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Location: Home >> Book Abstract
  • Author: Luo Xin , Lu Jingbo
  • Promulgation date: 2009-11-26
  • Language: English
  • Price: 180 USD
Sample Chapter

Section 1 Disputes over the Establishment of Labor Relationships

The establishment of a labor relationship between an employee and employer usually involves several phases: recruitment, the interview process, issuance of an OFFER LETTER, and the signing of a labor contract, in the course of which labor disputes often arise. This section discusses and analyzes disputes that can arise during the establishment of a labor relationship from three perspectives: recruitment, issuance of an OFFER LETTER, and guarantees.

1. Recruitment disputes

Case

Miss Zhang is a human resources assistant for a foreign-funded advertising company. The term of her labor contract with the advertising company is three years, including a six-month probation period. In the fourth month of the probation period, Miss Zhang informed the Company that she was pregnant. The company was surprised to hear this news, because when it sought to employ a human resources assistant, it clearly stated in the recruitment advertisement that the applicant should be single. Miss Zhang had worked in the company for four months and had not talked about getting married. Why did she suddenly become pregnant? Following an investigation, Miss Zhang admitted to already being married at the time she was recruited by the company.

In view of this fact, because the company considers that Miss Zhang does not satisfy the “single” requirement stated in the recruitment advertisement, it rescinds her labor contract during the probation period on the grounds that Miss Zhang does not meet the recruitment requirements during such period. Miss Zhang maintains that she performed very well during the probation period, was assessed as satisfactory during the probation period, and that the company cannot dissolve the contract just because she is married; in addition, now that she is pregnant, rescinding the contract is illegal. She therefore seeks legal redress and requires that her labor relationship be resumed.

The following are the advertising company’s requirements for the position of human resources assistant, to be hired through a public recruitment process:

● Single;

● Under the age of 28;

● University degree or above in human resources or a related major;

● No less than one year’s human resources work experience with a large company;

● Strong communication, coordination and organizational skills;

● Good command of English (both reading comprehension and written) and the ability to communicate in English;

● In good health (not a carrier of the hepatitis B virus).
 
 

Analysis

In this case, the company rescinded the labor contract because Miss Zhang did not satisfy the recruitment requirements during the probation period due to the fact that she was already married when she applied for the job and therefore did not satisfy the “single” requirement stated in the recruitment advertisement.

The focus of the dispute in this case is whether the “single” requirement stated in the recruitment advertisement can serve as one of the company’s recruitment requirements. Generally speaking, job descriptions and requirements stated in recruitment advertisements can constitute recruitment requirements provided they are legal and effective for the post concerned.

Miss Zhang’s performance during the probation period showed that she met the requirements of the advertising company and was fully qualified for the human resources assistant position. The company also made positive comments about Miss Zhang in her bimonthly assessment. In other words, being single or married was not related to job performance or work skills, and there was no basis for making single status one of the recruitment requirements for the post. Because the “single” recruitment requirement was invalid, the company’s termination of its labor relationship with Miss Zhang for not satisfying the “single” requirement that appeared in the recruitment advertisement constitutes unlawful termination, and the company is obliged to resume its labor relationship with her.

On the other way around, let’s examine whether the justifications raised by Miss Zhang have been completely established.

As mentioned previously, Miss Zhang maintains that because she performed very well during the probation period, passed her assessment, satisfied the company’s requirements for the post of human resources assistant, and met the company’s recruitment conditions, the company cannot terminate its labor relationship with her on the ground that she is married. This argument is based on fact and law. However, Miss Zhang’s submission that the company cannot terminate its labor relationship with her because she is pregnant has no legal basis. If it turns out that Miss Zhang does not meet the advertising company’s requirements during the probation period, fails her assessment, or is unqualified for the position of human resources assistant, the company can terminate its labor relationship with her on the ground that she is not qualified during the probation period, even if she is pregnant. In other words, there is no conflict between a female employee’s pregnancy and such employee’s lack of qualifications during the probation period.

