China Labor Contract Law Part 2 (Arts 29-95): termination, compensation, double wages for illegal termination, liabilities.
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Part 1:Labor Contract Law of the People’s Republic of China (Full Text)
Chapter III Performance and Modification of Labor Contracts
Article 29 Employers and employees shall fully perform their respective obligations in accordance with the agreements of the labor contract.
Article 30 Employers shall pay labor remuneration to employees on time and in full in accordance with labor contracts and national provisions.
Where an employer defaults on payment or fails to pay labor remuneration in full, the employee may apply to the local people’s court for a payment order in accordance with the law, and the people’s court shall issue such payment order in accordance with the law.
Article 31 Employers shall strictly implement labor quota standards and shall not force or indirectly force employees to work overtime. Where an employer arranges overtime work, it shall pay overtime wages to the employee in accordance with relevant national provisions.
Article 32 An employee’s refusal to follow illegal instructions or forced risky operations issued by the employer’s management personnel shall not be deemed a breach of the labor contract.
Employees shall have the right to criticize, report or file charges against employers for working conditions that endanger personal safety and physical health.
Article 33 Changes to an employer’s name, legal representative, principal person-in-charge or investors shall not affect the performance of the labor contract.
Article 34 Where an employer undergoes merger, division or other restructuring, the original labor contract shall remain valid and shall continue to be performed by the employer that succeeds to its rights and obligations.
Article 35 An employer and an employee may modify the contents agreed in the labor contract upon consensus through consultation. Any modification to a labor contract shall be made in writing.
The employer and the employee shall each retain one copy of the modified labor contract text.
Chapter IV Termination and Expiry of Labor Contracts
Article 36 An employer and an employee may terminate a labor contract upon consensus through consultation.
Article 37 An employee may terminate a labor contract by giving the employer a written notice thirty days in advance. An employee under probation may terminate the labor contract by giving the employer a three-day notice.
Article 38 An employee may terminate a labor contract if the employer:
(1) Fails to provide labor protection or working conditions as agreed in the labor contract;
(2) Fails to pay labor remuneration on time and in full;
(3) Fails to pay social insurance contributions for the employee in accordance with the law;
(4) Has rules and regulations that contravene the provisions of laws and administrative regulations and impair the employee’s legitimate rights and interests;
(5) Causes the labor contract to be invalid under the circumstances specified in Paragraph 1 of Article 26 of this Law;
(6) Has other circumstances under which employees may terminate labor contracts as specified by laws and administrative regulations.
Where an employer compels an employee to work by means of violence, threat or illegal restriction of personal freedom, or issues illegal instructions or forces risky operations that endanger the employee’s personal safety, the employee may terminate the labor contract immediately without prior notice to the employer.
Article 39 An employer may terminate a labor contract if the employee:
(1) Is proven not to meet the recruitment criteria during the probation period;
(2) Seriously violates the employer’s rules and regulations;
(3) Commits serious dereliction of duty or engages in irregularities for personal gain, causing substantial damage to the employer;
(4) Establishes labor relations concurrently with other employers, seriously affecting the completion of work tasks for the current employer, or refuses to rectify the situation upon the employer’s request;
(5) Causes the labor contract to be invalid under the circumstances specified in Item (1) of Paragraph 1 of Article 26 of this Law;
(6) Is subject to criminal liability in accordance with the law.
Article 40 An employer may terminate a labor contract by giving the employee a written notice thirty days in advance or paying the employee one additional month’s wages if:
(1) The employee suffers an illness or non-work-related injury and, upon the expiration of the statutory medical treatment period, is unable to perform the original job or any other job assigned by the employer;
(2) The employee is incompetent for the job and remains incompetent after receiving training or being reassigned to another post;
(3) Major changes occur to the objective circumstances relied upon at the time of concluding the labor contract, rendering performance of the labor contract impossible, and no agreement on modification of the labor contract can be reached through consultation between the employer and the employee.
