People's Republic of China

1. Impact of Covid-19 in the workplace

Covid-19 provides an opportunity for the government authorities, companies and employees to proactively consider a different way of working, and to maintain and even enhance efficiency under the remote working model given the new changes. Government authorities are providing online solutions for some employment-related applications, for example, simplifying flexible working hours system approval procedures, encouraging the using of e-signatures in employment-related documents, and providing guidelines regarding dealing with redundancies due to Covid -19.

Companies in certain sectors also consider different options for working from home. Some companies have even announced that they will make working from home a relatively permanent arrangement by providing necessary assistance to the employees. Working from home has become the new normal in 2020 and this trend will continue in 2021.

With more and more companies adopting a remote working model, it is anticipated that some companies need to establish a new set of rules regarding issues relating to work from home, which will also need to be updated from time to time. Also, potentially there will be some new types of litigation relating to the adoption of work from home model, for example, work-related injuries under working from home scenarios, communication of work-related issues via non-authorized platforms (for example, private we-chat), breach of confidentiality obligations, data and privacy protections etc.

2. Employee misconduct investigations and disciplinaries

With the strengthened regulatory requirements, more and more companies are paying attention to the establishment and perfecting their compliance system, including without limitation to hotlines, whistle-blowers reports, internal investigation and internal audits.

Some government authorities have also committed to providing a response to whistle-blowers if the reports are made in their real name with supporting documents. As such, company internal investigations have become more frequent and regular.

We have seen rising needs from clients in all sectors to conduct internal investigations within a defined scope. In particular, in certain highly regulated sectors, such as healthcare, food safety etc., companies will probably be liable for the individual employee’s misconduct, for example, offering bribery, except where companies can provide evidence to prove that there are company rules clearly prohibiting such misconduct. All these require companies to proactively establish an effective internal compliance system as a part of their defence in case of any violations.

3. Restructuring and termination

Employment law and regulation in China encourages a long-term employment relationship. As a result, when conducting a termination unilaterally, an employer has to provide a legal cause according to the law, follow the legal required procedures and bear the burden of proof for the satisfaction of the legal requirements from both substantial and procedural perspectives. Otherwise, the termination will probably be deemed to be a wrongful termination.

Given the current challenging economic environment, some companies may need to adjust their business goals and internal structure to cope with the difficulties. However, Chinese law and regulation does not support internal restructuring as an effective legal cause for termination.

Also, selective layoff is not encouraged and it is relatively difficult to be approved by government authorities (required under law if the employees to be laid off reaches certain threshold). With regard to unilateral termination decisions, in particular, if selective layoff or internal restructuring involves more than 10% of the total employees or 20 individual employees, companies have to evaluate different layoff options by taking into account the timeline, economic cost and make a detailed plan to avoid any potential collective labour disputes.

This will continue to be a challenge for companies considering lay off or restructuring in 2021.

4. Regulated people and conduct issues

For AMIF and FI sectors, in addition to labour and employment-related requirements, firms also have to comply with various requirements from the government authorities governing banking and asset management, in particular, regarding the qualification of senior management as well as misconduct investigations and accountability tracking.

Such rules also include disciplinary processes against ex-employees which require companies in AMIF and FI sectors to make and implement specific reports and handover procedures if certain misconduct is identified after an employee leaves. When making or implementing such internal rules, companies shall be careful about the overlap of the requirements between the labour and employment areas and the regulatory requirements, as well as consistency with other internal rules, including existing disciplinary rules regarding individual employees’ misconduct.

5. Data protection driven employment law claims

In addition to the Cybersecurity Law which came into effect in 2017, China is in the process of promulgating more laws and regulations regarding data and privacy protection, cross-border data transfer etc.

New developments in these areas should be monitored, and companies should update relevant policies and procedures regarding employment data collection, acquiring employee consent for data transfer etc. Particularly when conducting big internal investigations, companies shall take necessary steps to ensure a state-secret screening has been done before transferring a large amount of data outside to mainland China.