As the outbreak of COVID-19 from Wuhan early this year, there are 211 countries, areas or territories that have reported with confirmed COVID-19 cases according to the data disclosed by the World Health Organization on April 6, 2020. Even though the COVID-19 has been effectively controlled in China till now, it, however, is that super majority of companies, including foreign funded enterprises, have encountered, inter alia, serious difficulties in production and business operation due to the COVID-19. How to effectively manage and mitigate the legal risk in labor law is one of the most concerned areas for the foreign funded enterprises (the “FFE” or “FFEs”). In order to provide helpful advice for the FFEs, hereby we summarize the variety issues in labor law into 10 questions based on the actual needs thereof, and corresponding legal advice has been provided in form of answer, in hope to provide helpful reference to the FFEs.
1. After the employer resumes work according to the regulations, if the employee refuses the work arrangement without justified reasons, can the employer terminate the labor contract?
Answer: Labor contracts can be terminated in accordance with the currently effective related labor laws, rules and regulations.
Procedure for termination of labor contract
Full-time labor relations shall be dealt strictly in accordance with the provisions of the Labor Contract Law, while part-time labor relations can be terminated verbally.
Where the labor contract is terminated by employer
(1) Economic compensation is required to be paid the employer under the following circumstances,
(a) Where the employee suffers from an illness or a non-work-related injury and is unable to undertake the original job duties or other job duties arranged by the employer following completion of the stipulated medical treatment period;
(b) Where the employee cannot perform his/her duties and remains to be incapable of performing the job duties after training or job adjustment;
(c) Where the objective circumstances for which the conclusion of the labor contract is based upon have undergone significant changes and as a result thereof, the labor contract can no longer be performed and upon negotiation between the employer and the employee, both parties are unable to reach an agreement on variation of the labor contract.
(d) The labor contract cannot continue to be performed resulting from the fact that the employer does not continue to operate due to the expiration of the operating period of the employer;
(e) The employer is under reorganization according to the Enterprise Bankruptcy Law;
(f) The employer encounters serious difficulties in production and business operation;
(g) The enterprise undergoes a change of production, significant technological reform or change of mode of operation and upon variation of labor contracts, there is still a need for retrenchment of labors;
(h) Other situations where the objective circumstances for which the conclusion of the labor contract is based upon have undergone significant changes and as a result thereof, the labor contract can no longer be performed.
(2)Economic compensation is not necessary to be paid in the following circumstances,
(a) Where the employee has committed a serious breach of the employer's internal bylaws;
(b) Where the employee is guilty of serious dereliction of duties and corruption and causes the employer to suffer significant damages;
(c) Where the employee holds a labor relationship with another employer concurrently which has a severe impact on his/her performance of work tasks assigned by the employer or refuses to make correction as demanded by the employer;
(d) A labor contract which is concluded or varied by employee’s use of fraudulent or coercive tactics or taking advantage of the employer's unfavorable position to cause the counterparty to act against the real intention;
(e) Where the employee has been accused of criminal liability in accordance with the law;
(f) Where it is proved, on the expiry of the probationary period, that the employee has failed to meet employment requirements;
(g) Within one month from the date of employment, if the employee, due to her/his own reason, fails to conclude a written labor contract with the employer after written notification from the employer, the employer shall notify the employee in writing to terminate the labor relationship;
(h) Termination of part-time labor relations.
Circumstances for illegal termination of a labor contract
(1) Termination without the legitimate fact;
(2) The grounds for termination are not valid:
In the following circumstances, the employer cannot notify the termination of the labor contract 30 days in advance. Moreover, the employer cannot notify the termination of the labor contract in the form of an additional month's wages as well as terminate the labor contract in accordance with the layoff regulations,
(a) Where the employee who has engaged in work exposed to occupational hazards has not undergone post-employment occupational health check or during the period where the employee is suspected to have contracted an occupational illness or under medical observation;
(b) Where the employee has contracted an occupational illness or suffered a work injury while working for the employer and is confirmed to have lost his/her labour capability wholly or partially;
(c) During the stipulated medical treatment period of the employee suffering from illness or non-work-related injury;
(d) During the pregnancy, maternity leave or breastfeeding period of a female employee;
(e) Where the employee has worked for 15 years consecutively with the employer and will attain his/her statutory retirement age in less than five years' time;
(f) The labor contract of the lowest ranked employee is rescinded due to the "last elimination" assessment of the enterprise;
(g) The rules and regulations which the termination of the labor contract is based on are not legally valid;
(h) Other situations stipulated by laws and administrative regulations.
(3) Circumstances for illegal termination due to procedure
(a) An employer who has established a labor union has unilaterally terminated the labor contract without notifying the union of the reasons beforehand;
(b) An employer that has not established a labor union, and has unilaterally terminated the labor contract without notifying the labor union organization in the place where the enterprise is located, or without democratic procedures.
For the legal consequences of illegally terminating a labor contract, the employee may request the restoration of a labor contract relationship. If it cannot be restored, the employer shall pay compensation to the employee at twice the economic compensation rate stipulated in Article 47 of the Labor Contract Law.
2. Can an enterprise unilaterally terminate a labor contract on the grounds that the labor contract cannot be performed due to prevention and control of COVID-19?