Suggestions

Although this case concerns a dispute over the rescission of a labor contract, it can be traced back to issues arising from the recruitment advertisement placed by the employer. In light of the company’s requirements for a human resources assistant as stated in the recruitment advertisement, the advertisement raises some issues: first of all, the applicant is expressly required to be single, which is the focus of the dispute in this case, and this requirement cannot serve as one of the company’s recruitment conditions, the reasons for which have already been stated and will not be repeated; second, the applicant is required to be in good health (and not a carrier of the hepatitis B virus), which is highly likely to breach the Provisions on Employment Services and Employment Management, which provide that employers shall not, when recruiting employees, refuse to employ any person on the grounds that they “carry an infectious disease,” other than for posts that cannot be taken by carriers of the hepatitis B virus according to law.

Following the successive introduction of laws and regulations such as the Employment Promotion Law and the Provisions on Employment Services and Employment Management, there are now more detailed requirements for recruitment advertisements placed by employers. Recruitment advertisements must include basic information on the employer, the number of employees sought, the type of work involved, recruitment requirements, remuneration, welfare benefits, social insurance, and other details required by laws and regulations. The employer must not stipulate any discriminatory requirements, which often include: males only, people who are registered residents of a specific city only, etc. If, for any special reason, the employer needs to set special requirements for applicants, it can achieve this goal in a flexible manner through the screening of resumes and in interview, but it is advisable that no such special requirement is stated in the recruitment advertisement.

Laws and regulations have standardized the contents of recruitment advertisements, which will undoubtedly increase the risks taken by employers in the recruitment process. Recruitment advertisements placed by employers must not only include the details required by law, but must also take into account disputes that may arise out of such details after an applicant has become an employee. At the same time, a good recruitment advertisement should also provide a basis or evidence for the employer to dismiss the employee according to law during the probation period. Following the implementation of the Labor Contract Law, the threshold that must be met for an employer to unilaterally terminate a labor contract has been raised, the risks involved in such termination have greatly increased, and the consequences of unlawful termination have become more serious; if an arbitration commission or court considers an employer’s termination of a labor contract to be illegal, the employee may elect to either continue performing the labor contract or require the employer to pay damages of twice the amount of economic compensation.

The law includes specific provisions on the termination of labor contracts by employers during the probation period: the employer can terminate the labor contract if it is proved that the employee is unqualified during the probation period. This means that it is now more important for employers to set recruitment requirements.

When placing a recruitment advertisement, the employer will set certain requirements for the position, a job description or a description of the type of work involved. Position requirements and job descriptions that form part of a recruitment advertisement constitute recruitment conditions. If the employee does not perform in line with the job description during the probation period, or, following investigation and verification, his qualifications or educational background do not meet the requirements for the position, the amount of leeway the company has to terminate the labor contract with the employee during the probation period will increase greatly.
 

Questions and answers

Q1: Are stipulations such as “the employee must not get married or give birth within two years” valid?

A1: Some employers, for fear that a female employee will get pregnant and give birth shortly after she begins working for the company, thereby affecting the economic return of the company, will stipulate in interviews with prospective female employees that the company forbids pregnancy during the probation period, and some companies will stipulate requirements such as “the employee shall not get married or give birth within two years” in their recruitment advertisements; some even include such requirements in their labor contracts. The Provisions on Employment Services and Employment Management stipulates that employers shall not, when recruiting female employees, restrict female employees from getting married or giving birth. Therefore, such employer requirements or stipulations are invalid and do not have legal force.

Q2: Can an employer require that its prospective employees are tested for the new Hepatitis B virus when they undergo a physical examination before taking up a job?

A2: No, they cannot. According to the Provisions on Employment Services and Employment Management, employers must not make it mandatory for a Hepatitis B virus serological test to be undergone as part of a physical examination, other than for jobs which cannot be taken by Hepatitis B carriers according to state laws and regulations or State Council administrative department of public health provisions. In practice, some employers make a test for the new Hepatitis B virus an optional item in the physical examination undergone before an applicant takes the job, and do not require applicants to take this test. Nevertheless, employers seek to assess whether prospective employees carry the Hepatitis B virus according to whether or not they opt to take the test. The author is of the opinion that this practice needs to be questioned. if the employer does not recruit an applicant just because he elects not to take the test, a star performer may be lost forever.

