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Guidance Regarding Certain Employment Matters Amid Novel Coronavirus (Covid-19) Outbreak

2月 18, 2020

Many business are facing the challenges caused by the novel coronavirus pneumonia (Covid-19) outbreak. Among those challenges is the treatment of employees under these extraordinary circumstances. For example, whether an employer can terminate an employment agreement during the Covid-19 outbreak and how to pay remuneration to those employees who are under self-quarantine or who are unable to return to work due to quarantine measures imposed by local government authorities.

In response to some popular and commonly asked employment related issues, the Ministry of Human Resources and Social Security (the “MOHRSS”) issued the Notice on Properly Handling Labor Relations During The Prevention And Control Of Pneumonia Epidemic Of New Coronavirus Infection (关于妥善处理新型冠状病毒感染的肺炎疫情防控期间劳动关系问题的通知) on January 24, 2020 (the “Notice”).  On February 7, the MOHRSS, the All-China Federation of Trade Unions, the China Enterprise Confederation/China Enterprise Directors Association, and the All-China Federation of Industry and Commerce jointly issued the “Opinions on Stabilizing Labor Relations and Supporting Resumption of Business and Production During The Prevention And Control Of Pneumonia Epidemic Of New Coronavirus Infection” (关于做好新型冠状病毒感染肺炎疫情防控期间稳定劳动关系支持企业复工复产的意见) (the “Opinions”).

We set forth below certain scenarios as described under the Notice and the Opinions and the corresponding rights and obligations of the employer. We should note that, given the extraordinary nature of the current circumstances, each locality has been struggling to find its own solutions that are appropriate to the situation. As a result, any decisions regarding the treatment of employees during this time should be made only after also consulting applicable local policies. In addition, unless otherwise specified below, if a company contemplates terminating an employee at this time, it should consult with legal counsel. Termination of employees in China is often complicated, not least given differences in local rules around termination. However, the Notice and Opinions further complicate the situation in that they encourage companies not to terminate employees.

We also want to note that as the PRC central and local government authorities may continue to issue new policies and guidance to address ongoing or newly surfaced issues under this extraordinary circumstance, employers are advised to continue to monitor and closely follow changes in policy relating to the employment matters.

Scenario #1

Employees who are currently receiving medical treatment or who are under quarantine or medical observation AND meet any of the following criteria:

  • are confirmed infected with Covid‑19;
  • are suspected of being infected with Covid‑19; or
  • have been in close contact with people confirmed or suspected of being infected by Covid-19.
Work & Other Policy

The Employee cannot be required to work and the employer shall not terminate the employment relationship without cause or through mass-layoff (notwithstanding the applicable provisions provided in the PRC Labor Contract Law).

Further, if an employment agreement expires during the period when an affected employee is receiving medical treatment or under quarantine or medical observation, the term of the employment agreement will be extended to the end of such medical treatment or medical observation or quarantine period or until the government lifts emergency quarantine measures, whichever is earlier.

Compensation Requirements Must be paid normal salary
Notes from O’Melveny Upon the employee returning to work, an employer may consider requesting medical certification or other documentation to substantiate employee claims.

 

Scenario #2

Employees who cannot return to the work place on time due to circumstances related to Covid-19

Work & Other Policy

Employer should make reasonable arrangements to allow the employee to work from home if possible.

If work from home is not possible, employer should try to negotiate with employee to take advantage of any unused paid-leave.

Compensation Requirements

Normal salary must be paid to employees working from home or taking paid leave. 

For employees unable to work from home or who have exhausted any paid leave:

  • employer is required to pay normal salary during one pay cycle (i.e., cycle that the employer normally issues paychecks to the employee); and
  • for any period exceeding one pay cycle, employer may pay salary in accordance with any local rules for salary arrangements during “suspension of production or business” periods.  E.g., in Shanghai, an employer is required to at least pay the current minimum wage of RMB2,480 per month.
Notes from O’Melveny

This would cover employees who cannot return from their hometown because the hometown government has imposed a lockdown on people leaving as well as employees who are required to self-quarantine and thus are unable to return to the office.

The Opinions encourage employers to adopt flexible arrangements for working hours in the face of the Covid-19 situation. Based on this principle, it follows that an employer can require only some employees to come back to the office on the justification that Covid-19 makes it too dangerous to have a large number of employees in the office.  A common concern as a result has been the treatment of office “tea ladies” who may be asked not to return to work if an office has not fully resumed business and is only allowing essential personnel to return to the office.

 

Scenario #3

The employer suspends operation or business, whether in whole or in part, and requests employees to postpone their return to work due to the impact of Covid‑19

Compensation Requirements

Employer is required to pay a normal salary during one pay cycle (i.e., cycle that the employer normally issues paychecks to the employee).

For any period exceeding one pay cycle, the employer should pay salary in accordance with the local rules for salary arrangements during “suspension of production or business” periods: (1) if the employee provides normal work, the employer should pay the salary at least equal to the local minimum wage; E.g., in Shanghai, an employer is required to at least pay a salary equal to the current minimum wage of RMB2,480 per month; and (2) if the employee does not provide any work, the employer should provide a living fee (as determined in accordance with the local measures); E.g., in Beijing, the living fee is 70% of the Beijing minimum wage. In 2019, Beijing minimum wage was RMB2,200. Therefore an employer in Beijing is required to pay a living fee at least equal to RMB1,540. We further note that according to the Notice on Supporting Measures to Provide Human Resources and Social Security to Address Covid-19, issued by Shanghai Municipal Human Resources and Social Security Bureau on January 27, 2020, employers in Shanghai are required to pay 100% of the minimum wage (i.e. RMB2,480 per month).

 

Scenario #4

The employer that experiences production or operational difficulties

Work & Other Policy / Compensation Requirements

Employers are encouraged to consult with unions and negotiate with employees to reduce salaries, adopt shift schedules, or reduce working hours.

In addition, employers who cannot pay salaries may negotiate with unions or employee representatives to delay payment of salary.

 

Scenario #5

Employees who refuse to return to work without appropriate reasons

Work & Other Policy / Compensation Requirements

Where it is permissible for a company to resume operations, but an employee is unwilling to resume work due to safety concerns, the company should first discuss the concerns with the employee and try to resolve the employee’s concerns. If the employee continues to refuse to resume work without appropriate reasons, the company may terminate employment in accordance with the rules and process specified in existing laws and the company policies.

Notes from O’Melveny

Employer is advised to keep record of all communications in case any dispute arises during this process.

The Opinions did not specify the grounds for such termination of employment. The employer may argue that the employee seriously violates the company attendance policies and thus is entitled to unilaterally terminate the employee in accordance with Article 39 of the Labor Contract Law.

 


O’Melveny & Myers LLP is a foreign law firm registered with the Ministry of Justice of the People’s Republic of China. Under current Chinese regulations, we are allowed to provide information concerning the effects of the Chinese legal environment, but we are not authorized to practice Chinese law or to render legal opinions in respect of Chinese law. We work in cooperation with a number of Chinese law firms. Should you require a legal opinion in respect of any Chinese law matter, we would be happy to assist you in obtaining one from a Chinese firm.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Walker J. Wallace, an O’Melveny partner licensed to practice law in New York, Alan Bao, an O’Melveny counsel licensed to practice law in California, and Qianru Hong, an O’Melveny senior legal consultant in the firm’s Shanghai office, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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