This report provides an overview of recent developments in laws and regulations relating to labor and employment law in China

Baker & McKenzie

English

[Excerpt] On July 31, 2013, the Shanghai No. 1 Intermediate People’s Court, before a trial on the merits of the case, issued a preliminary injunction order against a former employee of the Chinese subsidiary of a U.S.-based pharmaceutical company. The injunction order restrained him from disclosing, using, or allowing others to use certain documents containing trade secrets that he downloaded from the company’s database without authorization. In addition, the court also issued an asset preservation order to freeze the ex-employee’s real property and bank account pending the trial. The former employee admitted he downloaded valuable, highly confidential information to his personal USB drive and personal computer. The downloading of such information was not justified by work-related needs, and violated his confidentiality agreement and the company policies. He later refused to cooperate with the company to delete such information from his personal device and computer. The company terminated his employment, and filed a civil action against him. The court acknowledged that there was a threat of irreparable damage to the company in the event of an unauthorized disclosure or misuse of the alleged trade secrets, and that preliminary injunction and asset preservation remedies were therefore warranted in this case. This is a landmark case as, according to Chinese media, it is the first case anywhere in China where a party successfully obtained a preliminary injunction and asset preservation order in a trade secrets dispute since the newly amended PRC Civil Procedure Law took effect on January 1, 2013. The amended Civil Procedure Law specifically allows for preliminary injunctions and asset preservation relief in all civil cases. In the past, such remedies were only specifically allowed in patent, trademark and copyright infringement cases. Trade secrets were therefore not well protected under the previous judicial practice, since companies would have to wait until they actually suffered harm before they even had a basis for bringing a claim, and then would have to wait for final judgment (which could be up to one year or more later if all appeals are exhausted) before obtaining any relief. This case thus sets a milestone for trade secrets protection (or breach of confidentiality) cases. It remains to be seen whether the court would enforce the same measures in a non-compete case, which is another type of employer-employee dispute in which preliminary injunctive relief would help the employer prevent further damage resulting from the employee’s alleged breach of duties. From an employee management perspective, employers should pay more attention to their company policies and agreements related to protection of confidential information as robust company policies and agreements may help the company seek injunctive relief even before the trial on the merits commences.China_Employment_Law_Update_August_2013.pdf: 111 downloads, before Oct. 1, 2020

eCommons (Cornell Univ.)

China Employment Law Update - August 2013

[Excerpt] At the end of June, the National People’s Congress passed the Law of the People’s Republic of China on Entry and Exit Control, which takes effect July 1, 2013. While there are existing regulations and notices related to the entry, exit and employment of foreigners, this is the first law in China to comprehensively address these issues. In the coming months, implementing regulations are expected on key provisions ranging from the new “talent” visa category to the employment of foreign students.
Foreigners are prohibited from engaging in activities not consistent with the purpose of the visit or stay in China, which can be a basis for being denied future entry. A foreigner may be “removed” (qiansong chujing) from China for illegal residence or employment, and in such a case will not be permitted re-entry during the next one to five year period. Violation of the new law under “serious” circumstances may lead to “deportation” (quzhu chujing), resulting in a 10-year bar. Foreign nationals may also be subject to administrative fines depending on the type of violation, and even be detained for five to 15 days.
A foreign national is deemed to be illegally employed if he or she: (1) works without having secured either a work permit or related residence permit; (2) engages in activities beyond the scope permitted by the work permit; or (3) is a foreign student engaging in activities beyond the scope permitted by the work- study position.
Employers may be subject to fines of RMB10,000 per illegally employed person, up to a maximum of RMB 100,000, as well a confiscation of any income derived from the illegal employment

DigitalCommons@ILR

China Employment Law Update - August 2012

[Excerpt] Recently, various preliminary steps have been taken by the government and the All China Federation of Trade Unions (“ACFTU”) to further push collective bargaining and increase “democratic management” at all companies. However, it is apparent that the government and ACFTU are still considering how exactly to implement this policy and no concrete steps have actually been taken so far