Q3: Is it legal to use the term “wages negotiable,” as is often seen in recruitment advertisements?

A3: Wages and welfare benefits are seldom touched upon in recruitment advertisements; the most commonly used expression is “wages negotiable.” However, because the Provisions on Employment Services and Employment Management require employers to include details on matters such as remuneration, welfare benefits, etc., in their recruitment advertisements, simply stating “wages negotiable” in a recruitment advertisement does not meet legal requirements.

In practice, enterprises find it inconvenient to state the specific wages or remuneration package available in a recruitment advertisement, because wages and welfare benefits will be different, even for the same position, due to the different backgrounds of prospective staff, such as their educational background and qualifications. Correspondingly, enterprises will pay different wages according to the circumstances. Enterprises are advised to set a range for the remuneration package on offer and state it in the recruitment advertisement. For example, an enterprise may stipulate a monthly salary of RMB 2,000-5,000 or an annual salary of RMB 100,000-150,000 and determine the specific wage to be paid to a particular applicant within that range, but the wage must be no lower than the minimum wage within the range stipulated in the recruitment advertisement.

Q4: Is it legal to state “applicants limited to local registered residents only” as frequently seen in recruitment advertisements?

A4: Many enterprises, mostly public institutions and stat-owned enterprises, state “applicants limited to local registered residents only” in their recruitment advertisements. This constitutes employment discrimination against rural laborers. The Employment Promotion Law expressly prescribes that when rural laborers move to a town or city, they enjoy employment rights equivalent to those of urban laborers, and that no restrictions that discriminate against the employment of rural laborers who live in a town or city are to be set.

Q5: A certain enterprise places a recruitment advertisement on the Internet all year round, but does not in fact employ any personnel. Is this practice legal?

A5: We often find that some enterprises place recruitment advertisements all year round on recruitment websites, the contents of which barely change, but do not actually recruit any personnel. The reason why they release recruitment advertisement throughout the year is on one hand, such advertisements can give the enterprise publicity and increase its influence at a low cost; on the other hand, they can collect a large number of resumes from applicants, obtain first-hand information on the labor market, and gain an understanding of applicants’ wage demands for each position by analyzing their resumes, then adjust the wages and welfare benefits of personnel employed by the enterprise. No matter out of which consideration, such conduct on the part of an enterprise violates the Provisions on Employment Services and Employment Management, which stipulate that employers are prohibited from publishing false employment information or placing false employment advertisements; any employer that violates these provisions shall be ordered by the administrative department for labor security to make rectifications, fined up to RMB 1,000, and required to pay compensation for any loss suffered by any of the parties concerned.

 

Regulations

Employment Promotion Law

Article 3 Workers shall enjoy the right to equal employment opportunities and the right to select a job for themselves according to law.

With regard to employment, no worker shall be discriminated against by reason of nationality, race, sex, or religious beliefs.

Employment Promotion Law

Article 27 The State guarantees that women shall enjoy labor rights equivalent to those of men.

Other than for types of work or posts that are not suitable for women as prescribed by the State, no employer shall refuse to employ women or raise recruitment standards for women on the grounds of gender.

When an employer recruits female employees, the labor contract shall not stipulate any requirement such as one restricting female employees from marrying or bearing children.

Provisions on Employment Services and Employment anagement

Article 19 When recruiting personnel, no employer shall refuse to employ an applicant on the ground that such applicant is a carrier of an infectious disease. However, no person who is found to be a carrier of an infectious disease following medical tests shall take up any job in which such infectious disease can easily be spread, as stipulated in laws, administrative regulations or provisions of the administrative department of public health under the State Council, before being cured or before the possibility of infection has been excluded.

When recruiting personnel, no employer shall make a hepatitis B virus serological test a mandatory physical examination requirement, other than for jobs which cannot be taken by Hepatitis B carriers according to state laws and regulations or State Council administrative department of public health provisions.
 