Article 41 Where an employer needs to lay off twenty or more employees, or fewer than twenty employees but accounting for ten percent or more of the total workforce of the enterprise, it may carry out layoffs only after explaining the situation to the trade union or all employees thirty days in advance, listening to the opinions of the trade union or employees, and submitting the layoff plan to the labor administrative department, if:
(1) Restructuring is carried out in accordance with the provisions of the Enterprise Bankruptcy Law;
(2) Severe difficulties arise in production and operation;
(3) The enterprise undergoes production shift, major technical innovation or business model adjustment, and layoffs are still necessary after modification of labor contracts;
(4) Other major changes occur to the objective economic circumstances relied upon at the time of concluding the labor contract, rendering performance of the labor contract impossible.
When carrying out layoffs, an employer shall give priority to retaining the following personnel:
(1) Employees who have concluded fixed-term labor contracts of relatively long terms with the employer;
(2) Employees who have concluded open-ended labor contracts with the employer;
(3) Employees whose families have no other employed persons and who have elderly persons or minors to support.
Where an employer re-recruits personnel within six months after carrying out layoffs in accordance with the provisions of the first paragraph of this Article, it shall notify the laid-off personnel and give priority to re-recruiting them under equal conditions.
Article 42 An employer may not terminate a labor contract in accordance with Articles 40 and 41 of this Law if the employee:
(1) Is engaged in work involving occupational disease hazards and has not undergone a pre-job-leaving occupational health examination, or is a suspected occupational disease patient under diagnosis or medical observation;
(2) Has contracted an occupational disease or suffered a work-related injury with confirmed total or partial loss of labor capacity while working for the employer;
(3) Is suffering from an illness or non-work-related injury within the statutory medical treatment period;
(4) Is a female employee during pregnancy, maternity leave or breastfeeding period;
(5) Has worked continuously for fifteen full years with the employer and less than five years remain before the statutory retirement age;
(6) Falls under other circumstances specified by laws and administrative regulations.
Article 43 Where an employer unilaterally terminates a labor contract, it shall notify the trade union of the reasons in advance. Where an employer contravenes laws, administrative regulations or labor contract agreements, the trade union shall have the right to request the employer to make rectifications. The employer shall study the opinions of the trade union and notify the trade union of the handling result in writing.
Article 44 A labor contract shall expire if:
(1) The term of the labor contract expires;
(2) The employee begins to enjoy basic old-age insurance benefits in accordance with the law;
(3) The employee passes away, or is declared dead or missing by a people’s court;
(4) The employer is declared bankrupt in accordance with the law;
(5) The employer’s business license is revoked, an order for closure or revocation is issued, or the employer decides to dissolve itself in advance;
(6) Other circumstances specified by laws and administrative regulations occur.
Article 45 Where the term of a labor contract expires and any of the circumstances specified in Article 42 of this Law applies, the labor contract shall be extended until the relevant circumstance ceases to exist. However, the expiry of labor contracts of employees with confirmed total or partial loss of labor capacity as specified in Item (2) of Article 42 shall be handled in accordance with relevant national provisions on work-related injury insurance.
Article 46 An employer shall pay economic compensation to an employee if:
(1) The employee terminates the labor contract in accordance with Article 38 of this Law;
(2) The employer proposes to terminate the labor contract with the employee and the labor contract is terminated upon consensus through consultation in accordance with Article 36 of this Law;
(3) The employer terminates the labor contract in accordance with Article 40 of this Law;
(4) The employer carries out layoffs and terminates labor contracts in accordance with Paragraph 1 of Article 41 of this Law;
(5) The fixed-term labor contract expires in accordance with Item (1) of Article 44 of this Law, except where the employer offers to renew the contract on the same or improved agreed terms and the employee refuses renewal;
(6) The labor contract expires in accordance with Items (4) and (5) of Article 44 of this Law;
(7) Other circumstances specified by laws and administrative regulations occur.