Cornell University ILR School 
DigitalCommons@ILR 
Law Firms Key Workplace Documents 
8-2010 
China Employment Law Update - August 2010 
Baker & McKenzie 
Follow this and additional works at: https://digitalcommons.ilr.cornell.edu/lawfirms 
Thank you for downloading an article from DigitalCommons@ILR. 
Support this valuable resource today! 
This Article is brought to you for free and open access by the Key Workplace Documents at DigitalCommons@ILR. 
It has been accepted for inclusion in Law Firms by an authorized administrator of DigitalCommons@ILR. For more 
information, please contact catherwood-dig@cornell.edu. 
If you have a disability and are having trouble accessing information on this website or need materials in an 
alternate format, contact web-accessibility@cornell.edu for assistance. 
China Employment Law Update - August 2010 
Abstract 
[Excerpt] Recently, various preliminary steps have been taken by the government and the All China 
Federation of Trade Unions (“ACFTU”) to further push collective bargaining and increase “democratic 
management” at all companies. However, it is apparent that the government and ACFTU are still 
considering how exactly to implement this policy and no concrete steps have actually been taken so far. 
Keywords 
Baker & McKenzie, China, employment law 
Comments 
Required Publisher Statement 
Copyright by Baker & McKenzie. Document posted with special permission by the copyright holder. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/lawfirms/78 
China Employment Law Update
People’s Republic of China
ACFTU Pushes Forward Collective Bargaining 
and Democratic Management at Enterprises
Recently, various preliminary steps have been taken by the government 
and the All China Federation of Trade Unions (“ACFTU”) to further 
push collective bargaining and increase “democratic management” 
at all companies.  However, it is apparent that the government and 
ACFTU are still considering how exactly to implement this policy and 
no concrete steps have actually been taken so far.  Some of the more 
significant recent developments are as follows:  
•	 At	the	national	level,	an	amendment	to	the	PRC Labor Union Law 
is reportedly being considered by the ACFTU and the National 
People’s Congress (“NPC”), which is expected to be passed into 
law by the second half of 2011. Among other things, the draft 
amendments reportedly stipulate more detailed procedures 
on how to form an employee representative council (“ERC”) to 
strengthen democratic management at enterprises, and try to 
encourage more collective bargaining at the industry-wide level 
(currently, collective bargaining is mainly done at the company 
level). ERCs are somewhat comparable to Works Councils and 
normally co-exist with enterprise unions. Another amendment 
reportedly under discussion is to have all companies pay the 
union fee (equivalent to 2% of the company’s payroll) to the 
local tax bureau, rather than directly to the company union’s 
bank account like is the case in most cities.  This would give 
the government greater control over how union fees are paid 
and allocated, so that practices such as companies negotiating 
with the ACFTU for lower union fees would likely no longer be 
possible.  In a related local development regarding unions fees, 
local authorities and ACFTU officials in Beijing are planning 
to have Beijing join the ranks of other localities (e.g. Jiangsu 
province) in requiring companies without unions to pay a “union 
preparation fee”, which would be the same amount as the union 
fee, to the local tax bureau.
•	 In	Guangdong	Province,	a	third	draft	of	the	Guangdong Enterprise 
Democratic Management Regulations was posted on the provincial 
government’s website for public comments on August 23. The 
draft sets out a detailed procedure on how to form an ERC and a 
description of the ERC’s powers. The draft also stipulates that a 
company may be forced to engage in collective wage bargaining 
if one-third or more of the employees of a company makes such 
August 2010 
Beijing
Suite 3401, China World Office 2 
China World Trade Centre 
1 Jianguomenwai Dajie 
Beijing 100004, PRC
Tel: +86 10 6535 3800 
Fax: +86 10 6505 2309
Hong Kong
14th Floor, Hutchison House 
10 Harcourt Road 
Central, Hong Kong
23rd Floor, One Pacific Place 
88 Queensway, Hong Kong
Tel: +852 2846 1888 
Fax: +852 2845 0476
Shanghai
Unit 1601, Jin Mao Tower 
88 Century Avenue, Pudong 
Shanghai 200121, PRC
Tel: +86 21 6105 8558 
Fax: +86 21 5047 0020
2 People’s Republic of China  |  August 2010
a request. If the company does not respond to such request 
within the required time (15 days), does not provide conditions or 
information necessary for the collective bargaining, or bargains 
in bad faith, and as a result a strike or work slowdown takes 
place, the employer may not terminate the striking employees.  
This would be the first time that a law provides specific 
protection to striking workers since the PRC Constitution 
abolished the right to strike in 1982.  On the other hand, the draft 
states that if the employees strike either without first requesting 
collective bargaining or during collective bargaining, they may 
face legal consequences.   
•	 Meanwhile,	the	Shenzhen	People’s	Congress	issued	a	draft	of	
the Shenzhen Economic Zone Collective Bargaining Regulations 
(“Shenzhen Collective Bargaining Regulations”) for public 
comment in August 2010. Under the draft, the employees may 
request the employer to provide information and materials 
necessary for collective bargaining, which may not be 
unjustifiably refused by the employer (with narrow exceptions). 
The	draft	Shenzhen	Collective	Bargaining	Regulations	also	
prohibit collective bargaining in bad faith, which is defined to 
