Recent Developments in PRC Employment Law

Transcription

1 Recent Developments in PRC Employment Law K. Lesli Ligorner Partner, Simmons & Simmons Shanghai 17 October 2013

2 Agenda 1. Changes to the labour dispatch regime - Amendments to 2008 Labour Contract Law and Draft Labour Dispatch Rules 2. Supreme Court s judicial interpretation on post-termination non-compete restrictions - Interpretation of the Supreme People s Court on Several Issues concerning the Application of Laws for the Trial of Labour Dispute Cases (IV) 3. New rules on entry and exit of foreigners - Exit and Entry Law and Regulation on Entry and Exit of Foreigners 2

3 Current labour dispatch regime Regulated under the Labour Contract Law, effective 1 January 2008 Generally limits labour dispatch to temporary, auxiliary or substitute positions (undefined) Principle of equal pay for equal work Employers must treat dispatched staff and permanent staff equally Administrative penalties on staffing agencies only Significant abuse exists which has led to the change in the law 3

4 Changes to labour dispatch regime - Amendments to 2008 Labour Contract Law and Draft Labour Dispatch Rules (1) Amendments to Labour Contract Law, effective 1 July 2013 Limit use of dispatched workers to only temporary, auxiliary or substitute positions: temporary - up to six months auxiliary - non-core positions substitute - replacement for employees on leave Maximum percentage of dispatched workers to be set by the MHRSS Equal pay for equal work principle re-emphasized contracts must reflect equal pay for equal work 4

5 Changes to labour dispatch regime - Amendments to 2008 Labour Contract Law and Draft Labour Dispatch Rules (2) Increased entry requirements for staffing agencies minimum registered capital increased from RMB500,000 to RMB2,000,000 administrative approval required to operate Increased penalties administrative penalties can be imposed on both staffing agencies and entities using dispatched workers increased amount from RMB1,000-5,000 to RMB5,000-10,000 per person additional penalties for staffing agencies: up to five times illegal profits or RMB50,000 if no illegal profits 5

6 Changes to labour dispatch regime - Amendments to 2008 Labour Contract Law and Draft Labour Dispatch Rules (3) Draft Labour Dispatch Rules, published on 7 August 2013 Propose labour dispatch may also occur in a service outsourcing arrangement Limit number of dispatched workers for auxiliary positions to 10% of total workforce Include transition provisions: agreements entered into before 1 July 2013 continue in force until expiration permitted cap must be met before hiring new workers for auxiliary positions clarify representative offices are not subject to position and percentage restrictions require entities to verify labour contracts signed by dispatched workers require entities to obtain approval for alternative working hours system 6

7 Changes to labour dispatch regime - Amendments to 2008 Labour Contract Law and Draft Labour Dispatch Rules (4) What this means for you: Review qualifications of staffing agencies Review types of positions filled by dispatched workers Review pay and benefits provided to dispatched workers Calculate the percentage Develop transition plan Should companies keep labor dispatch arrangements at all? twice renewal rule not clarified advantages vs. disadvantages continued use of payroll services 7

8 Current law on non-compete restrictions Regulated under the Labour Contract Law, effective 1 January 2008 Key provisions on post-termination non-compete restrictions: Employer must pay separate financial compensation Payment due at least monthly Maximum length is 2 years Limited to those employees with access to trade secrets 8

9 Supreme Court s latest judicial interpretation on post-termination non-compete restrictions - Interpretation of the Supreme People s Court on Several Issues concerning the Application of Laws for the Trial of Labour Dispute Cases (IV) (1) Passed on 31 December 2012; came into force on 1 February 2013 Key provisions on post-termination non-compete restrictions: 30% of employee s average monthly wages is required if contract does not specify non-compete compensation not enforceable if payment of compensation is delayed for longer than 3 months due to employer s fault 9

10 Supreme Court s latest judicial interpretation on post-termination non-compete restrictions - Interpretation of the Supreme People s Court on Several Issues concerning the Application of Laws for the Trial of Labour Dispute Cases (IV) (2) If employer intends to cease enforcing non-compete before the agreed upon duration, 3 months additional compensation is required Unclear whether employer is required to give any notice of termination of non-compete restrictions Continuance of enforceability against breaching employee throughout post-termination non-compete period if employer requests so 10

11 Supreme Court s latest judicial interpretation on post-termination non-compete restrictions - Interpretation of the Supreme People s Court on Several Issues concerning the Application of Laws for the Trial of Labour Dispute Cases (IV) (3) What this means for you: Review existing non-compete agreements Review template termination/exit documents Consider whether to waive non-compete restrictions before termination (non-compete may include other restrictive covenants such as nonsolicitation of clients) 11

12 New rules on entry and exit of foreigners - Exit and Entry Law and Regulation on Entry and Exit of Foreigners (1) Exit and Entry Law, effective 1 July 2013 Aims to: set up central registers for exit and entry records in the PRC impose control on types of jobs available for foreigners Key point: new class of work authorization Talent Visa 12

13 New rules on entry and exit of foreigners - Exit and Entry Law and Regulation on Entry and Exit of Foreigners (2) Regulation on Entry and Exit of Foreigners, effective 1 September 2013 Introduces various changes to existing visa and residence permit arrangements R visa, a new visa category, created for high-level and talented personnel Current F visa is split into an F visa for certain types of business (e.g., scientific, cultural exchange activities) and the new M visa for business visitors engaging in commercial and trading activities in the PRC Increase in the processing time for residence permit application to 15 working days 13

14 New rules on entry and exit of foreigners - Exit and Entry Law and Regulation on Entry and Exit of Foreigners (4) Catalogue for Foreign Employment Under the new law, MHRSS will issue a catalogue for guiding foreign employment in the PRC MHRSS catalogue likely to provide guidelines as to which sectors or industries may be open for employment of foreigners Expected to facilitate the requirement that foreigners must only fill positions where there is a special need for foreigners and there is a lack of local candidates No mention of the MHRSS catalogue in the new regulation 14

15 New rules on entry and exit of foreigners - Exit and Entry Law and Regulation on Entry and Exit of Foreigners (5) What this means for you: Greater scrutiny by authorities over employment and residence arrangements of foreigners Audit the employment arrangements of expatriates working temporarily or long-term in the PRC to ensure they do not fall foul of the new rules Keep abreast of developments regarding the enforcement situation Hong Kong nationals entering with travel pass and no visa 15

16 Q & A simmons-simmons.com elexica.com Disclaimer simmons-simmons.com elexica.com Simmons & Simmons is registered in the People's Republic of China (PRC) as a foreign law firm. We are permitted by PRC regulations to provide information on the impact of the PRC legal environment and also to provide a range of other services. We are not admitted to practice in the PRC and cannot, and do not purport to, provide PRC legal services. We are, however, able to co-ordinate with local counsel to issue a formal legal opinion should this be required. These materials are provided by Simmons & Simmons and reflect information as of 17 October The contents are intended to provide a general guide to the subject matter only and should not be treated as a substitute for specific advice concerning individual situations. You may not copy or modify the materials or use them for any commercial purpose without our express prior written permission. 16

17 Contact us Lesli Ligorner, Partner, Shanghai T E Lesli is a partner of the China employment group in the firm s Shanghai office. She specializes in strategic counseling with respect to employment and anticorruption matters. Representing some of the world s largest corporations in their most sensitive cases, Lesli provides a unique, global perspective on a wide range of employment issues. 17