Answer: An enterprise shall not terminate a labor contract unilaterally on this ground. Although Article 40 of the Labor Contract Law stipulates that the labor contract cannot be performed due to a significant change in the objective economic conditions on which the labor contract was concluded, the enterprise can terminate the labor contract 30 days in advance or pay an additional month's wages contract. However, the Ministry of Human Resources and Social Security specifically requests that the enterprise shall pay the employee who is the COVID-19 infected patient, suspected patients or the close contacts person and those who could not provide normal labor due to the implementation of isolation measures or other emergency measures remuneration during their isolation treatment or medical observation period, and the enterprise shall not terminate the labor contract with the employee on the grounds provided in Articles 40 and 41 of the Labor Contract Law.
3. During the period of COVID-19, if an employee violates relevant regulations on prevention and control of COVID-19, can the enterprise terminate the labor contract?
Answer: Enterprises should deal with it according to the internal bylaws formulated in accordance with the law and the provisions of the Labor Contract Law. If there are no internal bylaws, they should make a comprehensive judgment based on labor discipline, socialist core values, public order and good customs, as well as good faith. The labor contract cannot be simply and mechanically terminated on the grounds that the employee violated the relevant regulations on COVID-19 prevention and control. However, if an employee is accused for criminal liability in violation of relevant regulations on COVID-19 prevention and control, the enterprise may terminate the labor contract.
4. Can the employer terminate the labor contract if the employer has difficulties in production and operation due to the impact of COVID-19, but cannot reach an agreement with the employees in reducing wages, rotating shifts or shortening working hours?
Answer: Yes. First of all, the Labor Contract Law stipulates the circumstances and ways in which both enterprises and employees can terminate the labor contract, that is, the enterprise has the right to terminate the labor contract, but only in accordance with the provisions of the Labor Contract Law. Secondly, to avoid terminating the labor contract illegally, the enterprise should terminate in accordance with Articles 40 and 41 of the Labor Contract Law. When an enterprise terminates its labor relationship, it should pay attention to whether the employee is in the exceptional situation stipulated in Article 42 of the Labor Contract Law and the procedural provisions for layoffs. However, according to the requirements of Ministry of Human Resources and Social Security on the proper handling of labor relations during the prevention and control of COVID-19 infection, it is not recommended to make job cuts.
5. For the employers who have difficulties in production and operation due to the impact of COVID-19, can they take rotations, reduce working hours and lower the labor remuneration for employees?
Answer: Yes. The Notice on Properly Handling Labor Relations During the Prevention and Control of COVID-19 Infection by Ministry of Human Resources and Social Security provides that enterprises affected by the COVID-19 which falls into difficulty in operation, can stabilize the job by adjusting the salary, shifting off and shortening the working hours through consultation with the employees, and try not to lay off or try to reduce the number of lay-offs.6. Can the employer use the resumption of work delay notice notified by the relevant local government department to offset the paid annual leave of employees to reduce wage expenses?
6. Can the employer use the resumption of work delay notice notified by the relevant local government department to offset the paid annual leave of employees to reduce wage expenses?
Answer: Yes. National statutory holidays and rest days are not counted as annual leaves. The State Council has decided to extend the 2020 Spring Festival holiday for 3 days, which is a rest day. Employers shall not arrange employees to take paid annual leave during those 3 days. The local government and other relevant departments need to stipulate postpone of work resumption due to epidemic prevention and control. As there is work remuneration during the period of postpone of work resumption, the employer can negotiate with the employee on using such period to offset the paid annual leave of the employee.
7. If employees suspected of infecting COVID-19 or those who are in close contact with COVID-19 patient who return from the epidemic area need to isolate themselves at home during the observation period due to epidemic prevention and control, therefore they cannot provide normal labor during the observation period. How to pay the wages for those employees?
8. If the employees are infected with COVID-19 on the way to work, can that be identified as work injury?
Answer: It cannot be identified as work injury. According to the Injury Insurance Regulations, an injury caused by a traffic accident or urban rail transit, passenger ferry, or train accident on the way home or way to work is a work injury. According to this, employees who are not injured for the above reasons during their commute are not considered work injuries. Except for those who have contracted COVID-19 due to the performance of their work duties and related staff who died of COVID-19.
9. Can the medical and related staff infected with the COVID-19 due to performing their duties during epidemic prevention and control be identified as work injury?
10. If the employee is diagnosed with or suspected to have COVID-19, do the employers and employees need to bear medical expenses?
Answer: They need not to bear medical expenses. If the employer has already covered the basic medical insurance for employees in accordance with the law, the employer and employees are not required to pay medical expenses. If the employer has not covered the basic medical insurance for the employees in accordance with the law, the employer must bear the medical insurance compensation liability and bear part of the medical expenses reimbursed by the medical insurance fund. According to the Urgent Notice on Medical Protection for COVID-19 Infection ([2020] No. 5) issued by the Ministry of Finance and the Medical Insurance Ministry, it provides that medical insurance and local financial departments shall ensure that patients who are infected with COVID-19 will not be affected by financial issue and will be treated by hospitals even with difficulties of financial issue. First, for the medical expenses incurred by patients such as basic medical insurance, critical illness insurance, medical assistance, etc. shall be paid in accordance with regulations, and the personal burden will be subsidized by the finances. Secondly, for those who seek medical treatment in different places, they will be treated first, and their reimbursement procedure will not be subject to the reduction proportion of same kind. Third, the medicines and medical service items used by patients that comply with the COVID-19 and treatment plan formulated by the health departments can be temporarily included in the payment range of the medical insurance fund.