2. Disputes arising from an OFFER LETTER

Case

Xiao Wang is a member of the finance department in a certain electrical equipment manufacturing company (the electrical equipment company). When Xiao Wang passed the interview stage of the electrical equipment company’s recruitment process, it sent an OFFER LETTER to Xiao Wang, in which it was expressly stated that the electrical equipment company would pay 14 months of wages to Xiao Wang each year, the 13th and 14th months of which would be paid by the end of January in the following year at the same rate as the basic wage. After joining the electrical equipment company, Xiao Wang signed a 3-year labor contract in which the payment of 14 months’ wages each year was not stipulated. In addition, the electrical equipment company’s rules and regulations on paying double wages at the end of the year state that employees who successfully complete their probation period and are on the payroll at the end of the year may enjoy 13 months’ wages, that the wages for the thirteenth month will be paid in January of the following year, and that such wages shall be paid at the basic rate.

Xiao Wang began working at the electrical equipment company in February 2007, then resigned and terminated the labor relationship with the company in March 2008. In January 2008, the electrical equipment company paid Xiao Wang RMB 3,500 (one month’s basic wages) as wages for the 13th month. Xiao Wang maintains that the company should pay him RMB 7,000, equivalent to two months’ basic wages, on the ground that the OFFER LETTER issued by the electrical equipment company clearly stated that 14 months’ wages, rather than 13 months’ wages, would be paid. The electrical equipment company considers that the OFFER LETTER became invalid once the labor contract had been signed, and that the matter should be settled in light of the company’s rules and regulations, as a result of which one month’s basic wages are payable. The company has therefore refused to accept Xiao Wang’s claim.

Analysis

The focus of the dispute in this case is on how to determine the validity of the stipulation on payment of 14 months’ wages by the end of the year in the OFFER LETTER signed by Xiao Wang and the electrical equipment company. Let’s go over some of the legal issues reguarding the OFFER LETTER before analyzing the case in detail:

A. Nature of OFFER LETTER

An OFFER LETTER is a letter containing recruitment information that many employers issue to their workers before signing a labor contract. In an OFFER LETTER, an employer generally stipulates the time and place for reporting for work, wage and welfare benefits, the position concerned and other details. If the worker, after receiving such an OFFER LETTER, agrees to be employed, he posts or faxes the signed OFFER LETTER to the employer within the specified time limit.

An OFFER LETTER is usually issued by the employer and the signed version returned by the employee before a labor relationship is established by the two parties. As such, OFFER LETTERS are governed by the Civil Law and the Contract Law, rather than by the Labor Contract Law.

B. The relationship between the OFFER LETTER and the labor contract

Generally, an employer will specify in the OFFER LETTER the valid term thereof and the relationship between such letter and the labor contract, namely, whether such letter constitutes an appendix to the labor contract or becomes invalid after the labor contract has been signed, itself. However, the OFFER LETTERS issued by many employers do not stipulate the relationship between such letter and the labor contract. In this case, how should the relationship between the two be determined when a dispute arises?

(1) If the terms of the labor contract cover the terms of the OFFER LETTER, there will be no conflict or discrepancy between them;

(2) Where there is any discrepancy or conflict between the terms of the OFFER LETTER and the terms of the labor contract, the terms of the labor contract will prevail, since the establishment of the labor contract means that the employer and employee have agreed to different terms with regard to the same issue, indicating that the terms of the OFFER LETTER have changed.

(3) If the terms of the OFFER LETTER are not included in the labor contract, such terms will remain effective and be binding on both parties.
 

C. The relationship between the OFFER LETTER and rules & regulations

Collective contracts, labor contracts and OFFER LETTERS all represent special sets of terms on the rights and obligations of employers and employees. This essential characteristic is not shared by the internal rules and regulations of the employer. In the event of any discrepancy between the terms agreed by the two parties and the rules & regulations, the agreed terms will prevail.

In this case, the valid term of the OFFER LETTER is not stipulated in either the labor contract concluded by Xiao Wang and the electrical equipment company or the OFFER LETTER. In other words, the terms of the OFFER LETTER will remain effective after the labor contract has been concluded, and the stipulation on the payment of 14 months’ wage will be valid and not become ineffective due to the fact that a labor contract has been entered into. With regard to the discrepancy between the rules & regulations on double wages at the end of the year and the OFFER LETTER, the OFFER LETTER will have priority over the rules & regulations because it is a special term agreed to by the two parties. Xiao Wang’s claim will therefore be upheld.

