
- Rules governing the employment of foreign nationals who are registered students in China will be issued by the Ministry of Education. Students who breach these rules would be deemed to be illegally employed.
- Foreign nationals will be fingerprinted by public security bureaus when they apply for resident permits.
- PRC nationals, legal persons, or other organizations that become aware of foreign nationals who are illegally employed must timely file reports with the public security bureau.
Draft of Restrictions to Labor Dispatch Practices under Labor Contract Law Reviewed
Jeffrey Wilson, Jun He Law Offices, Shanghai
Draft amendments to the Labor Contract Law restricting labor dispatch and the companies that provide labor dispatch services were reviewed by the Standing Committee of the National People's Congress on June 26, 2012.
The draft amendments are likely to be reviewed again in October and approved before the end of 2012.
The key points of the draft amendments for employers are the following:
- The Labor Contract Law currently provides that labor dispatch is "generally" permitted only for "temporary, auxiliary, or substitute job positions." The amendments delete the word "generally," thereby indicating that labor dispatch will be permitted only for the three types of positions.
- The three types of permitted positions are defined as follows:
- "temporary" means a position with a duration of a maximum of six months;
- "auxiliary" means a position that is not engaged in the principal business of the employer;
- "substitute" means a position that replaces another employee who cannot work for a certain period of time due to off-the-job study, leave or "other reasons".
- Employers using dispatch labor before the effective date of the amended law must adjust their labor practices to comply with the amended law. The Ministry of Human Resources and Social Security is expected to issue rules setting forth how employers currently using dispatch labor may comply with new requirements.
- The maximum fines on employers who violate rules regarding dispatch labor are increased from RMB 5,000 to RMB 10,000 per employee.