Navigating the most confusing issues in Chinese Labor Law: Q&A

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Navigating the most confusing issues in Chinese Labor Law: Q&A

Regarding overtime pay legal cases, is the statute of limitations two years? If an employee continues to take sick leave after their medical leave is over, can the employer refuse to pay them? For Women’s Day and Chinese Youth Day, if employees do not take time off, does the employer need to pay overtime pay? Under what circumstances can the employer and employee sign a labor contract? In service relations, can employers assess employees according to company regulations?

All of the above questions are easily misunderstood. This article will clarify each of these questions one by one.

Q: Regarding overtime pay legal cases, is the statute of limitations two years?

A: NO! According to Article 27 of the ” Law of the People’s Republic of China on Labor-dispute Mediation and Arbitration “(中华人民共和国劳动争议调解仲裁法),

The limitation period for application for arbitration of a labor dispute is one year, which shall be calculated from the date a party comes to know or is expected to know the infringement of its rights.

……Where, during the existence of the labor relations, a dispute arises over the default in payment of labor remuneration, the application for arbitration by the worker concerned shall not be restricted by the limitation period for arbitration prescribed in the first paragraph of this Article. However, where the labor relations are terminated, such application for arbitration shall be submitted within one year from the date the labor relations are terminated.

At the same time, Article 6 of the ” Payment of Wages Tentative Provisions “(工资支付暂行规定) stipulates that the employer must record in writing the amount, time, recipient’s name, and signature of the payment of wages to the workers and keep them for more than two years for reference.

According to the above provisions, there is no statute of limitations for overtime pay claims. Workers can claim overtime pay from the date of their employment. However, the employer only have to provide attendance and wage records for the past two years as evidence.

Q: If an employee continues to take sick leave and does not return to work after the medical period has expired, can the employer not pay their wages?

A: NO! Article 40 of the “Labor Contract Law of the People’s Republic of China” (中华人民共和国劳动合同法)stipulates that

 In one of the following circumstances, an employing unit may revoke the labor contract, if it notifies in writing the worker of its intention 30 days in advance or after paying him an extra one month’s salary:(1) The worker is unable to take up his original work or any other work arranged by the employing unit on the expiration of the specified period of medical treatment for illness or for injury incurred when not at work……

Therefore, if an employee still needs to take sick leave after their medical leave has expired, the employer must either terminate the labor contract with the employee according to Article 40 of the Labor Contract Law or continue to pay sick leave wages. There is no other option.

Q: Is the medical period capped at 24 months for employees with cancer or other terminal illnesses or mental illnesses (in Shanghai)?

A: No! According to the “Provisions on the Standards for the Medical Period of Workers in Shanghai who are Sick or Non-Work-Related Injured During the Term of the Labor Contract”(关于本市劳动者在履行劳动合同期间患病或者非因工负伤的医疗期标准的规定) issued by the Shanghai Municipal People’s Government,

if an employee is assessed by the labor capacity appraisal committee as having completely lost their labor capacity but does not meet the conditions for retirement or resignation, the medical period should be extended. The extended medical period should be specifically agreed upon between the employer and the employee, but the total of the extended medical period and the medical period specified in the previous article shall not be less than 24 months.

In the case of complete loss of labor capacity of the employee, the medical period is a minimum of 24 months, and the specific extension time is agreed upon by the employer and the employee. In practice, employers usually adhere to the 24-month limit and are unlikely to extend it further.

Q: During International Women’s Day or Chinese Youth Day, if the company doesn’t give a holiday, do they need to pay overtime?

A:  Not necessary!!!

Q: Can an employee claim 300% of their unused paid annual leave salary if their employer doesn’t arrange for them to take the leave?

A: No! Article 10 of the “Implementation Measures for Paid Annual Leave for Employees of Enterprises “(企业职工带薪年休假实施办法) stipulates that:

Where an employer does not give annual leave to an employee or gives him days of annual leave less than the days of annual leave due upon the consent of the employee, it shall pay the employee 300% of his daily wage income for each day of the annual leave due and not taken in the year, which includes the wage income to be paid by the employer to the employee per day in normal working days.

If the employer has not arranged annual leave but the employee has been working and has received their regular salary, they can only claim 200% of their unused annual leave salary, not 300%.

Q: Under what circumstances do both employers and employees need to sign a service agreement? If the relationship between the two parties is a service relationship, can the employer require the employee to follow the rules and regulations and assess them accordingly?

A: In practice, there are mainly two types of service relationships that a company may encounter:

  • When the employee is no longer eligible as a labor relationship subject, such as retirees who continue to work after retirement, both employers and employees can sign a service agreement. In this case, the two parties have a management and managed labor relationship, and the employer can still require the employee to follow the rules and regulations and assess their work performance.
  • If the relationship between the two parties is a typical service relationship, such as when the employer hires a part-time consultant, the employer shall not manage him, including attendance management and requiring them to follow the rules and regulations. If the assessment is necessary, the assessment is just based on the part-time consultant’s work results, rather than their work attitudes such as attendance and compliance with rules and regulations.
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