Suggestions

Since OFFER LETTERS are widely used by foreign-funded enterprises in the human resources management context, HR departments would be well advised to pay attention to how to avoid the circumstances of this case arising.

First, when an employer prepares an OFFER LETTER, it can clearly record the matters in respect of which the two parties have reached an agreement, which will usually include: the type of work involved, remuneration, contractual term, workplace, etc.

Second, to avoid disputes at a later date, it is advisable to clarify the validity (or otherwise) of the OFFER LETTER after the labor contract has been concluded in the OFFER LETTER itself or in the labor contract.

Third, since the labor relationship between the two parties is not established when the OFFER LETTER is signed, any dispute arising from the OFFER LETTER will fall within the ambit of the Civil Law. Therefore, the two parties may stipulate liability for breach of contract in the OFFER LETTER, such as a penalty or other form of liability, and stipulate whether the party that breaches the contract (regardless of whether it is the employer or the employee) will bear corresponding liability for breach of contract.

Questions and answers

Q1: If an employee goes back on his word after signing an OFFER LETTER, will the employee be legally liable?

A1: In practice, an exceptional employee may have several OFFER LETTERS open to him at the same time, and when he makes his choice, he will certainly give up one or more OFFERS. The HR manager of any of the employers not chosen will feel particularly frustrated on being informed by a much sought after applicant who has been selected after several rounds of screening that he will not be working for his company after all. In such a case, if the employee backs out after signing the OFFER LETTER, what remedies does the employer have? Should the employee be legally liable?

An OFFER LETTER is the result of an agreement reached by two parties through consultation and is binding on both parties; any party that backs out will be liable for breach of contract. If the two parties have specified liability for breach of contract in the OFFER LETTER, the non-breaching party may, according to the requirement, investigate the liability of the breaching for breach of contract; if no method for assuming the said liability for breach of contract has been specified, the non-breaching party may require the breaching party to undertake the liability for compensation.
 
 

Q2: Can an OFFER LETTER take the place of a labor contract?

A2: Article 17 of the Labor Contract Law specifies the clauses that a labor contract must include, and if an OFFER LETTER includes the mandatory labor contract clauses, it will be deemed to constitute a labor contract. However, we still advise that employers sign labor contracts with their employees. According to China’s Labor Contract Law, an employer is taking on significant legal risks if it has not signed a labor contract where it should have done so, such as potential liability to pay double wages or being deemed to have signed a labor contract without a fixed term. To avoid the corresponding legal risks, an employer should sign a separate labor contract even if it has signed a very detailed OFFER LETTER with its employee.

Q3: If there is any conflict between an OFFER LETTER and a labor contract, which prevails?

A3: In the event of any discrepancy or conflict between the terms of the OFFER LETTER and the terms of the labor contract, because the labor contract is signed after than the OFFER LETTER, the terms of the labor contract will prevail, which means that the employer and the employee have reached a different agreement on the same issue, thus changing the terms of the OFFER LETTER.

Q4: Can an employer arbitrarily withdraw an OFFER LETTER?

A4: An OFFER LETTER sets out the rights and obligations of employer and employee and is to be observed by the two parties, and the employer cannot arbitrarily withdraw the OFFER LETTER issued. In practice, many employees terminate their labor contracts with their existing employers only after receiving an OFFER LETTER from another firm; the arbitrary withdrawal of the OFFER LETTER by the new employer is bound to have an influence on the employee and may even lead to significant economic loss in serious circumstances.

If there is an express term in the OFFER LETTER on liability for breach of contract, the employee can hold the employer liable for breach of contract according to such term; if no express term exists, the employee can require the employer to bear any economic loss he has suffered.

Q5: What are the differences and links between A. “tripartite agreements” signed by a college, graduate and employer; B. an OFFER LETTER; and C. a labor contract?