Article 47 Economic compensation shall be paid to an employee based on the number of years the employee has worked for the employer, at the rate of one month’s wages for each full year of service. Where the employee has worked more than six months but less than one year, one year shall be counted; where the employee has worked less than six months, half a month’s wages shall be paid as economic compensation.
Where an employee’s monthly wages are three times higher than the average monthly wages of employees in the previous year published by the people’s government of the municipality directly under the Central Government or city divided into districts where the employer is located, economic compensation shall be paid at three times the local average monthly wages of employees, and the maximum number of years for calculating economic compensation shall not exceed twelve years.
The term “monthly wages” as used in this Article refers to the average wages of the employee for the twelve months prior to the termination or expiry of the labor contract.
Article 48 Where an employer terminates or expires a labor contract in contravention of this Law and the employee requests continued performance of the labor contract, the employer shall continue to perform it; if the employee does not request continued performance or the labor contract can no longer be performed, the employer shall pay compensation damages in accordance with Article 87 of this Law.
Article 87 Where an employer terminates or expires a labor contract in contravention of this Law, it shall pay compensation damages to the employee at twice the economic compensation standard specified in Article 47 of this Law.
Article 49 The State shall adopt measures to establish and improve a system for the cross-regional transfer and continuation of employees’ social insurance relations.
Article 50 Upon the termination or expiry of a labor contract, an employer shall issue a certificate of termination or expiry of the labor contract, and complete the transfer procedures for the employee’s personal file and social insurance relations within fifteen days.
The employee shall complete handover of work in accordance with the agreement of both parties. Where the employer is required to pay economic compensation to the employee in accordance with relevant provisions of this Law, such compensation shall be paid upon completion of work handover.
Employers shall retain the texts of labor contracts that have been terminated or expired for at least two years for inspection purposes.
Chapter V Special Provisions
Section 1 Collective Contracts
This section has been omitted as it is irrelevant to foreign employees.
Section 2 Labor Dispatch
This section has been omitted as it is irrelevant to foreign employees.
Section 3 Part-time Employment
This section has been omitted as it is irrelevant to most foreign employees.
Chapter VI Supervision and Inspection
This section has been omitted as it is irrelevant to employees.
Chapter VII Legal Liabilities
Article 80 Where an employer’s rules and regulations directly concerning employees’ vital interests contravene the provisions of laws and administrative regulations, the labor administrative department shall order rectification and issue a warning; where damage is caused to employees, the employer shall bear compensation liability.
Article 81 Where an employer fails to include the mandatory clauses of labor contracts specified in this Law in the labor contract texts it provides, or fails to deliver a copy of the labor contract text to the employee, the labor administrative department shall order rectification; where damage is caused to employees, the employer shall bear compensation liability.
Article 82 Where an employer fails to conclude a written labor contract with an employee for more than one month but less than one year from the date of employment, it shall pay double wages to the employee every month.
Where an employer contravenes this Law by failing to conclude an open-ended labor contract with an employee, it shall pay double wages to the employee every month starting from the date on which an open-ended labor contract ought to have been concluded.
Article 83 Where an employer contravenes this Law by agreeing on a probation period with an employee, the labor administrative department shall order rectification; if the illegally agreed probation period has been performed, the employer shall pay compensation damages to the employee calculated based on the monthly wages of the employee upon completion of the probation period, for the portion of the probation period performed in excess of the statutory limit.
Article 84 Where an employer contravenes this Law by withholding employees’ resident identity cards or other certificates, the labor administrative department shall order the employer to return such certificates to the employees within a time limit and impose penalties in accordance with relevant laws.
Where an employer contravenes this Law by collecting property from employees under the pretext of guarantees or any other pretext, the labor administrative department shall order the employer to return such property to the employees within a time limit and impose a fine of not less than RMB 500 but not more than RMB 2,000 per person; where damage is caused to employees, the employer shall bear compensation liability.