include (a) either party willfully delaying the bargaining process 
by focusing on minor procedural issues, and (b) either party 
persistently sticking to its position or resisting the other party’s 
reasonable proposals without justification. Employers may be 
fined for conducting collective bargaining in bad faith, with fines 
up to RMB50,000, if they fail to correct the violation as ordered 
by the competent labor bureau.
•	 In	a	related	development,	a	draft	of	the	Payment of Wage 
Regulations is under review at the national level, which 
reportedly contains a provision that if an employer unjustifiably 
declines employees’ request for collective bargaining over wages 
and fails to correct such violations within the period given by 
the competent authorities, the employer may be fined up to 
RMB200,000.
•	 The	national	ACFTU,	as	well	as	the	Beijing	ACFTU,	have	
publicly announced that they are considering plans to have 
the salary of the union chairman paid directly by the ACFTU 
rather than the company in order to ensure independence from 
company pressure, though again no concrete implementation 
steps have been announced.  On a related point, the ACFTU 
has also discussed training professional collective bargaining 
representatives to be dispatched to companies to assist 
employees with collective bargaining, and even sending in 
individuals from outside the company to be union chairman.
People’s Republic of China  |  August 2010 
3
New State Secrets Law
The amended Law on Protection of State Secrets (“State Secrets Law”) 
was adopted by the Standing Committee of the NPC on April 29, 2010, 
and is set to take effect on October 1, 2010.  The State Secrets Law 
has	received	much	attention	following	the	highly	publicized	arrests	
and sentencing of four Rio Tinto executives and the sentencing of a US 
geologist.  
Among other changes, one major revision specifically requires Internet 
service providers and other network operators to cooperate with 
public security officials, state security officials, and prosecutors in 
the investigation of any leak of state secrets that may have occurred 
through the use of their Internet or media networks.  The Internet 
service providers and network operators also are charged with 
affirmative duties to keep records related to any leak of state secrets, 
to report such leak to the government authorities, and immediately 
cease the transmission of any relevant information. The amended law 
also lists more specific types of actions in relation to state secrets that 
may lead to criminal penalties.
Although many of these new requirements are specifically imposed 
on the telecommunications industry, the increased monitoring may 
be relevant for other companies as well, since the government’s 
increased vigilance may have an impact on employees’ use of 
company-provided Internet/Intranet and computer systems to transmit 
information overseas and companies may need to be more careful 
than before regarding such transmissions.  While the newly amended 
law has somewhat clarified the previous definition of what constitutes 
a state secret and what types of actions may lead to criminal liability, 
government officials still retain broad discretion to determine what 
type of information would fall under this definition.  
Employee Challenge to Change in Sales 
Commissions Plan Successful
In August 2010, the Minhang District People’s Court in Shanghai 
held a textile company liable for the back pay of sales commissions 
and severance to an employee. The employee had resigned from 
the company after the company had unilaterally amended its sales 
commission plan resulting in reduced sales commissions for the 
employee. The calculation of sales commissions had been set forth 
in a sales commission plan, which included a clause stating that the 
company could reasonably amend the plan at its own discretion.  The 
company later unilaterally amended its sales commission plan by 
calculating the commissions according to the sales collection amount 
instead of the gross sales revenue, which substantially reduced the 
4 People’s Republic of China  |  August 2010
employee’s commission.  The employee refused to accept the lesser 
commission amount, and resigned.  The Court ordered the company to 
pay the employee the commission (which was held to constitute part 
of her salary) according to the original plan.  The Court also awarded 
severance, since the employee resigned as a result of the Company’s 
failure to fully pay the employee’s salary in a timely manner.   
This case shows that the ability of a company to unilaterally amend 
non-contractual benefits plans to the detriment of employees may 
be challenged if consultation procedures under Article 4 of the 
Employment Contract Law are not followed, despite any language 
in such plans giving the company the right to unilaterally amend the 
terms of such plan.
Employer Ordered to Sign Open-Term 
Contract After Two Fixed-Term Contracts
On July 29, 2010, the Chengdu Qingyang District People’s Court 
reportedly ordered a company to enter into an open-term employment 
contract with an employee, a Mr. Fan, effective from January 1, 2010, 
and to pay double wages for the period between January 1 until the 
time an open-term contract is executed. Mr. Fan reportedly was 
transferred to work with the company from one of its sister companies 
in December 2007 and signed two consecutive one-year employment 
contracts after 2008. Before the second contract was to expire on 
December 31, 2009, the company informed Mr. Fan of its decision not 
to renew his contract and rejected Mr. Fan’s  request to sign an open-
term employment contract. 
This case reflects the opinion of some courts that at the end of the 
