CHINA LABOR & EMPLOYMENT LAW UPDATE

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Pauline Lyons
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January 2018 www.junhe.com/en Please contact us for more information: Beijing Wang Dongpeng wangdp@junhe.com +86-10-85191300 Bai Hongjuan baihj@junhe.com +86-10-85191300 Shen Nan shenn@junhe.

1 January Please contact us for more information: Beijing Wang Dongpeng Bai Hongjuan Shen Nan Shanghai Ma Jianjun Jeffrey Wilson Gordon Feng Bu Yimu Guangzhou Laura Fu Shenzhen Sandra Sun Sexual harassment claims gain widespread attention Recent reports of disciplinary action taken against university staff accused of sexual harassment have prompted speculation as to whether China may be about to witness a flood of high-profile complaints similar to that currently being experienced in the United States. Luo Xixi, a former doctoral student at Beijing s Beihang University, who is currently reportedly living and working in the U.S., credited the #MeToo movement which aims to demonstrate the widespread prevalence of sexual harassment and assault, particularly in the workplaces as providing the inspiration to go public on Chinese social media with a complaint. On 1 January, 2018, Luo alleged that her former doctoral supervisor, Professor Chen Xiaowu had sexually harassed her 12 years earlier, when she was a student. With other female students making similar allegations through social media against Chen, on January 11, 2018, he was reportedly stripped of his teaching qualification and administrative responsibilities, though as yet his employment has not been terminated. Luo s allegation and three other campus incidents that had been reported in December 2017 have attracted widespread public attention, prompting students from tens of Chinese universities to pressure their schools to establish anti-sexual harassment policies and procedures. On January 16, 2018, the Ministry of Education unveiled its plan to work with other authorities to create policies to prevent sexual harassment on colleges and universities across the country. On January 21, more than 50 teachers from universities and colleges across the country issued a joint statement calling for legislation to be introduced to prevent sexual harassment on campus, and for staff who committed sexual harassment to be fired. The swift response in Luo s case was in stark contrast to a similar accusation in May 2017, when a graduate of the Beijing Film Academy, using the pseudonym Alyosha, accused the father of a female professor of having sexually harassed her in Alyosha reportedly suffered retaliation from the school, including the withholding of her graduation certificate. Her friend, Song Zechen, revealed the alleged incident on social media. As public discussion of Alyosha s case raged, a school representative promised to initiate an investigation. However, the original allegations and subsequent social media posts have since been deleted, and as yet, no resolution of the case been reported. Furthermore, the professor and her father are reportedly now suing Song and Alyosha for libel and defamation. Surveys indicate that nearly one third of women in China have experienced sexually harassment at work and an even higher proportion report that they have been harassed at school. While China has rules requiring employers to take measures to prevent and stop sexual harassment against women in the workplace, scholars and victim advocates have for years been demanding tougher and more effective legislation. In 2016, a representative of People s Congress in Beijing reportedly submitted a proposal to criminalize sexual harassment

