China & COVID-19: Labor Law Considerations

The 2019 coronavirus disease (“COVID-19”) outbreak that began in December 2019 has sparked new responses around the world, including Chinese cities where millions of people were foreclosed before the 2020 Chinese New Year and the US government, which imposed quarantine restrictions, the first to be reported since the smallpox outbreak in the 1960s.

During this period, China has introduced travel restrictions and quarantine obligations, ordered holiday extensions, delayed business operations, closed factories and schools, and enforced separation controls, among other things. Sectors such as manufacturing, transportation, energy, tourism, retail and financial services in China are badly affected.

Given China’s well-known position in the world manufacturing order, this article addresses some of the labor law considerations that underlie the outbreak containment measures ordered and implemented by the Chinese government. At the same time, the Standing Committee of the National People’s Congress of China has indicated that the virus outbreak may constitute a force majeure event in which the parties fail to meet their contractual obligations.

Compliance with employers’ outbreak measures

The main government outbreak measures that will have the greatest impact on employers are the extension of public holidays and the delayed resumption of business.

On January 27, 2020, the Chinese State Council extended the Chinese New Year holiday across the country from January 30, 2020 to February 2, 2020. In certain cities and provinces such as Shanghai, Jiangsu, Zhejiang and Guangdong, local governments have ordered further delays in resuming business until February 9, 2020 or at a later date, with the exception of those companies that are responsible for the city’s operations and the Epidemic prevention are essential and control and basic human needs. Generally, resumption of business before the relevant announced date is subject to regulatory approvals.

China’s central and local governments have the power under Chinese law to take action to respond to a public health emergency such as an epidemic outbreak. In general, all companies are required to comply with or face fines, including business suspension and fines or in, under the Law on Infectious Disease Prevention and Treatment of PRC and the Law on Emergency Measures in PRC In serious cases, the persons responsible are arrested.

Payment of remuneration to employees

The above “extended holidays” are considered “rest days” by some local authorities under the labor law regime in China. “Days of rest” within the meaning of the labor law of the PR China are not counted towards the annual vacation. The employees do not have to work on rest days, but are entitled to their regular remuneration. Employees who work during the extended vacation period are entitled to compensation time or twice their regular remuneration.

As with late business resumption, Chinese local governments have provided different guidance, some examples are given below:

  • Shanghai City: The late deadline is considered a “rest day” and the requirements of Chinese labor law are as explained above.

  • Suzhou and Wuxi Cities: Regular compensation must be paid as if the workers were working during this delayed period. and

  • Guangdong and Shandong Provinces: The grace period is an “interruption of work and operations” by employers, and employers are required to pay employees their regular wages if the suspension is less than one payroll cycle, that is, the length of time between Payments of two consecutive pay slips. If the suspension lasts more than one payroll cycle, employers must pay their workers a basic living expenses of at least the local minimum wage.

Employees who are unable to work due to the mandatory quarantine

The Chinese Ministry of Human Resources and Social Security has specifically ordered that any person who cannot go to work because they have been identified as “infected”, “suspicious” of infection or in close contact with COVID-19 should undergo an investigation Must The mandatory quarantine or other mandatory government-imposed measures must receive their regular allowance. In addition, an employer cannot terminate the employment contract with this employee and must renew any employment contract with this employee that expires during the relevant period (up to the end of that period).

If an employee is unable to return to work after mandatory quarantine or other mandatory action and requires medical treatment, that employee is (generally) entitled to three to 24 months of “sick leave” with a medical certificate. This employee’s “sick leave” remuneration is paid in accordance with applicable labor laws.

Employees who cannot or do not want to work due to the outbreak

An employee may not be able to return to work on time due to travel restrictions or other situations caused by the virus outbreak. Such a circumstance may constitute an event of force majeure under the PRC Contract Law, and the employee may have an facility to perform his / her employment contract. For the same reason, the employer can withhold payment of the salary to this employee. An employee who is absent from work for no good reason may be violating the management policy and thus the terms of the employment contract, which can lead to the termination of the employment relationship.

The COVID-19 outbreak has hit China like a storm, prompting novel administrative and regulatory countermeasures by the local Chinese government. In order to reduce the risks of labor disputes, we recommend employers to consider consensus working arrangements with their employees by remaining flexible and providing assistance in accordance with local regulatory and practical requirements.

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