second fixed-term contract after 2008, the employer is required to 
enter into an open-term contract with the employee, regardless 
of whether it intends to renew the employment contract, upon the 
employee’s request to enter into an open-term contract.
Employee Raises Successful Claim for 
Emotional Distress
A court in Tianjin ordered a company to pay RMB333,000 in damages 
for emotional distress caused to one of its former employees.  In 
order to prevent employee theft, a shoe manufacturing company 
conducted a body search of every employee everyday before they left 
work.  After one employee was terminated in April 2008, the employee 
was	diagnosed	with	schizophrenia.		She	then	sued	the	company	for	
RMB333,000 in damages for emotional distress caused by the body 
search.  The Dongli District People’s Court in Tianjin entrusted a 
forensic psychiatry institution to provide an independent professional 
People’s Republic of China  |  August 2010 
5
opinion.  The institute issued a report testifying that the employee’s 
schizophrenia	was	in	part	caused	by	the	body	search.		The	court	
adopted the report and supported the employee’s claim for damages 
for emotional distress.  The legal basis for such decision is a Supreme 
People’s Court interpretation on compensation for emotional distress 
in tort claims, under which an individual may claim damages if he/
she suffers an illegal breach of his/her right of dignity and/or right of 
freedom.
Employee Successfully Sued for  
Defaming Company
A court in Shanghai awarded RMB7,000 to a real estate advertising 
company for defamation by an employee.  As a result of an employee’s 
dissatisfaction with her compensation and the management in the 
company, her boyfriend posted several articles on the Internet with 
false statements about illegal conduct by the company.  The company 
sued Ms. Jiang and her boyfriend for damages in relation to the 
defamation.  The Shanghai Jing’an District People’s Court deemed the 
articles as defamatory.  Also, the Court ruled that though the articles 
were not posted by the employee herself, she had provided implied 
consent to her boyfriend’s behavior and was therefore jointly liable for 
the defamation.  
While the case shows that companies in some cases may be able to 
successfully claim for damages from employees or ex-employees for 
publicly making defamatory comments about the company, obtaining a 
substantial award from the court may be difficult. 
Manager at Two Stores Claims Double Wages 
and Loses
A local manager who was posted to work in two different stores in 
Shanghai sought to claim double wages from the company after being 
terminated on the grounds of incompetence.  The employee claimed 
that since he managed two stores (which were branches under the 
same company), each store should pay him salary.  The Zhanglin 
District Court in Shanghai dismissed the manager’s claims in August 
2010. The Court held that the manager’s claim for double wages could 
not be justified because the employment contract expressly allows the 
company to assign the manager to divide his time between two stores. 
The case demonstrates the importance of including flexible language 
in an employment contract. 
6 People’s Republic of China  |  August 2010
Tax Bureau Orders Back Pay of 15 Years of 
Social Insurance Plus Late Fee
The local tax bureau in Haikou city in Hainan province ordered a local 
company to back pay 15 years of unpaid social insurance contributions 
plus a late fee penalty equal to 0.2% of the unpaid contributions for 
each day of delay in payment during the past 15 years.  The total back 
payment amount reportedly was RMB4,193,700, and after adding in 
the late fee penalty, the total amount reached RMB27,215,000. It is 
reported that in 2008, the tax bureau ordered the company to back pay 
the contributions several times, but the company rejected such orders. 
While normally, local authorities are willing to allow back payments 
without penalty, this incident shows that authorities are willing to 
impose a substantial penalty if a company continually refuses to abide 
by administrative orders for back payment of social insurance.
Should you wish to obtain further 
information or want to discuss any 
issues raised in this newsletter with 
us, please contact:
Andreas Lauffs 
+852 2846 1964 (Hong Kong) 
andreas.lauffs@bakermckenzie.com
Joseph Deng 
+8610 6535 3937 (Beijing) 
+8621 6105 5988 (Shanghai) 
joseph.deng@bakermckenzie.com
Jonathan Isaacs 
+852 2846 1968 (Hong Kong) 
jonathan.isaacs@bakermckenzie.com
This	client	alert	has	been	prepared	for	clients	and	professional	associates	of	Baker	&	McKenzie.		Whilst	every	effort	has	been	made	to	ensure	accuracy,	this	client	alert	is	not	an	exhaustive	treatment	of	
the	area	of	law	discussed	and	no	responsibility	for	any	loss	occasioned	to	any	person	acting	or	refraining	from	action	as	a	result	of	material	in	this	client	alert	is	accepted	by	Baker	&	McKenzie.		If	advice	
concerning individual problems or other expert assistance is required, the services of a competent professional adviser should be sought.
Data Privacy 
Please	contact	Wendy	Yung	by	telephone	+852	2846	1635	or	e-mail:	wendy.yung@bakermckenzie.com	should	you	wish	your	details	to	be	added,	amended	or	deleted	from	our	mailing	list.
©2010	Baker	&	McKenzie.		All	rights	reserved.		Baker	&	McKenzie	International	is	a	Swiss	Verein	with	member	law	firms	around	the	world.	In	accordance	with	the	common	terminology	used	in	professional	
service	organizations,	reference	to	a	“partner”	means	a	person	who	is	a	partner,	or	equivalent,	in	such	a	law	firm.	Similarly,	reference	to	an	“office”	means	an	office	of	any	such	law	firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
www.bakermckenzie.com