2 As yet, there have been no steps taken to make employers financially liable for harassment committed by employees, nor have there been indications of large scale settlements being demanded or paid to victims. In the absence of more detailed legislation, combatting sexual harassment in the workplace will require various measures. Employers should have their own harassment policies with tough provisions to discipline and terminate the employment of perpetrators, and should also provide training to inform employees as to what constitutes unacceptable behavior. Employer credit system includes female employment rights Employers in Guangdong province who fail to protect the rights of female employees will have the resultant sanctions recorded in the enterprise credit system, pursuant to rules issued on December 29, Although the rules do not specifically state what type of information will be recorded by the authorities, it is understood that they may include violations of equal pay and discriminatory recruitment practices. Employers with poor credit records may find themselves subject to greater scrutiny through audits and inspections. Guangdong s rules are not the first attempt to use the enterprise credit system to encourage employers to implement fair employment practices. Heilongjiang, Jilin, Liaoning, Hebei and Jiangsu have all issued rules to include gender equality compliance in the enterprise credit system. In some of these local systems, supervisory authorities have the right to visit employers to persuade them to redress their discriminatory practices. Beijing attempts clarification on severance for pre-2008 service On January 17, 2018, the Beijing Human Resources and Social Security authority issued an opinion in order to resolve uncertainty over employer severance obligations stemming from the repeal of a 1994 rule known as Circular 481. Up to the time when it was repealed, on November 24, 2017, Circular 481 had been serving as the principal legal basis for calculating severance and payment of certain medical subsidies for pre-2008 service years. Although the Beijing Opinion has subsequently been withdrawn for further revision, the following clarifications and directions can be inferred from the originally published version: For severance purposes, Circular 481 will continue to apply. Hence, service years prior to 2008 should be calculated at the current compensation of the employee, and not be subject to the cap under the Labor Contract Law that applies for service after January 1, For medical subsidy purposes, despite of the repeal of Circular 481, employers must still pay medical subsidy to employees who are terminated at the end of their medical treatment periods if they have been assessed to have little or no ability to engage in work. The Beijing - 2 -

3 Opinion, however, did not shed light as to how the medical subsidies should be calculated. To date, only Shanghai, Jiangsu, Hubei and Qingdao have announced rules on specific calculation standards. An employee with a severe illness or incurable disease who claims for additional medical subsidy will bear the burden of proof for such medical condition. Termination without a required labor capacity assessment will not be deemed wrongful if the employee refuses to do the assessment. Employers will be subject to the % penalty under the Labor Contract Law for late payment of salary and severance, meaning that the reduced 25-50% penalty no longer applies. Personal information definitions released Following the release of definitions of personal information and personal sensitive information, employers now have greater clarity regarding the personal data of employees they may be required to protect. The Personal Information Security Specification, released on January 24, 2018 by the National Information Security Standardization Technical Committee, supplements the Cybersecurity Law, which requires network operators to protect personal information. Pending draft measures indicate that employers could be deemed to be network operators. The Specification defines personal information as information recorded in electronic or any other form and used alone or in combination with other information to recognize the identity of an individual. This information includes details such as name, address, telephone number, birth date, ID number, and biometric information. The Specification defines sensitive personal information as personal information that once leaked, disclosed or abused, might potentially harm personal property, security, personal reputation, physical and mental health, or cause discriminatory treatment. Sensitive personal information includes ID numbers, biometric information, bank accounts, communication records and contents, property information, credit information, and an individual s transaction records. The Specification establishes general requirements on the collection, usage, control, deletion, transfer, disclosure and sharing of personal information. The Specification also provides that processing of personal information must be for legitimate, proper, necessary and specific purposes and can only be collected with explicit authorization and consent of the relevant individual. Moreover, sensitive personal information requires the collector to provide a justification for collecting such information. Although the Specification is not legally binding, it will likely establish sound practice principles to be followed by network operators, including employers. It may serve as a basis for regulatory authorities to enforce the Cybersecurity Law or for courts to determine privacy-related cases when no other law can be applied

