China Employment Contracts: Don’t Get Creative

China practice contractEmployers in China are reputed to have larger negotiate energy than their employees and China courts and labor play therefore China’s labor laws tend to yield China employees with estimable protections and China courts typically preference employees in disputes with their employers, generally unfamiliar employers. If we as a unfamiliar employer wish to equivocate authorised problems, we should essay to form to a practice laws, generally when it comes to drafting your practice contracts.

China practice contracts are not a time to get artistic and a new justice box out of Guangdong confirms this. In this case, an worker and a Guangzhou-based employer entered into an practice agreement for a bound tenure (more on this later). The parties categorically concluded on a agreement indemnification sustenance saying that if possibly celebration terminates a agreement though good means before a finish of a agreement term, a breaching celebration shall compensate a other celebration 200% of a employee’s income for a residue of a term. This sustenance was dictated to be effective both ways: it did not usually request to a employer.

The agreement was scrupulously executed and a employer eventually consummated a worker before a finish of a tenure — about 4 years into employment, with about 6 years remaining on a term. The worker afterwards sued a employer for double indemnification for wrong stop and for a agreement indemnification per a practice contract: 200% of income for a 6 years remaining on a term. The employer argued that it was entitled to indemnification since a worker had deceived them in securing his job by secretly claiming to be a unfamiliar expert.

The appellate justice ruled that Chinese law prohibits commanding a chastisement on employees unless an difference applies, which it frequency does and it did not in this case. The appellate justice also inspected a indemnification sustenance as practical to a employer and hold a employer probable for a agreement damages. The justice ruled that a indemnification sustenance as practical to a worker was bootleg since that same sustenance as practical to a employer did not violate any laws. The employer therefore due a worker 200% of his salary.

In reaching a decision, a justice remarkable that China’s labor laws concede for penalties opposite employees in usually a following dual circumstances:

  • Pursuant to an preparation payment agreement, an employer can need its employee repay a association for a preparation losses if a association pays vital losses for an employee’s employment-related preparation or training, though a worker quits a association on execution of a training.
  • Pursuant to a non-compete agreement, an employer can need an worker compensate a chastisement to a association if a worker violates any non-compete terms by, for example, operative for a aspirant after withdrawal employment.

Except for a dual resources above, an employer and an worker might not determine on any sustenance that requires a worker compensate a chastisement to a employer.

Bottom line: Chinese laws are despotic about when an employer can levy a chastisement on an worker and employers typically can't agreement around China practice laws. For these reasons, it frequency creates clarity to breeze an practice agreement with supplies that effect to do otherwise.

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