China Employment Law Update - August 2010

[Excerpt] At the end of June, the National People’s Congress passed the Law of the People’s Republic of China on Entry and Exit Control, which takes effect July 1, 2013. While there are existing regulations and notices related to the entry, exit and employment of foreigners, this is the first law in China to comprehensively address these issues. In the coming months, implementing regulations are expected on key provisions ranging from the new “talent” visa category to the employment of foreign students. Foreigners are prohibited from engaging in activities not consistent with the purpose of the visit or stay in China, which can be a basis for being denied future entry. A foreigner may be “removed” (qiansong chujing) from China for illegal residence or employment, and in such a case will not be permitted re-entry during the next one to five year period. Violation of the new law under “serious” circumstances may lead to “deportation” (quzhu chujing), resulting in a 10-year bar. Foreign nationals may also be subject to administrative fines depending on the type of violation, and even be detained for five to 15 days. A foreign national is deemed to be illegally employed if he or she: (1) works without having secured either a work permit or related residence permit; (2) engages in activities beyond the scope permitted by the work permit; or (3) is a foreign student engaging in activities beyond the scope permitted by the work- study position. Employers may be subject to fines of RMB10,000 per illegally employed person, up to a maximum of RMB 100,000, as well a confiscation of any income derived from the illegal employment.China_Employment_Law_Update_August_2012.pdf: 194 downloads, before Oct. 1, 2020

[Excerpt] Recently, various preliminary steps have been taken by the government and the All China Federation of Trade Unions (“ACFTU”) to further push collective bargaining and increase “democratic management” at all companies. However, it is apparent that the government and ACFTU are still considering how exactly to implement this policy and no concrete steps have actually been taken so far.China_Employment_Law_Update_August_2010.pdf: 152 downloads, before Oct. 1, 2020

This report provides an overview of recent developments in laws and regulations relating to labor and employment law in China.China_Employment_Law_Update_August_2011.pdf: 1239 downloads, before Oct. 1, 2020