Where an employer withholds an employee’s personal file or other articles upon the employee’s lawful termination or expiry of the labor contract, penalties shall be imposed in accordance with the provisions of the preceding paragraph.
Article 85 Where an employer falls under any of the following circumstances, the labor administrative department shall order it to pay labor remuneration, overtime wages or economic compensation within a time limit; if the labor remuneration is lower than the local minimum wage standard, the employer shall pay the difference; if payment is overdue, the labor administrative department shall order the employer to pay additional compensation damages ranging from fifty percent to one hundred percent of the payable amount:
(1) Failure to pay labor remuneration to employees on time and in full in accordance with labor contract agreements or national provisions;
(2) Payment of employee wages below the local minimum wage standard;
(3) Arrangement of overtime work without payment of overtime wages;
(4) Failure to pay economic compensation to employees in accordance with this Law upon termination or expiry of labor contracts.
Article 86 Where a labor contract is confirmed invalid in accordance with Article 26 of this Law and damage is caused to the other party, the party at fault shall bear compensation liability.
Article 87 Where an employer terminates or expires a labor contract in contravention of this Law, it shall pay compensation damages to the employee at twice the economic compensation standard specified in Article 47 of this Law.
Article 88 Where an employer falls under any of the following circumstances, administrative penalties shall be imposed in accordance with the law; if a crime is constituted, criminal liability shall be pursued in accordance with the law; where damage is caused to employees, the employer shall bear compensation liability:
(1) Compelling employees to work by means of violence, threat or illegal restriction of personal freedom;
(2) Issuing illegal instructions or forcing risky operations that endanger employees’ personal safety;
(3) Insulting, imposing corporal punishment on, beating, illegally searching or detaining employees;
(4) Extremely poor working conditions and severe environmental pollution causing substantial harm to employees’ physical and mental health.
Article 89 Where an employer contravenes this Law by failing to issue a written certificate of termination or expiry of the labor contract to an employee, the labor administrative department shall order rectification; where damage is caused to employees, the employer shall bear compensation liability.
Article 90 Where an employee terminates a labor contract in contravention of this Law, or breaches confidentiality obligations or non-compete agreements agreed in the labor contract, causing losses to the employer, the employee shall bear compensation liability.
Article 91 Where an employer recruits an employee whose labor contract with another employer has not yet been terminated or expired, causing losses to the other employer, it shall bear joint and several compensation liability.
Article 92 Where a labor dispatch entity contravenes the provisions of this Law, the labor administrative department and other competent departments shall order rectification; if the circumstances are serious, a fine of not less than RMB 1,000 but not more than RMB 5,000 per person shall be imposed, and the administrative department for industry and commerce shall revoke its business license; where damage is caused to dispatched employees, the labor dispatch entity and the accepting employer shall bear joint and several compensation liability.
Article 93 Where an employer without lawful business qualifications commits illegal or criminal acts, legal liability shall be pursued in accordance with the law; where employees have performed labor services, such entity or its investors shall pay labor remuneration, economic compensation and compensation damages to the employees in accordance with relevant provisions of this Law; where damage is caused to employees, compensation liability shall be borne.
Article 94 Where a private contractor recruits employees in contravention of this Law and causes damage to employees, the contracting organization and the private contractor shall bear joint and several compensation liability.
Article 95 Where labor administrative departments, other competent departments and their staff members neglect their duties, fail to perform statutory functions or exercise their powers illegally, causing damage to employees or employers, such departments and staff shall bear compensation liability; disciplinary sanctions shall be imposed in accordance with the law on the persons-in-charge with direct responsibility and other personnel with direct liability; if a crime is constituted, criminal liability shall be pursued in accordance with the law.
Chapter VIII Supplementary Provisions
This section has been omitted as it is irrelevant to foreign employees.
Note: This article is for general informational purposes only and does not constitute legal advice. For specific matters, please consult your local notary office.
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