4 Guangzhou, Chongqing require paid leave to care for ill parents From March 1, 2018, employees in Chongqing who are only children will be eligible for up to 10 days of paid leave per year to take care of their hospitalized parents, pursuant to rules issued on November 30, Guangzhou issued similar rules on January 3, 2018, due to take effect on February 1, Under the Guangzhou rules, only-child employees are entitled to paid leave of up to 15 days per year to take care of parents older than 60 years old who are receiving treatment in a hospital. While Guangzhou officials reportedly stated that the paid leave is needed as a societal measure to care for the elderly, there has been some public concern expressed that costs are to be borne solely by employers, with the potential consequence that they may be reluctant to hire only-child employees. Fujian, Guangxi, Hainan, Henan, Hubei and Heilongjiang provinces have all issued similar paid leave regulations enabling employees to take off between 10 and 20 days per year to care for sick parents. It is anticipated that additional provinces and cities will issue similar rules. Talent Visa now available for qualified foreign nationals In 2018, China continues to reform its work permit system with new rules for a Talent visa also known as the R visa on January 9, The R Talent Visa will be available to Category A employees, such as senior executives, entrepreneurs, graduates of top universities and other foreigners who reach the required level under a points-based classification system. Some of the key features of the new R Talent Visa include: Validity will be between 5 and 10 years. Multiple entry, allowing up to 180 days for each stay. The spouse and children of an R visa holder may obtain visas conditions with the same term of validity. If the R visa holder is in China for business meetings, then there is no requirement for a work or residence permit. If they wish to work and live in China, R visa holders will still be required to obtain work permits and residence permits once they enter China, but these visa holders will find the total processing time significantly reduced, from approximately three months to one month. Further important immigration developments: China has started to implement a national, unified exit-entry system which allows visa and residence information of foreign nationals to be shared nationwide. According to a - 4 -

5 Shanghai notification, this national system, unlike the new national online work permit system, is only intended for internal government purposes. Information stored will include passport and visa information, entry-exit records, and lists of individuals who are restricted from going abroad or entering China. In Shanghai, the entry-exit system has been linked with the national work permit system, thereby allowing authorities the opportunity to share information on the activities, including any non-compliance, of foreign nationals. For example, under the new entryexit system, border control authorities would know the work permit status of foreigners as and when they enter and exit the country. Starting February 28, 2018, work permit renewal applications must be filed at least 30 days, but no earlier than three months, in advance of their expiry. Failure to do so will mean that a work permit will not be able to be renewed and the foreign national employee will be required to re-apply for a work permit from scratch. Shanghai issued a series of rules on January 16, 2018 aimed at attracting qualified foreign nationals: - Category A foreign nationals working in the China (Shanghai) Pilot Free Trade or Zhangjiang National Innovation Demonstration Zones are able to apply for PRC permanent residence cards under a set of simplified requirements. - Foreign talents working in either of these two zones may start part-time businesses while still employed by their original work sponsors. - Qualified foreign graduates who start businesses in Shanghai will be eligible for two-year residence permits, which after two years can then be converted to permanent residence cards. HMT residents gain access to housing fund program Hong Kong, Macau, and Taiwan residents (HMT residents) employed in mainland China are now eligible to participate in housing fund programs as a result of national rules issued on December 18, Under the new rules, fund accounts may be established by employers, with HMT employees and their employers making contributions at the same rates as PRC nationals. HMT residents will be allowed to use the funds for housing loans. HMT residents who leave mainland China on a permanent basis will be permitted to withdraw the balance of any deposit remaining in their housing fund accounts. Employers are not required to enroll HMT resident employees in a housing fund or to make contributions. The voluntary nature of the national scheme is in line with recent initiatives of provincial and local governments. In January 2017, for example, the Guangdong provincial government issued a notice encouraging local governments to allow HMT residents to participate - 5 -

6 on a voluntary basis in housing fund programs. Shenzhen issued local government regulations on July 1, 2017 stating that HMT residents in Shenzhen could participate in the housing provident fund. Further to this, Tianjin issued rules on January 5, 2018 that will include foreign nationals in the local housing fund program effective February 1, Under the Tianjin rules, foreign nationals with work and residence permits issued in Tianjin will be able to enjoy the same rights to participate as PRC nationals and would be subject to the same contribution requirements. Union funds can now be used for employee gifts Unions are now permitted to use union funds to provide gifts to employees during traditional festivals and for birthdays, marriage, and on the retirement of employees, pursuant to rules issued by the All-China Federation of Trade Unions and effective from December 15, These rules formalize the practice of unions providing employees with products and cash vouchers. The rules also allow for union funds to be paid in cash to employees who are hospitalized or when an employee or employee s direct relative dies. Other permitted uses of union funds include: employee training. recreational activities, e.g., movies, cultural events, sporting events and outdoor activities. legal aid. purchases of work safety equipment. internal union activities and expenses. Court rules employee may be fired for vacationing on sick leave The Beijing People s Higher People s Court on December 1, 2017 overturned a serious of lower rulings with its decision that an employer in this case Alibaba - had the right to terminate an employee who had traveled abroad during a sick leave period. The employee, Ding Jisheng, had worked for Alibaba in Beijing as a senior manager. He was granted two weeks sick leave starting on April 19, 2013 on the basis of a medical certificate that recommended rest in order to treat an abnormal development of the bones in his neck, a condition known as cervical spondylopathy. In his leave application, Ding stated that he needed to take rest due to his medical condition. During the period of his sick leave, Mr. Ding travelled to Brazil, leaving on April 19, 2013 and returning on May 4, Upon his return to work, Mr. Ding refused to respond to company - 6 -

