12 May, 2016
The Sichuan Province High People’s Court issued a “Reply to Several Issues Concerning Handling of Labor Dispute Cases” (“Reply”), on January 15, 2016, for the purpose of providing guidance to the lower courts in Sichuan province on unresolved issues that came up in past labor dispute cases. It is likely that the Reply will influence the way in which local judges handle employment dispute cases in Sichuan. We have listed a number of highlights from the Reply below:
Severance calculation formula: The Reply defines the salary base for calculating statutory severance and the double wage penalty for failure to sign a written employment contract as regular salary received for the past 12 months. The Reply expressly excludes overtime pay and other irregular pay such as bonuses, allowances or benefits from the salary base.
Working hours: The Reply may make it slightly easier for companies to avoid normal overtime pay requirements. Usually, to avoid the normal overtime pay rules under the standard working hours system, a company must obtain approval from the local labor bureau for an alternative working hours system to apply to certain types of job positions. The Reply states that if a job position is not covered by any labor bureau approval, but the nature of the work appears to have the characteristics of the flexible working hours system or comprehensive working hours system after looking at multiple factors, the courts may conduct an overall analysis to determine whether overtime compensation is payable.
Social insurance: The Reply confirms that any agreement to include the employer-portion of social insurance payments in an employee’s salary or any employee acknowledgement to waive social insurance payments will be deemed void. Therefore, any arrangements that are made to reduce or avoid social insurance contributions will not satisfy the employer’s obligations to make full social insurance contributions at the statutory rate.
Double wages claims: The Reply puts some limits on when double wage claims should be supported for failure to sign a written contract. Some of the more important clarifications in this respect include the following: (i) if any written documents such as job applicant registration form, offer letter or employee registration form contains employment terms such as a contract term and labor remuneration and the company has honoured such terms of employment, then the parties will be deemed to have entered into a written employment contract; (ii) double wage claims will be rejected if made by senior managers or Human Resources managers whose job duties cover management over employment contract signing; and (iii) retrospectively dating the commencement date of an employment contract to an earlier employment period is acceptable and can release an employer from liability for double wage penalties.
For further information, please contact:
Jonathan Isaacs, Baker & McKenzie
jonathan.isaacs@bakermckenzie.com