China Employment Law Update - August 2011

Cornell University ILR School 
DigitalCommons@ILR 
Law Firms Key Workplace Documents 
8-2011 
China Employment Law Update - August 2011 
Baker & McKenzie 
Follow this and additional works at: https://digitalcommons.ilr.cornell.edu/lawfirms 
Thank you for downloading an article from DigitalCommons@ILR. 
Support this valuable resource today! 
This Article is brought to you for free and open access by the Key Workplace Documents at DigitalCommons@ILR. 
It has been accepted for inclusion in Law Firms by an authorized administrator of DigitalCommons@ILR. For more 
information, please contact catherwood-dig@cornell.edu. 
If you have a disability and are having trouble accessing information on this website or need materials in an 
alternate format, contact web-accessibility@cornell.edu for assistance. 
China Employment Law Update - August 2011 
Abstract 
This report provides an overview of recent developments in laws and regulations relating to labor and 
employment law in China. 
Keywords 
Baker & McKenzie, China, employment law, maternity leave, benefits 
Comments 
Required Publisher Statement 
Copyright by Baker & McKenzie. Document posted with special permission by the copyright holder. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/lawfirms/60 
China Employment Law Update
People’s Republic of China
August 2011 New Rules on Maternity Leave Benefits May 
Increase Costs for Employers
Authorities in Shanghai and Qingdao have each promulgated new 
rules with regard to the pay during maternity leave, each of which 
took effect on July 1.  These new rules are based on the Social 
Insurance Law, which stipulates that such compensation shall 
be calculated and paid on the basis of the average wages of all 
employees of the same employer in the previous calendar year. 
The new rules in both cities provide that while a portion of the 
employee’s compensation will be paid by the social insurance 
fund up to a capped amount, the employer must pay an additional 
amount to the employee to make up for the gap between the capped 
amount the fund will pay and the average wage of all employees 
at the company (“Average Company Wage”).  However, existing 
national regulations and local regulations in both cities also state 
that female employees are entitled to their full salary during 
their maternity leave, which meant that previously, employers 
were responsible for making up the difference between what was 
paid by the fund and the individual’s full salary.  Now, even if the 
employee’s individual salary is lower than the Average Company 
Wage (which is oftentimes the case for young female employees 
taking maternity leave), the company would be responsible for 
ensuring that the employee receives the Average Company Wage. 
Conversely, if the employee taking maternity leave is a highly paid 
employee, the new regulations appear to state that the company 
only needs to pay her up to the Average Company Wage rather than 
her own full salary, but this would conflict with existing national 
and local regulations.  Based on inquiries made with the authorities 
in each city, the different local authorities currently seem to be 
handling this apparent conflict differently.  
While these rules only apply in Shanghai and Qingdao, since they 
are based on the national Social Security Law, it is possible that the 
national or other local governments will promulgate similar rules. 
Beijing
Suite 3401, China World Office 2 
China World Trade Centre 
1 Jianguomenwai Dajie 
Beijing 100004, PRC
Tel: +86 10 6535 3800 
Fax: +86 10 6505 2309
Hong Kong
14th Floor, Hutchison House 
10 Harcourt Road 
Central, Hong Kong
23rd Floor, One Pacific Place 
88 Queensway, Hong Kong
Tel: +852 2846 1888 
Fax: +852 2845 0476
Shanghai
Unit 1601, Jin Mao Tower 
88 Century Avenue, Pudong 
Shanghai 200121, PRC
Tel: +86 21 6105 8558 
Fax: +86 21 5047 0020
2     People’s Republic of China  |  August 2011
Amended IIT Law: Change of Standard 
Deduction and Tax Rates
The Individual Income Tax Law (“IIT Law”) and the Implementing 
Rules to the IIT Law have been revised effective September 1, 2011.
The main changes to the revised IIT Law and the Implementing 
Rules are summarized below:
•	 The standard monthly deduction for Chinese individuals’ 
employment income is increased from RMB 2,000 to RMB 
3,500. 
•	 The standard monthly deduction for expatriates’ employment 
income remains unchanged at RMB 4,800.
•	 The progressive tax rates applicable to salaries and wages 
will change from the current nine brackets to seven brackets.
•	 The monthly IIT reporting deadline is extended to the 15th day 
after the end of a month from the current 7th day.
The revised IIT Law reflects a policy of mitigating the tax burden 
of “low and middle income individuals”. To a certain extent, high 
income individuals may be subject to a higher tax burden. It is 
evident that the China tax authorities are continuing to strengthen 
IIT administration and collection in relation to investment income. 
Further IIT reform is expected.
For more information on these amendments please see Baker & 
McKenzie’s China Tax Monthly update which can be accessed via 
this link. 
New Developments on Hot Temperature 
Subsidy Requirements
In June, national government authorities and the All China 
Federation of Trade Unions issued a notice requesting authorities 
at all levels to inspect and supervise the protection of employees’ 
rights in hot weather, with particular focus on enforcement of the 
hot temperature subsidy (“Subsidy”) requirement.  Under existing 
national and local regulations, employers are required to pay the 
Subsidy to employees who work outdoors or otherwise in a hot 
temperature workplace during summer.  
On July 1, Shanghai issued new regulations under which employers 
must pay eligible employees a high temperature subsidy of 
RMB 200 per month from June to September each year regardless 
of actual temperatures during those months.  In the past, eligible 
employees were entitled to the Subsidy at a rate of RMB 10 per day 
for each day of high temperature. 
People’s Republic of China  |  August 2011     3
Guangdong Province issued draft measures on August 9, under 
which employers may be fined up to RMB 20,000 if they continue to 
fail to pay the Subsidy after the local labor bureau orders them to 
do so.  However, these draft measures have not yet been finalized 
and passed.
Company’s Unilateral Termination Rescinded 
for Failure to Notify Union
In August 2011, a Court in Yancheng City, Jiangsu Province 
reportedly ruled a public transportation company’s (the “Company”) 
unilateral termination of a vehicle attendant (the “Employee”) 
unlawful for failing to notify the labor union prior to the actual 
termination pursuant to Article 43 of the Employment Contract Law.
During an inspection, a Company officer discovered that the 
Employee had sold two invalidated tickets with a face value of 1 
RMB each to passengers. Based upon internal Company rules 
(which were voted on and passed by the Company’s employee 
representatives), the Company unilaterally terminated the 
Employee. The Court held that, although the Company’s internal 
rules were binding, the termination was still unlawful because the 
Company failed to notify the union.  Article 43 of the Employment 
Contract Law requires an employer to provide notice to the union 
prior to any unilateral termination of an employee. (The case report 
was not clear whether the Company had its own union or whether 
it was required to notify the upper level branch of the All China 
Federation of Trade Unions).
This case demonstrates that, although companies may have 
valid substantive reasons for terminating an employee in China, 
procedurally, they still must notify the labor union prior to 
terminating an employee. Otherwise, companies risk having their 
termination decision overturned in court. 
Court Adopts Broad Definition of Employees 
Exempt from Overtime
On July 25, 2011, the Shanghai Jing’an District Court reportedly 
rejected an employee’s claim for overtime payment, based on his 
senior management status and the flexible working hours provision 
in his employment contract. 
The employee’s employment contract stated his position as 
Supply Chain Manager of a cosmetics company, and his monthly 
