Labor Laws in China Following COVID-19 Outbreak

Since the outbreak of Coronavirus (COVID-19) in China, a number of new employment rules, and proposed legislations, have been enacted in an attempt to stabilize China’s economy. The nation has recognized the need to facilitate business practices that will support a balance between protecting employees while also maintaining profitability. In some dire cases, organizations are doing everything that they can to maintain not just profitability, but to stay in business and maintain their existence as a company. In the USA it would not be unreasonable to expect to see mass layoffs from a number of industries in order to maintain profitability; however, in China, this process is fraught with legal requirements that must be upheld.

For example, businesses in China must prove that they have reached the point of experiencing significant difficulties of business operations by submitting their tax statements and financial records to the local labor authorities. In addition, only certain employees may be laid off as certain categories of employees are protected from mass layoffs (such as pregnant employees). These stipulations used to make it quite difficult to layoff Chinese employees, and it becomes the responsibility of the company to display how they have really suffered before requesting the implementation of any layoffs.

Additionally, another condition that would support the implementation of layoffs is if the employment contract between the employer and employee had significantly changed to the point where the contract could no longer be performed, and even after negotiations, an agreement could not be reached for how to amend the contract so that it could be fulfilled by the employee. Employers may try to use the outbreak of COVID-19 as a condition that breaches the employment agreement, however, it must be recognized that the COVID-19 pandemic is assumed to be a temporary issue, where employees may be temporarily unable to perform their duties based on the requirements of their employment contracts. Additionally, employers may pay employees minimum wages instead of their current salaries if they are not able to perform their role to the full extent of the duties and expectations listed within their employment contracts.

Laying off an employee in China was difficult before the outbreak of COVID-19, and now unilateral terminations (either layoffs or mass layoffs) will undoubtedly be even more problematic until this situation is brought under control. Overall, employers would be wise to avoid any unilateral terminations and should instead work tirelessly to come to other employment agreements until the COVID-19 outbreak is under control.

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