A5: After a fresh gradate has determined his employer, the college, graduate and employer will sign a tripartite agreement according to policy to record terms on the position, remuneration, and penalties, etc. These terms constitute the agreement signed before the establishment of a labor relationship between the graduate and the employer and fall within the ambit of the Civil Law; the graduate establishes a labor relationship with the employer only after he begins working for the employer. This type of “tripartite agreement” is similar in nature to an OFFER LETTER and is not a labor contract.

Regulations

Interpretation of the Supreme People’s Court on Several Issues concerning the Application of Laws for the Trial of Labor Dispute Cases (II)

Article 16 Where the internal rules and regulations formulated by an employer differ from the terms stipulated in the relevant collective contract or labor contract, if the employee requests that the terms of the contract be applied with priority, the people’s court shall uphold such request. 
 
 
  3. Disputes arising from guarantees

Case

After graduating from university and attending many interview rounds, Xiao Wang is finally recruited by a commercial bank (the bank) and assigned to work in its credit department. As he is signing his labor contract, Xiao Wang is informed by the personnel department that according banking system practice, Xiao Wang should provide a guarantor who has full civil capacity, is a locally registered resident, resides locally, and has a stable income. Meanwhile, the bank gives a deed of guaranty to Xiao Wang that states “I hereby provide a guarantee for Xiao Wang for the period he remains an employee of the Bank and agree to be jointly and severally liable for any liability Xiao Wang may bear to pay compensation (including leaving his position without approval before repaying any outstanding loan) for any loss suffered by the bank due to any violation of the banking system or due to any other subjective or objective reason. Xiao Wang then asks his father, Lao Wang, to be his guarantor and sign the deed of guaranty by way of confirmation.

After working with the bank for more than a year, Xiao Wang violates bank regulations when handling a credit transaction and thereby causes the bank to suffer a significant economic loss. The bank, according to its system, makes a decision to dismiss Xiao Wang, holds Xiao Wang liable to pay compensation for the loss suffered by it, and requires Lao Wang to assume joint and several liability. Xiao Wang, worried that he might be liable for the mistake he has made, leaves town, and the bank takes Lao Wang to court since it cannot find Xiao Wang, requiring that Lao Wang compensate the bank for the loss caused by Xiao Wang. Will the bank’s claim be upheld by the court?

Analysis

This case concerns a dispute arising from a guarantee, the key issues in the dispute being: is the deed of guaranty signed by Lao Wang valid? Can the bank require Lao Wang to undertake joint and several liability on the basis of the guaranty?

Article 2 of China’s Guaranty Law provides: “In economic activities such as loans, purchases and sales, goods transportation and contracted processing, where a creditor needs to safeguard the realization of his rights by way of a guarantee, a guarantee may be arranged in accordance with the provisions of this Law”. The above provision expressly points out that a debt is a specific set of rights and obligations between the parties in light of the terms of the contract. A guaranty contract, as an auxiliary contract, guarantees only the debt arising from such master contracts such as those relating to loans, purchases and sales, the transportation of goods and contracted processing activities. Such master contracts certainly set out the terms of civil relations. In this case, the relationship between Xiao Wang and the bank is a labor relationship, which falls within the ambit of the Labor Law. The “master contract” to which the “guaranty” relates does not stipulate a creditor/ debtor relationship between equal parties, but specifies the rights and obligations of the employer and employee. The purpose of the “guaranty” is not to safeguard the rights of a creditor, but to ensure that the activities of the guaranteed party in violation of laws and disciplinary requirements do not damage the interests of the employer. Therefore, the deed of guaranty executed in this case does not conform to the provisions of the Guaranty Law and the giving of the guaranty is invalid. Therefore, the bank’s request that Lao Wang be required to accept joint and several liability will not be upheld.

Suggestions

In practice, there do exist a small number of employees who damage the interests of their employer by taking advantage of their work situations. Such employees are difficult to manage or make a claim against due to their itinerant nature, causing individual employers to seek to avoid losses by requiring employees to provide a guaranty, collecting a risk surety or collateral, or retaining their ID cards. However, these practices are illegal. If an employer wants to avoid the risk of an employee causing it to suffer a loss and resigning without accepting liability to pay compensation, it should resolve this problem by enhancing its internal management practices and increasing benefits instead of using inappropriate methods such as requiring a guaranty or collecting a surety or collateral.