7 inquiries about his whereabouts during the leave. Alibaba subsequently fired Mr. Ding for providing an untruthful sick leave application intended to deceive the company, citing company rules that providing false personal statements is a serious violation. Band 1: Employment Chambers Asia Pacific Guide, 2014, 2015, 2016 & 2017 Outstanding: Labor & Employment in 2016 Asia Law Profiles, 2015, 2016, 2017, 2018 Tier 1 Law Firm for Employment in 2016 Asia Pacific Legal 500, 2015, 2016 & 2017 PRC Firm of the Year, Labor & Employment China Law & Practice Awards, 2015 Employment and Industrial Relations Law Firm of the Year China Business Law Journal, 2013, 2014 & 2015 Employment Law Firm of the Year Thomson Reuters ALB China Law Awards, 2014, 2017 Employment Firm of the Year ASIAN-MENA COUNSEL In-House Community, 2016 Mr. Ding prevailed in claims for reinstatement against Alibaba in labor arbitration, district and intermediate courts on the basis: (i) that the medical certificates were genuine and issued by a licensed hospital; (ii) where an ill employee should rest is a decision for medical professionals to make, and is not within the competency of the employer; (iii) the company had no rules regarding where ill employees should take sick leave. The intermediate court also relied in its judgement upon the absence of a rule in PRC law addressing where an ill employee should rest during sick leave. In the Higher People s Court, the court found that the existence of an employment relationship requires both parties to comply with the principles of good faith and honesty. Although Alibaba had no restriction in company rules about where ill employees should recover, the court agreed with Alibaba that the conduct of an employee during sick leave should correspond to the reasons for applying for sick leave. The court wrote that common sense says that a person with Mr. Ding s diagnosed condition should not travel. Thus, it was reasonable for Alibaba to doubt the purpose of the sick leave application and to conduct its own investigation. The court ruled that the termination was justified based on Mr. Ding s (i) lack of good faith and honesty in completing the application, and (ii) his refusal to cooperate and provide truthful responses to the company, which constituted a serious violation of company rules. Foreigner found criminally liable for failure to pay employees Hong Ki Sang, a South Korean owner of a Shanghai clothing factory was sentenced on December 19, 2017 to criminal detention of five months and fined RMB 50,000 for his company s failure to pay more than RMB 600,000 in salary to 158 employees. This case is believed to be the first case in Shanghai in which a foreign national has been held criminally liable for not paying employees. Mingxin Fashion was established by Mr. Hong in 2004 and reportedly began suffering financial loses in mid His employees had filed a complaint with the labor bureau, which then ordered him to pay the outstanding salaries by certain deadlines. Mr. Hong disappeared in February 2017 and was subsequently apprehended by police in August The crime of failing to comply with a labor bureau order to pay employees was made a criminal offence in an amendment to the Criminal Law in Under the amendment, owners of a company may face imprisonment up to seven years, criminal detention of up to six months, and fines as determined by the court. The two possible thresholds for criminal liability in Shanghai are the failure for at least three months to pay one employee at least RMB 20,000 in total, or the failure to pay at least ten employees at least RMB 100,000 in total

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