China Update

Q&A on Labor Issues which may arise during the New Corona Virus epidemic prevention and control period.

1. Are employees entitled to salary during the extension of the Spring Festival vacation (from January 31, 2020 to February 2, 2020)? Is it required to pay overtime salary to employees who worked during this period?
The extended period is regarded as an additional special vacation and not qualified as national statutory holiday. According to the notice published by Ministry of Human Resources and Security, the extended period is deemed "days-off", however, employers may arrange for its employees to work, provided that employers arrange for its employees to take deferred days-off in lieu or pays overtime salaries at the rate of 200% of the normal daily salaries.

2. Shall the employer pay employee salaries during the period of postponement of resumption of work (from February 3, 2020 to February 9, 2020), if employees were not able to work?
To combat the spread of Covid-19, local governments ordered companies to postpone the date of resumption of work. In Shanghai, the period of postponement of resumption of work (from February 3, 2020 to February 9, 2020) is regarded as days-off, during which employers are required to pay full amount of salaries to employees even though they did not work. In other regions, this period of postponement of resumption of work is not qualified as days-off. However, some local governments as Wuxi stipulate that employees should be paid normal salaries during this period, even if they were not able to work.

3. Is it permissible that companies arrange employees to work from home during the period of postponement of resumption of work (from February 3, 2020 to February 9, 2020)? Can employees require overtime payment?
To reduce the risk of infection in the public, local governments encourage companies to arrange for employees to work at home. Enterprises are entitled to arrange its employees, during this period, to work at home according to their needs.
As mentioned in Question 2, the period from February 3, 2020 to February 9, 2020 is regarded as days-off in Shanghai. Hence, employees in Shanghai who were arranged to work from home shall either take deferred day off in lieu or be paid overtime payment (200% of normal daily salaries) during this period. By contrast, employers in other regions such as Jiangsu Province shall pay regular salaries to employees who worked from home during this period.

4. How to deal with the annual leave which should be used during the period of postponement of resumption of work (from February 3, 2020 to February 9, 2020) where the employees have already made an application before the Spring Festival?
In Shanghai, employees can withdraw their annual leave requests. In case of absence of local regulations on the nature of the work postponement period, it remains controversy. We recommend that enterprises allow their employees to withdraw their applications.

5. In event that an employee is placed in quarantine, is the employer obligated to pay salary during their quarantine period? Can the employer terminate the labor contract with the employee?
Pursuant to the Notice published by the Ministry of Human Resources and Social Security of the PRC, employers shall pay full salaries to employees who (1) have been confirmed to have contracted COVID-19, or (2) are suspected of having a COVID-19 infection, or (3) have been in close contact with those confirmed or suspicious cases, or (4) have to be absent from work in order to receive medical treatment, (5) are under medical observation, (6) are subject to quarantine or other emergency measures taken by the government. Employers may not terminate the labor contracts with employees who are under medical observation, treatment or quarantine according to Article 40 and 41 of the Labor Contract Law, unless for serious misconduct of employees. If the labor contract automatically expires while the respective employee is medical observation, treatment or quarantine, the labor contract shall be automatically extended until period ends.

6. How to pay salary to employees who are unable to return to work due to the epidemic?
Except for the circumstances mentioned in Question No. 5, if the employee cannot resume work as a result of the epidemic, the employer may arrange for the employee to work from home or take annul leave after consultation with employees. For employees who are unable to resume work after their annual leaves, enterprises shall (i) pay salary as specified in the employment contract during the first salary pay cycle, and (ii) for the period beyond the first salary pay cycle, pay living expense according to local rules instead of regular salary. In Shanghai, living expense is no less than the local minimum wage, while in Jiangsu province the amount hereof shall be 80 percent of the local minimum wage.

7. What should company be doing, if an employee is diagnosed of having COVID-19 after the employee resumes work?
The employer bears the obligations to promptly report infectious cases or suspected infectious cases to local disease prevention and control authority and carry out strict disinfection measures in workspace under the direction of the disease prevention and control authority or in accordance with the authority's sanitary requirements. The government may require the employer to suspend operations temporarily, in case of widespread transmission within the company. Infected employees under medical treatment may be paid sick leave salaries during their medical treatment periods.

8. Is an employer obligated to cover medical expenses for employees who contracted COVID-19?
With respect to medical expenses for persons who are infected with COVID-19, the social insurance fund will cover part of medical expenses, the remaining part shall be paid by the government finance. Consequently, the employer is not required to pay for medical expenses.

9. Can company require employees to isolate at home?
Under the Infectious Diseases Prevention Law and its implementing measures, a company is obliged to have its employees to stay at home for self-quarantine for 14 days in accordance with the local rules, if, for example, the employees have traveled back from areas deemed hot-zones or have been exposed to someone who shows symptoms of COVID-19 infection.

10. What measures may a company implement, if the corona virus outbreak causes difficulty in business operations of the company?

Company may undertake the following measures in order to avoid the worst-case scenario of mass layoffs:

1) Consult with employees to adjust salary, work and rest shifts, shorten working hours and so on. According to relevant comments of the Ministry of Human Resources and Social Security, the company may consult with the labor union or representative of employees for postponing the payment of salary, if the company cannot afford the salaries temporarily.

2) If the company suspends business operations and production as a result of COVID-19, it shall pay regular salaries during the first salary pay cycle. For the period beyond the first pay cycle, for companies in Shanghai, the company may pay a living expense, which is no less than the local minimum wage, instead of regular salaries. Companies in Jiangsu province shall pay the living expense at a rate of 80% of the local minimum salary.

3) Apply with local authorities for subsidy to stabilize jobs or unemployment insurance premium return, and/or delay payment of social insurance contribution.

According to Shanghai Ministry of Human Resources and Social Security, companies with 30 or less employees participating in the unemployment insurance in 2019 are eligible to apply for refund 50% of the total unemployment insurance premiums, if its layoff rate is less than 20%.

Disclaimer: This article has been prepared for general reference purposes only and should not be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. Professional advice appropriate to a specific situation should always be sought.

Contact Person:
Dr. Bernhard Heringhaus, Osnabrueck
Raymond Kok, Shanghai