salary was RMB 25,000. The employment contract also provided 
that Mr. Jiang was subject to the flexible working hours system 
(and therefore not entitled to overtime pay), based on his senior 
4     People’s Republic of China  |  August 2011
management status.  The company had obtained approval from 
the local labor bureau for “senior management” to be subject to 
flexible working hours.  In response to the employee’s claim that he 
was not a senior manager, the court ruled that the employee failed 
to provide sufficient evidence to prove that he was not a senior 
manager, and further commented that he should not be taken as 
a regular employee taking into account the amount of his monthly 
salary and his job level.  The court also relied on the fact that the 
employment contract stated he was a senior manager.
The definition of “senior management”, for flexible working hours 
purposes, is not clear under national law and oftentimes approval 
certificates issued by the labor bureau will not detail all the 
different types of positions within the company that may be covered. 
A few local regulations (e.g., Shenzhen) provide that the definition 
should follow the narrow definition under the Company Law (e.g., 
the general manager, the deputy general manager and CFO), and 
many local labor bureau officials informally hold the same position. 
However, in this case, the court adopted a broader definition of 
senior management for flexible working hours purposes, based on 
the amount of the employee’s compensation, his job level, and the 
wording in his employment contract.  Companies therefore, where 
possible, should ensure that employment contracts with personnel 
who may qualify for flexible working hours status are properly 
worded to ensure the employee is exempt from overtime.
Court Rules Summary Dismissal Unlawful 
Despite Being Based on Company Rules
In July 2011, the First Intermediate People’s Court of Beijing 
Municipality ruled in favour of an employee who was dismissed by 
Carrefour, a supermarket chain, for alleged serious violation of the 
company’s rules and policies.
Mr. Li, a former employee of Carrefour, was found to have input 
incorrect financial information into the company’s accounting 
system in violation of the company’s working procedures, and also 
wrongfully gave access to the company’s database to unauthorized 
colleagues.  He was summarily terminated without severance pay 
for serious violation of the company’s policies.  
The court ruled that though Mr. Li committed misconduct, 
Carrefour failed to prove any serious economic loss or harm it 
suffered, and thus ruled the dismissal decision as unreasonable 
and therefore unlawful.  As a result, the court ordered Carrefour 
to pay Mr. Li a penalty for the wrongful termination at an amount 
equal to RMB 69,540.
People’s Republic of China  |  August 2011     5
The case shows that even if a termination is based on the 
company’s written policies, many courts will still scrutinize 
whether the termination and the company’s policies whereupon the 
termination is based are reasonable.  Companies should therefore 
ensure that termination grounds listed in their rules and policies 
are reasonable and assess the seriousness of an employee’s 
misconduct before proceeding with a termination.
Demotion of Employee with Poor Performance 
Ranking Held Illegal
In August 2011, the Jing’an District People’s Court of Shanghai 
reportedly affirmed the ruling of a Shanghai labor arbitration 
commission in favour of an employee who was demoted and had his 
pay reduced after receiving the lowest performance ranking among 
all mid-level staff.  The court ordered the employer, a property 
management company, to back pay RMB 8,000 to the employee, 
which represented eight months of underpaid salary after the 
employee was reassigned to another post.
In the reported case, the employer argued that it should be able to 
reassign the employee for poor performance based on the fact the 
employee had received the poorest ranking among employees at 
his level in various performance evaluations.  The Court, however, 
found that the employer was unable to submit sufficient evidence 
to prove the employee’s failure to fulfil job assignments and the 
performance evaluation scores the employee received showed that 
he had passed the performance evaluations; the only issue was that 
such scores were lower than the scores received by others.  As a 
result, the Court held that the demotion and salary decrease were 
illegal. However, taking into account that the employee had reached 
the age for retirement, the Court did not order reinstatement but 
merely ordered a back payment of the underpaid salary through the 
employee’s retirement age on May 1, 2011. 
This reported court ruling shows the difficulties of demoting 
employees, especially with a salary decrease.  Also, the court ruling 
indicated the importance for employers to carefully keep records of 
actual performance results in relation to assigned tasks if they plan 
to demote or terminate an employee for poor performance.    
Termination for Employee’s Refusal to Get 
Second Medical Check-Up Held to be Unlawful
In July 2011, the Changning District People’s Court in Shanghai 
ruled that the termination of an employee who refused to get a 
second opinion on her illness at a company approved hospital 
constituted wrongful termination. 
6     People’s Republic of China  |  August 2011
The employee had repeatedly tendered sick leave notices for five 
different and unrelated causes of illness following the company’s 
relocation.  To confirm the veracity of the alleged illness, the 
company requested that another staff member accompany the 
employee to have a second medical check-up at the company’s 
designated hospital.  The employee refused. The company then 
unilaterally terminated the employee on the grounds that the 
employee’s refusal to have a second medical check-up rendered 
her sick leave unauthorized, and thus the employee’s extended sick 
leave constituted unauthorized leave of absence which seriously 
violated the company’s rules and policies.
The Changning District People’s Court held that it was 
unreasonable for the employer to unilaterally require the employee 
to undergo a second medical check-up, since the employee had 
submitted her medical history, clinic invoices, and sick leave 
notices chopped by a legitimate hospital.  There was no indication 
in the report whether the company’s policies had specific provisions 
requiring the employees to go through a second medical check-up 
at the request of the company.  
In practice, employees claiming sick leave oftentimes can get a 
doctor’s note even when they are not truly sick, and in this way get 
protection from termination. Companies should therefore consider 
including language in their employee handbooks giving companies 
the right to demand a second opinion; while the enforceability 
of such provision is not clear under the law, it at least puts the 
company in a stronger position to make such demand than if the 
company has no written basis at all to assert such right.
Should you wish to obtain further 
information or want to discuss any 
issues raised in this newsletter with 
us, please contact:
Andreas Lauffs 
+852 2846 1964 (Hong Kong) 
andreas.lauffs@bakermckenzie.com
Joseph Deng 
+8610 6535 3937 (Beijing) 
+8621 6105 5988 (Shanghai) 
joseph.deng@bakermckenzie.com
Jonathan Isaacs 
+852 2846 1968 (Hong Kong) 
jonathan.isaacs@bakermckenzie.com
This Update has been prepared for clients and professional associates of Baker & McKenzie.  Whilst every effort has been made to ensure accuracy, this Update is not an exhaustive treatment of the area of 
law discussed and no responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this Update is accepted by Baker & McKenzie.  If advice concerning individual 
problems or other expert assistance is required, the services of a competent professional adviser should be sought.
Data Privacy 
Please contact Viven Chan by telephone +852 2846 1635 or e-mail: vivien.chan@bakermckenzie.com should you wish your details to be added, amended or deleted from our mailing list.
©2011 Baker & McKenzie.  All rights reserved.  Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional 
service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
www.bakermckenzie.com


