the dilemmas for expat employees in China

Recent two labor dispute cases in Shanghai I came to learn have further demonstrated the dilemmas that are faced by foreigner employees in China, which do not seem to be solved any time soon. Bear in mind, in this post, I discuss the dilemma for expat employees whose monthly salary is well above three times the average monthly salary (RMB 3896 in 2011) in Shanghai.

Case 1: a lawyer from another law firm in Shanghai after reading my article (you can find the English version of the article here) called me saying her client was just caught in the same situation where during the labor arbitration proceeding, the expat employee’s work permit was revoked by Shanghai Labor Department without giving any prior notice to the client. Now the lawyer was not so sure about her original litigation strategy under which she helped her client to reinstate the labor relationship between her client and the employer.

I am indeed surprised and disappointed that Shanghai Labor Department has not stopped their malpractice even when there has been a clear decided judgement ruling that their cancellation of expat’s work permits unilaterally without verifying whether the labor contract has been terminated legally is illegal.

Dilemma 1: Expat employees when mistreated by employers may confront their employers by taking them to arbitration or court. But given the illegal practice by Shanghai Labor Department, expat employees may well find themselves trapped in the legal proceeding when their work permits are revoked by Shanghai Labor Department.

Case 2: A Hong Konger was fired by his company in Shanghai after working in the company for only six months. His monthly salary is well above RMB 50,000. The company offered no economic compensation, much less damages (i.e. damages payable by employers to employees that are illegally fired). He sued the company for reinstatement in a bid to have a settlement with company that may result in payment of bigger amount of damages. He won an arbitration award, and failed in court which dismissed his claim for reinstatement on the ground that the company had already hired a new employee for that position, and at the same time ordered the company to pay an amount of damages of RMB 11,688, which seemed ridiculous to the employee.

I still remembered not long ago, a German expat came to me for advice on his situation where his boss fired him but offered him legal compensation based on his actual salary, he felt that he was wrongly fired and wanted to fight for more benefits. But sadly, I had to tell them if he fighted in arbitration or court, he would get less.

Dilemma 2: when an expat employee is fired by his or her employer but is offered with reasonable compensation based on his or her actual salary, even though he or she is not satisfied and feel wronged, he may end up with less compensation from their employers and more loss because of attorney fee and time. On the other hand, the employer will in the end benefit from their illegal termination since he ends up paying less.

Solutions for the Dilemmas

Well, maybe, I should not call it “solutions” but rather “pratical tips” to counter or hedge your risks of working in China. Such dilemmas are caused by poor legislation and misreading of existing rules.

For Dilemma 1

Once you decide to go to arbitration or court to solve the dispute with your employer, the only possible action to stop Shanghai Labor Department from cancelling your work permit is to inform in writing the department immediately or even before you file your case. The earlier, the better. You need to tell your department that your employer has illegally terminate your employment contract and you are going to sue the employer soon, and request the department not to revoke your work permit when the employer applies to have the work permit cancelled.

I have not tried this before, but I believe with this proper notice served on the department, they will be more careful and cautious in deciding to cancel your work permit upon your employer’s unilateral application. You may also cite the court decision of my successful case in which court declared illegal the cancellation of work permit by the department upon employer’s one-sided application.

For Dilemma 2

There is really no easy, if at all, solution for this because you cannot fight against the law.

Expat employees when find their labor contract to be terminated by employers shall try to settle disputes peacefully and get better compensation.

Probably the best thing an expat can do is to bargain for and stipulate in their labor contract some clauses addressing the dilemma. For example, if the employer terminates the labor contract without due cause, the employer shall pay certain amount of liquidated damages which is calculated based on the expat actual salary. Of course, I understand it is not gonna be anything easy for an employee to ask for such clauses or commitment from employers esp in the current world of financial crisis. But give it a try.

Another Thought on Reinstatement

Ever since the adoption of China Labor Contract Law, lawyers have been keen to advise clients to sue for reinstatement of their labor contract in arbitration and court. This has been a very successful strategy for some time from the enactment of Labor Contract Law when employers are not clear about court’s attitude on reinstatement.

