China Employment Law and Employee Handbooks

In many Western countries, written employee handbooks have been standard practice for most employers for decades. These handbooks provide a uniform set of guidelines that the employer follows in terms of employee dress codes, vacation policies, procedures and grounds regarding discipline and termination of employees, and a whole host of other issues that may arise in the workplace. They can serve as powerful defenses in wrongful termination, harassment, whistle-blower protection and other lawsuits.

Employers in China are beginning to follow suit by adopting formal written employee handbooks where companies previously may have lacked formal policies and procedures relating to the above-mentioned topics. These employee handbooks cover topics relating to vacation policies, anti-corruption and bribery policies and procedures, minimum expectations for employees, workplace dress, termination and disciplinary procedures, and a slew of related issues that affect employees. Although Chinese labor law does contain protections for both employees as well as employers, developing and adopting an employee handbook assists employers in protecting themselves even further in their dealings with a particular troublesome employee. A good employee handbook can not only be a powerful defense against allegations of wrongdoing by an individual employee such as if the employee was engaging in illegal or unsavory activity like bribing government officials as well as in terms of a complaint for wrongful termination filed by a terminated employee. In addition, a written employee handbook can also be a tremendous asset to employers in China if, for example, it sets out a clear protocol for reporting workplace accidents or always wearing protective gear on a job site as a company policy. These types of policies could be evidence of how a company protects its workers as well as the procedures taken for investigating complaints of wrongdoing in the workplace. This can lessen the chances of a government audit turning up illegal or unsavory practices, including potential bribery or other wrongdoing that is going on at the employer.

Why Is Having an Employee Handbook So Important?

An employee handbook can be a tremendous asset to any employer because it requires the employer to specifically set forth written policies and procedures that guide employee conduct. It can also reduce the employer’s potential legal liability for illegal acts committed by a rogue employee as well as offer significant protections for an employer who is engaged in wrongdoing in connection with termination of a troublesome employee.

1. Establishes a code of conduct

One of the most important areas that should be covered by employers in China’s employee handbook should be an ethical conduct policy. This is essentially a written “code of conduct” for employee that should enumerate prohibited behavior that the employer will not tolerate. This should absolutely include bribery of government officials as well as engaging in corruption or illegal behavior of any sort. Although current PRC President Xi Jinping has begun and is in the midst of the largest anti-corruption drive in China’s history, there are still corrupt government officials who may be in charge of issuing permits or licenses or approving a company’s action that demand bribes in order to do their jobs. It is easy for a well-meaning employee to become caught up in corrupt behavior or bribery if this is case. For instance, if the employee’s job puts him or her in charge of obtaining all necessary permits and all other governmental approvals necessary to build a new manufacturing facility in Shenzhen province, the employee could indulge in bribing a local official who is demanding a bribe in order to expedite the company’s acquisition of property on which his employer plan to build a new manufacturing facility. The employee may not be meaning to commit an illegal act, but may still engage in such wrongful conduct anyway, and a written ethical code of conduct prohibiting such conduct can assist employers in China in distancing itself from such behavior by an employee.

An employee handbook also can be a particularly important weapon for an employer that is accused of having engaged in bribery or other corrupt behavior because such behavior could violate not only Chinese law but also foreign anti-corruption laws like the U.S. Foreign Corrupt Practices Act or the U.K.’s Bribery Act. For instance, if the employer is a WFOE owned by an American corporate parent, then the American corporate parent could potentially be held liable under the American FCPA based on a local Chinese employee’s actions in bribing a government official. Nevertheless, the fact that the local Chinese WFOE’s employee handbook specifically prohibited such behavior would lessen the chances that behavior could be attributed to the American corporate parent in proceedings brought by the American Department of Justice against the parent company.

2. Facilitates the termination of a troublesome employee

A well-drafted employee handbook can also assist employers in China in terminating a troublesome employee. The employee handbook should specifically set forth the procedures that a company will follow in disciplining and eventually terminating an employee, including a provision that the employee will be given written notice of each disciplinary infraction, what company policy the employee is breaking, and, when employee is terminated, what the specific reason is for the employee’s termination. Like any Chinese employee, troublesome employees who may be not following the employer’s ethical conduct or rules and regulations as set forth have protections under Chinese labor laws more powerful than those enjoyed by employees in many other countries. Therefore, it is important that the employer have a documented process which it follows to the letter in terminating any employee. This is particularly important because, in disputes arising from an employee termination, the employer bears the burden of proving its termination was both handled properly and justified. This means that for an employer to prevail in a termination dispute filed by the terminated employee with a local labor commission, it must have the evidence/records to support the termination. In an ideal situation, the employer would have a written record of the performance or behavioral counseling that lead the employee to first be disciplined and then eventually to terminate the employee.

3. Eases the burden of a government audit

An employee handbook can also offer an employer protections in the event an employee “goes rogue” and files a false report with the authorities regarding a termination, counseling or other workplace event. For example, it is not unheard of for a Chinese employee to make a false report to a Chinese government agency regarding alleged wrongdoing at the employer’s workplace if the employee was recently disciplined or terminated. A written employee handbook prohibiting the behavior can assist the employer in having something to point to in terms of a formal, written company policy that it has been accused of violating that explicitly refutes a troublesome employee’s allegations of wrongdoing by the company. Having a set of written policies and procedures which can disprove whatever the employee has falsely accused his or her former employer of is particularly important given the consistency with which problem employees can be expected to “tattle” on their employers to Chinese government agencies for transgressions that are at best fabrications.

4. Ensures consistency and reduce absenteeism or problematic behaviors

An employee manual can also be very important for setting forth the minimum standards and guidelines that every employee is expected to adhere to. For example, it is important to include a provision in each employee handbook that the company’s employees should only be expected to work for a single employer and that using company time or resources for personal or other business purposes is considered a theft of company resources. The employee handbook should also cover the corporate hierarchy and expressly state all employees are expected to abide by any instructions given to them by a supervisor or direct superior and that management will exert management and control of the Chinese company’s employer to the extent allowed by Chinese law. These requirements are all legal under current Chinese law, but by formally setting them forth in an employee handbook, an employer makes clear that employees are expected to (and required to) abide by Chinese law in this respect.

Conclusion: A must have for employers in China

For all the reasons described above, a written employee handbook that sets out the company’s employment policies is an absolute must have for any company operating in China, whether foreign or domestic. Although Chinese labor law does require that every employee have a written employment contract, having an employee handbook that explicitly spells out a company’s policies is of the utmost importance for any employer operating in the PRC. It can protect the Chinese company as well any foreign parent corporation it may have in the event that an employee violates the law by, for instance, bribing a government official or engaging in some other sort of corrupt practice or act. A well-drafted (and closely followed) employee handbook can serves as both a sword and shield to an employer wishing to terminate a troublesome employee. Employers in China, now is the time to get yours!

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