mARCH 2012 64 Legal Focus www.lawyer-monthly.com

Employment issues in M&A China

China’s new Social Insurance Law came into effect on July 1 2011. The new legislation is aimed at protecting the right of foreign workers in China, allowing them to benefit from the social security system. To find out more about the new law and other issues that surround employment law in China currently, Lawyer Monthly speaks to Caroline Berube, Managing Partner of leading law firm, HJM Asia Law Co LLC

Q

Can you briefly introduce yourself and your firm?

By understanding the Asian legal systems and the Western business mindset, HJM Asia Law Co LLC has developed into a leading boutique firm for corporate, IP and related commercial matters for foreign companies doing business in China. While the firm has the capacity to assist clients of all sizes, HJM is particularly adept at advising small to medium size enterprises. HJM offers a full range of corporate related legal services as well as a full spectrum of IP and technology services.

I personally specialize in Chinese

corporate law and IP practice and am especially well regarded for practical advice on corporate legal structure in Asian countries, based on my sound understanding and experience of the challenges and advantages of most Asian jurisdictions.

Q

Please give me an overview of employment law in your jurisdiction currently.

In China, employment law is governed by the Labour Contract Law of the

Peoples’ Republic of China, 2008, as well as various other statutory provisions and regulations. All lawfully registered entities and lawful employees of such entities are subject to these laws. This also includes foreign entities such as Wholly Owned Foreign Enterprises (WOFEs) and foreign employees. The labour laws tend to be in favor of the employee and cover the main areas such as probation, severance, lay-offs, non-compete and collective bargaining. Dismissal of an employee is only permitted under good cause and under Chinese laws. A good cause is when an employee commits an act in violation of a written regulation. Employee handbooks are therefore an important and useful tool to set out the company’s rules and regulations. Saved for summary dismissals, an employee is entitled to severance pay when his employment is terminated.

Employers are required to enter into a

written contract with employees within thirty days after the employee has commenced work. It is important to note that an employee becomes an employee on the first day he/she commences work and not the date the contract is signed. If no written contract is entered into between the parties, the employee may

claim double his/her salary for the period of time worked without a contract.

Q

what are the main issues surrounding business immigration that you are facing at the moment?

If a company intends on hiring foreign employees, it is first required to obtain approval from the competent trade authorities. Such approval is also called the People's Republic of China Employment License for Foreigners (referred to as the "Employment License"). The position to be filled by the foreign employee must be a position of ‘special need’, i.e. the candidate must have the requisite and specific skills to perform the requirements of the position, and the nature of this position must be of such a nature that it cannot be performed by a local candidate.

The issuing of a work permit can be a

rather time consuming and tedious process. In order to be granted a work permit, the employee must undergo a medical examination and obtain a report written on the prescribed form. The employer must apply for a foreign employment licence on the new employee's behalf and the employee