 

Questions and answers

Q1: If an employer funds an employee’s training and the employee receives a certificate on completion of such training, does the employer have the right to retain the certificate?

A1: For some posts that have qualification requirements, the employer usually trains new recruits and in most cases pays for such training. After receiving training and passing the relevant exams, employees receive a qualification certificate issued by the relevant department and can take up the position. Some employers consider that because they fund employee training, any qualification certificates obtained by their employees belong to the employer and are to be kept on firm premises, and that they still have the right to retain such certificates even after the labor relationship has ended. Is this employer practice acceptable?

Qualification certificates obtained by an employee belong to the employee, regardless of whether the employer paid for the training, and the employer should not retain an employee’s qualification certificates for any reason; the law expressly forbids employers from retaining an employee’s qualification certificates after the dissolution or termination of the labor relationship for the purpose of restricting reasonable employee turnover.

Q2: Is it legal for employers to collect uniform expenses from employees?

A2: In practice, some employers, for the purpose of avoiding legal obligations, use indirect methods of collecting deposits from employees rather than collecting deposits or risk sureties directly. These usually include: collecting uniform expenses, computer costs, training costs or collected funds (share funds) from employees. These practices are also contrary to the provisions of the Labor Contract Law, and are therefore illegal.

Q3: If an employee borrows money from his employer, can the employer require the employee to provide a guaranty?

A3: Since requiring or giving a guaranty is expressly forbidden under the Labor Contract Law, some enterprises are uncertain of the answer to this question: if an employee borrows money from the company for a non-work related reason, i.e., as a private loan, can the company require the employee to provide a guaranty?

Because personal loans made by an employer to an employee fall into the category of debts between equivalent civil subjects and are not necessarily related to the performance of labor relationship obligations, guarantee relationships established in relation to such loans comply with the provisions of the Guaranty Law and are therefore valid.

Q4: If an employer signs a service term (training) agreement, can the employer require the employee to provide a guaranty?

A4: Some companies, due to their work requirements, need to send employees abroad for training. The employer will sign a service term agreement or training agreement with the employee before he leaves the country, stipulating the number of years the employee is required to continue working for the company after the overseas training has been completed, as well as the assumption of liability for breach of contract. Since the company’s overseas training costs are high, some companies require their employees to provide a guarantor when the training agreement is signed for fear that the employee does not return after going abroad, does not pay the penalty, or does not have the ability to pay the penalty. Is a guaranty in these circumstances valid?

A service term (training) agreement is based on the existence of a labor relationship between the employer and the employee. The rights and obligations of the employee and the employer are akin to those of an internal subordination relationship and do not amount to a relationship involving rights and obligations between equal civil subjects. The funded training guaranty dispute arising between the two parties does not comply with the provisions of the Guaranty Law; the guaranty agreement between the two parties is therefore invalid.

Q5: If an employer retains an employee’s personal file or other articles belonging to the employee, what can the employee do?

A5: In practice, after an employee has dissolved a labor contract according to law, the employer deliberately delays transferring the employee’s personal file or simply retains the personal file because it does not want the employee to leave the firm. How should the employee handle such a situation?

Article 50 of the Labor Contract Law provides that an employer shall, within 15 days of dissolving or terminating a labor relationship, go through the personal file and social insurance transfer procedure for the employee. In other words, it is the statutory obligation of the employer to handle file transfer procedure for the benefits of the employee. In case the employer retinas the employee’s personal file, the employee may lodge a complaint to the administrative department for labor in the place where the employer is located. The administrative department for labor will order the employer to return the personal file to the employee within a specified time limit and may give the employer an administrative fine (of between RMB 500 and RMB 2,000); if the employee has suffered any loss as a result of the employer’s actions, the employee may initiate a labor arbitration case and require the employer to pay compensation.

Regulations

Labor Contract Law

Article 9 When hiring an employee, the employer shall not retain the employee’s resident ID card or other identification, nor require the employee to provide a guaranty or collect property from such employee under any other guise.

 
 
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