Employment in joint ventures and wholly foreign-owned enterprises

Joint ventures and wholly foreign-owned enterprises have independent legal person status and therefore have much more autonomy in terms of employment. The supervising authority for the employment of labour in these circumstances is the labour and social security department in the venture's place of domicile. The supervising authority exercises supervision of the labour contracts to make sure that the legitimate rights and interests of workers are well protected. Joint ventures and wholly foreign-owned enterprises have complete autonomy in terms of their employment decisions. The relationship between the supervising authority and the joint venture is that the joint ventures or wholly foreign- owned enterprise needs to file their recruitment plans with the local labour authority, which in turn will provide assistance with sourcing employees and processing necessary documents to validate the employment. The joint venture or wholly foreign-owned enterprise has freedom to determine what criteria to apply when screening qualified staff.

Labour contract

It is a requirement of the Labour Law that employers sign an employment contract with their employees. In some places, the labour authority will encourage employers to use their standardised labour contract, which is considered to be neutral and trustworthy. Employers can draft their own labour contract, but it must be strictly in compliance with the labour law. An employer may also enter into a collective labour contract with its employees. Terms and conditions are negotiated by the trade union or by elected representatives of the workers.

In a labour contract, the rights and obligations of both the employer and employees should be clearly defined. Clauses such as job description, labour remuneration, insurance and welfare, labour protection, safety conditions, disciplinary requirements, probation and validity period and conditions under which the contract can be terminated or changed should be included in the contract. Employers must file the standard labour contract with the governing labour authority. Although there is no explicit stipulation regarding what language a labour contract should use, it is advisable for the employer to use the Chinese language, or at least to produce a bilingual document. In any case, the labour authority requires a Chinese language contract (or translation). All contracts signed between the employer and the employees must be verified by the labour authority. Such verification is intended not only to ensure it is signed on the basis of equality and free will, but also to check the different language versions are consistent. There have been cases in which the stipulation of rights and obligations varies greatly between different language versions.

Some foreign-invested enterprises sign a probationary contract before they engage themselves in a formal labour contract, which is not correct practice. According to relevant laws and regulations, the probationary period is the precondition of a formal labour contract. A probationary contract does not free employers from their responsibilities and obligations. In cases of labour disputes, a probationary contract will be regarded as a formal contract. Employers may require a probation period, but it is not mandatory. The probation period should not exceed the statutory length. the maximum of which is six months depending on the length of contract term . During the probation period, either contracted party may terminate the contract without compensation from the employers. No prior notice is needed.

There are two important elements that the employer should take into account in the labour contract: confidentiality and non-competition covenant. A non- disclosure agreement will help protect employers' trade secrets and a non-competition commitment may prevent competitors from taking advantage of the staff 's experience and knowledge about the company.

Termination of labour contract and labour disputes

According to the Labour Law, employers are required to provide 30 days' notice prior to dismissal of employees or termination of labour contracts. Under PRC Labour Law, an employer cannot dismiss an employee without cause.

The employer can terminate the labour contract by giving the employee 30 days written notice if one of the following situations occurs:

If, after recovering from an illness or non-work- related injury , within a prescribed period of medical treatment, the employee is unable to perform the original duties or other alternative jobs arranged by the employer;
The employee is proved incapable of performing a job, even after receiving training or being transferred to another position;
Major changes in the circumstances based on which the labour contract was signed have led to the employer's inability to perform the original contract and agreement to amend the contract can not be reached among parties of the contract.

However, employers can not dismiss employees under the following circumstances:

Employees who have been suffering from occupational diseases or work related injuries and have been proved to have completely or partially lost the ability to work;
Employees who have been suffering from illness or injuries but are still in the prescribed period of medical treatment;
Employees who are pregnant, nursing or on maternity leave;
Other circumstances as stipulated by pertinent laws and administrative regulations.

The employer has the right to terminate a labour contract with immediate effect if an employee

fails to satisfy requirements during the probation period;
has seriously violated the disciplinary rules or regulations of the work place;
has committed a serious abuse of duties or engaged in graft , causing serious damages to the employer;
is charged with a criminal offence.

Once a dispute arises, the case must first go to arbitration with the labour arbitration committee. This procedure is required by law before a lawsuit can be filed. Application for arbitration must be filed within 60 days after the dispute. If either party is not satisfied with the arbitral award, they may file a lawsuit within 15 days of receipt of the award.

Foreign participation in China's job market

According to its WTO commitments, China will allow foreign human resource service enterprises to enter its talent market. The Ministry of Labour and Social Security and State Administration for Industry and Commerce jointly promulgated the Provisional Regulation on the Establishment and Administration of Job Referral Agencies of Sino-Foreign Joint Ventures and Cooperatives , which was implemented as of 1 December, 2001 . According to the regulation, foreign employment agencies can engage in the employment agency business in China through the establishment of equity or contractual joint ventures with qualified Chinese partners . The setting up of job referral agencies as Sino-foreign joint ventures and cooperatives must be approved by the provincial-level government labour and social security department and the provincial-level government foreign trade and economic cooperation department. The minimum capital requirement for such joint ventures is US$300,000. Wholly foreign-owned employment service companies are not allowed by the current regulation.

With the entry of foreign employment service companies, foreign-invested enterprises will receive services from local as well as foreign-invested employment service agencies. These latter will undoubtedly improve the overall quality of China's employment services industry.