China Employee Problems Rising – Harris Bricken Sliwoski LLP

China’s economy is under siege. COVID lockdowns and shutdowns are increasing. Foreign companies are seeking to reduce their workforce or leave China entirely. Tension between foreigners and Chinese citizens is on the rise. All of these things are combining to increase the risks for foreign employers in China.

As regular readers of this blog should know, employers in China, (especially foreign employers) have always faced myriad, complicated and hypertechnical national and local employment laws. One small employer mistake can lead to big and expensive problems. As much as we wish all our employment law clients would first come to us requesting we audit their employment program to make sure they are in full compliance, they usually come to us only after they’ve been hit with a big (and nearly always expensive) employee problem.

The good news is that most who come to us to solve a pressing employee problem quickly realize the benefits of having us work with them to prevent future problems. These are the clients that realize it is better to regularly change the oil in their car than to buy a new engine every 50,000 miles. Some clients are convinced (or should I say convince themselves) that their employee problem was just a one-off and that their “relationship” with their other employees means there will be no such problems in the future. In reality, in nearly every instance, the company with one employee problem is the company with many employee problems.

The best way to deal with pretty much every legal problem in China (and everywhere else as well) is to solve that one problem and to search out and remedy the root cause of that problem so the same sort of problem does not recur.

Consider this hypothetical based on one of the more common China employment law issues we see. Employer wants to terminate an employee and approaches the employee to discuss a severance package. The employee responds by saying, “You can’t terminate me because not only do you not have any legal basis to do so, but also I am on an open-term contract.” The employer then seeks to check the employee’s contract but cannot find a signed copy of it. Now let’s suppose the employer then has a face-to-face meeting with the employee in which the employee says: “I like working here so I will forget about what you said about my termination.” The employer replies, “Great. We appreciate your cooperation.” and then goes on about its business.

Smart move by the employer? NO, NO, NO, a thousand times no. When I get a matter like this, the first thing I do is try to clarify with the employer why it wanted to terminate the employee in the first place. Was it because there was not enough work? Was it because the employee is incompetent? If there is a legally permissible ground for a unilateral termination, the employee’s consent is not required and the employer can (and oftentimes should) proceed with the termination. If the employer is dealing with a problem employee, it likely will make sense for it to initiate a unilateral termination as soon as possible, while being sure to preserve all evidence supporting its claimed basis for the termination for any labor arbitration or litigation in the future. In most cases, if the employer does not wish to retain the employee, the employer should talk with the employee about a mutual termination as soon as possible, even if the employee is an open-term employee.

Even if the employer continues to employ the (almost terminated) employee it should do what it can to determine whether the employee was actually on an open-term employment. Not having a written employment agreement does not necessarily mean the employee has become an open-term employee. If the employee is not an open-term employee, the employer still should  decide whether it wants to use a fixed-term or an open-term agreement with the employee going forward.

If there is no written employment contract between the parties that accurately reflects the employee’s specific situation, the employer should seek to enter into a written employment contract with this employee as soon as possible. Once the issues concerning this employee have been resolved, the employer should then see what sorts of current employment contracts it has with its other employees. Even if the employer has contracts with all its employees, that is not enough if the contracts are not current. If there are any imminent employment contract renewals due to an employee’s contract expiring soon (i.e., within 30 days) the employer should immediately deal with those renewals as well. In other words, the employer must not lose sight of its other employees because of this one employee.

If the employer in the above hypothetical executes an appropriate new employment contract with this one employee but does nothing beyond this, it will almost certainly soon have similar employment matters with its other employees. China employees — like employees everywhere — talk with their fellow employees and this one employee will soon be telling other employees how he or she got a great deal and they should too. It is not uncommon for our China employment lawyers to have to deal with a situation where one employee has complained about an employment contract problem and literally within days be dealing with three or four employees with the same complaint.

It is much cheaper to deal with your employment issues proactively than deal with an employee lawsuit or complaint that has come “from nowhere”. Your first employee complaint is your canary in your coal mine and you should use that to nip impending/future employee problems in the bud.