Over time, courts have showed reluctance to support reinstatement which is often manipulated by employees only as a way of bargaining for higher compensation or damages, and in practice very often employers have already employed new person to fill the position, leaving it awkward for courts to support reinstatement claim.

Recent development has proved that it may not be advisable for expat employees to sue for reinstatement the long proceedings of which only prolong the anxiety and anguish on the employee who in the end get less compensation, and lose more money on attorney fee as well as, maybe more importantly, other job opportunities.

Jason Tian

Jason Tian, senior partner, specializes in foreign-related legal services ranging from foreign investment in China, banking and capital, real estate, M&A, corporate, international trade, estate planning, inheritance and divorce at his blog: https://www.sinoblawg.com.

23 Comments

  1. Bill-e-Bob   •  

    Hello Jason,
    I’m an expat currently in the process of being terminated, (I’ve heard from several managers about this, but haven’t had anything directly related to me in writing.) The company itself has violated roughly 7 provisions related to the contract. My concern is that they will not pay my final pay / and severance, as well as provide me with the proper release letter, so that I may transfer to another position within my field.
    If this happens, how exactly should I respond? The reasons stated for termination are simply personal, I’ve received no feedback that wasn’t positive in the past 6 months of employment, and my customers have been generally quite happy with me. What should I do?

  2. merpol   •  

    Hi Mr. Jason Tian, im a foreign worker connected in a landscape design company here in shenzhen for 14 years and 4 months. Last week Aug 31, 2016 our administrator department informed me that the company decided to close down by the end of this month (September) due to the economic slow down. My Boss is making an arrangement for my employment to his friend’s company which is also in the same field of practice. I noticed that my boss is so eager to help me get this job and even trying to intervene with the negotiation of the salary. I was already interviewed and made some negotiations regarding the salary, benefits, etc with the new company and about to sign the contract today. i am still skeptical if i will take this job because im worried that if i will take this offer, my boss will be free from paying me the severance pay (severance pay=monthly salary x number of years of service) .My question is: if i will take this job (that is being arranged by my boss), am i still entitled to get a severance pay from my boss? Please advise ASAP.

    • Jason Tian   •     Author

      It is simple. if your new employer does not agree to carry on your employment years with your old employer, then you will have to ask the old employer to pay the severance pay. Otherwise, you will lose entitlement to the severance pay that should be otherwise paid.

  3. Meaghan   •  

    My employer advised me that my contract wouldn’t be renewed after the notice deadline. Is this a viable dispute? Can I contact you to discuss further?

  4. Karl   •  

    Dear Jason,

    I’m expat, having been working in Shanghai for 13 years, and have now unexpected termination of my labor contract due to the reasons which I would not like to post here. Can I write to your personal email indicating above for detailed description of the situation and getting your advise over this issue?

    Thanx!

    • Jason Tian   •     Author

      Hi Karl, sure send me emails. let me see whether I can help you out.

      • Karl   •  

        Thanx! Sent to both addresses

  5. Tonny Svensson   •  

    Good day, i work in Shanghai for a company whit a home made contract. Now after 8 month the trading company need me to leave the company and with out any compencation, and no reason to fire me. Please what shall I do, what can I do.
    The company is English and trading co.ltd.
    I am Swedish.

    • Jason Tian   •     Author

      Hi Tonny, I don’t think you want to talk about this matter too much on this blog. Please contact me via email or phone call for a detailed discussion.