[Excerpt] On July 31, 2013, the Shanghai No. 1 Intermediate People’s Court, before a trial on the merits of the case, issued a preliminary injunction order against a former employee of the Chinese subsidiary of a U.S.-based pharmaceutical company. The injunction order restrained him from disclosing, using, or allowing others to use certain documents containing trade secrets that he downloaded from the company’s database without authorization. In addition, the court also issued an asset preservation order to freeze the ex-employee’s real property and bank account pending the trial.
The former employee admitted he downloaded valuable, highly confidential information to his personal USB drive and personal computer. The downloading of such information was not justified by work-related needs, and violated his confidentiality agreement and the company policies. He later refused to cooperate with the company to delete such information from his personal device and computer. The company terminated his employment, and filed a civil action against him. The court acknowledged that there was a threat of irreparable damage to the company in the event of an unauthorized disclosure or misuse of the alleged trade secrets, and that preliminary injunction and asset preservation remedies were therefore warranted in this case.
This is a landmark case as, according to Chinese media, it is the first case anywhere in China where a party successfully obtained a preliminary injunction and asset preservation order in a trade secrets dispute since the newly amended PRC Civil Procedure Law took effect on January 1, 2013. The amended Civil Procedure Law specifically allows for preliminary injunctions and asset preservation relief in all civil cases. In the past, such remedies were only specifically allowed in patent, trademark and copyright infringement cases. Trade secrets were therefore not well protected under the previous judicial practice, since companies would have to wait until they actually suffered harm before they even had a basis for bringing a claim, and then would have to wait for final judgment (which could be up to one year or more later if all appeals are exhausted) before obtaining any relief. This case thus sets a milestone for trade secrets protection (or breach of confidentiality) cases. It remains to be seen whether the court would enforce the same measures in a non-compete case, which is another type of employer-employee dispute in which preliminary injunctive relief would help the employer prevent further damage resulting from the employee’s alleged breach of duties.
From an employee management perspective, employers should pay more attention to their company policies and agreements related to protection of confidential information as robust company policies and agreements may help the company seek injunctive relief even before the trial on the merits commences

https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1082&amp;context=lawfirms

China Employment Law Update - August 2011

Abstract

Similar works

Full text

Available Versions

eCommons (Cornell Univ.)

DigitalCommons@ILR

DigitalCommons@ILR

eCommons (Cornell Univ.)

eCommons (Cornell Univ.)

eCommons (Cornell Univ.)

DigitalCommons@ILR

DigitalCommons@ILR