  6. M.McKeogh   •  

    Hi Jason,

    I have just completed my two year contract at a school here in Shanghai. Part of our contract outlined half pay for the summer break of 2012 for July and August of this year (actually not a bonus at all given that we just got half pay last Summer), would be paid based upon performance evaluation. Naturally, and not knowing to the contrary, we were all expecting this full pay.
    Surprise, surprise in my past pay which was to include the ‘bonus’, I was minus 30% of what I had been expecting to get. I have had no feedback at all in the past two years to the effect that I am a D teacher,in fact I did not even know of any reviews or appraisals being done. I feel very wronged by this outcome as do the other 5 also affected. We are all leaving to move on but have fulfilled our contracts in every, which way possible. None of the staff who are renewing their contracts have been affected nor do their new contracts have this half pay one year and two month bonus system written in. We feel what has gone on is very arbitrary, murky and most of all, dishonest.
    Is it worthwhile challenging this? Talking and discussing as you may imagine does not resolve anything because within management no one wants to take ownership of the decision and its outcomes.We have had two great years here teaching in China and at our school,but have to move on because of our age. It seems such a shame to be finishing on this note.

    Many thanks,I would appreciate any advice you may have.

    Marcus

  7. Leon   •  

    Dear Jason,

    i m an expat and since 31st of March the German company i was working for shut down operations (i think legally still exists). I got my salaries till March, but what is missing is 2 months of compensation(was workign almost for 2 years). What i have in my hands is a dissolution agreement with the ex general manager of the shanghai office and the chinese company who does the salary payments. Few days ago all the chinese workers got the compensation except from the expats. Is it something that the company is not obligated to do? Do i have any legal options to be protected? Thanks
    Best Regards
    Leon

    • Jason Tian   •     Author

      Dear Leon, you are entitled to compensation as well. You can sue to get what you are supposed to get under the China labor contract law. If there are a few expats facing the same problem, you can come over to our office and see how we can help you then. Good luck.

  8. N. Golden Thrower   •  

    Hello Mr.Tian
    I have a one-year contract (for my school) that will expire 30 Jan 2013. Since April, I have been asked by my employer to travel to another school by train (until they got another instructor;8 to 10 hours round trip)to work for a few days and return to my city and work at my school.Summer – my company wanted me to travel to the school again which I declined. New school semester – my company email me and said that my school will not have classes for me in September and October, but would I consider traveling to the other school. I declined traveling to the other school.

    Note: I do not have a contract with the other school and I do not know why I have been asked to work there. Also, I believe that my employer reneged on my one-contract by not having classes. Can I ask my employer to pay me out of the contract?

    • Jason Tian   •     Author

      Dear Golden Thrower, basically, place of work is a term in the labor contract and without your consent, employer cannot unilaterally change your place of work. Meanwhile, the school cannot just get you off work for two months without paying salary. You may ask your shchool to pay your salary. In any case, it is better to solve the issue peacefully.

      • N. Golden Thrower   •  

        Thank you kindly for your response.

  9. MK   •  

    A company has asked more work from me with an expired contract, and haven’t given a payment date for the work already provided. What are my rights? They changed the items from the original agreement, now expired and asked me to produce the work within a tight schedule without a set payment date. I am an expat. Your comments are most appreciated.

    • Jason Tian   •     Author

      Dear MK, for any unpaid salary, it is easy to start arbitration to get your money back. For any work after expiry of your contract, you may say no.

  10. Gloria   •  

    Hi Jason,

    Just want to clarify, my friend – an expat, working in Shanghai. He received a termination notice from his company today. Since the contract they signed with 90-days notice period. So, his company ask him to work till 30 June 2012. Then ask him to take annual leave from July onward. And the employment will end on July 15.

    He wanted to know his entitlement for the severance payment ? Does his entitled for payment in lieu of notice? should it be 90 days ..or..? Can he refused to take the annual leave but have leave pay instead?

    Thanks for your help. I’ll forward your blog to my friend. thanks.

    • Jason Tian   •     Author

      Hi Gloria, I understand from your message that in the contract signed by your friend with his company, the company has the right to terminate the contract upon serving a three-month prior notice on him. In this case, why will the employment end on July 15?

      When we talk about annual leave, it shall be noted that employers should pay the normal salary for the days of annual leave. Otherwise, the company shall have no right to ask the employee to take long annual leave without paying him or her.

      I think your friend should negotiate with his company for continuing working there for 90 days or getting paid for 90 days instead. Please ask him to be careful of his work permit being cancelled.

Leave a Reply

Your email address will not be published. Required fields are marked *