CHINA: An Introduction to Employment (PRC Firms)

Labour and Employment in China in 2024: Observations and a Forecast 

2024年中国劳动用工要点观察及展望 

Amid the economic downturn exacerbated by COVID-19 and unfavourable international conditions, the contradictions between employees and employers in China's industrial upgrading and transformation have become increasingly prominent. Moreover, labour and employment issues are no longer confined to traditional labour law domains but are also increasingly intertwined with areas such as corporate law, securities law, civil law, intellectual property law, and criminal law. This article reviews several important new policies and practices in China labour law and related legal fields in recent years, aiming to provide guidance for labour and employment practices in 2024.

在受疫情和国际环境不利影响的经济下行周期内，中国产业升级和转型过程中的劳资矛盾日趋凸显，而且出现的劳动用工问题不再局限于传统相对单一的劳动法领域，也越来越多地与公司法、证券法、民法、知识产权法、刑法等领域深度交叉。本文梳理了近年来劳动法及交叉法律领域的几个重要新规政策及实践情况，以期对2024年的劳动用工实务提供指引。

Impact of the Amendment to the Company Law on Human Resource Management

《公司法》修订对人力资源管理的影响 

On December 29, 2023, the Company Law of People's Republic of China (hereinafter referred to as "the New Law") was revised and passed, and to be implemented from July 1, 2024. The impact of the New Law on human resource management mainly includes the following aspects:

2023年12月29日，《中华人民共和国公司法》（以下简称“新法”）被修订通过，自2024年7月1日起施行。新法对人力资源管理的影响主要包括以下几个方面：

1. The New Law further emphasises the protection of employees' legitimate rights and interests, and safeguards the rights of employees to participate in democratic management, which is consistent with the legislative purpose of relevant provisions in labour law. Regarding matters involving the vital interests of employees or even significant adjustments at the company's operational level, companies should pay more attention to and safeguard employees' procedural rights of democratic participation.

新法进一步强调了保护职工合法权益，保障了职工参与民主管理的权利，与劳动法相关规定立法宗旨一致。对于涉及员工切身权益的事项，甚至是公司经营层面的重大调整，公司更应当重视和保障员工民主参与的程序性权利。

2. The New Law improves the fiduciary duties of company directors, supervisors, and senior managers (hereinafter referred to as "management"), which may contribute to the company's companies’ identification and handling of serious disciplinary breaches or dereliction of duty by these employees to a certain extent. It also strengthens the supervisory responsibility of management in maintaining the adequacy of capital, which may provide some favourable guidance or basis for disciplinary actions by companies. However, we understand that the aforementioned two amendments will not significantly break through the judicial review requirements for cases of dismissal due to serious breaches by management. The New Law also clarifies the liability of infringement committed on duty of directors and senior managers, marking a significant breakthrough in the direct accountability of the third party to directors and senior managers. However, the liability of infringement committed on duty of legal representatives should still be borne by the company first and then recovered. Therefore, for employees holding multiple roles or positions within the company, companies should establish more targeted risk control and compliance management mechanisms, including anti-corruption measures, conflict of interest management, and accountability for authority.

新法完善了公司董事、监事及高级管理人员（以下合称“董监高”）的忠实和勤勉义务，可能一定程度上有助于公司对于此类员工严重违纪及严重失职行为的认定和处理；同时还强化了董监高维护资本充实的监督责任，可能为公司的违纪处理提供一些有利导向或依据。但理解前述两项修改整体上不会明显突破司法实践对于董监高违纪解除案件的审查要求。新法还明确了董事、高级管理人员的职务侵权责任，是第三人向董事、高级管理人员直接追责的重大突破，但法定代表人职务侵权责任仍应由公司先承担后再追偿。因此，对于在公司中担任多重身份或职务的员工，公司应当建立更有针对性的风控合规管理机制，包括反腐败、利益冲突、职权问责等。

3. The New Law simplifies the resignation procedures for directors and legal representatives, which can prevent directors from causing damage to the company by engaging in legal acts after resignation, and also helps to avoid corporate governance disruptions caused by the failure to select a new legal representative in time. From a legal perspective. The New Law also grants the shareholders' meeting the right to remove directors without cause, which may play an important role in personnel reshuffles for control of the company, but there is also the risk of abuse.

新法简化了董事和法定代表人的辞任程序，可防止董事辞任后还以法定代表人身份对外从事法律行为给公司造成损害，同时也有助于避免法定代表人无法确立造成公司治理混乱的情况。新法也从法律层面赋予股东会无因解任董事的权利，这可能会在公司控制权争夺的人员洗牌中发挥重要作用，但也存在被滥用的风险。

The Impact of Regulatory Requirements on Payment Withholding and Reclamation on Human Resource Management in Financial Institutions

薪酬止付监管要求对金融机构人力资源管理的影响 

After a period of rapid development, the Chinese financial industry has experienced frequent risks exposed various problems, among which the issue of excessive incentives for employees has attracted high-level attention. Regulatory authorities in China have issued multiple regulations requiring financial institutions to establish sound internal accountability mechanisms and enhance the binding force of payment management, including withholding payment and reclaiming already disbursed bonuses from risk-causing personnel.

中国金融行业在经过前期快速发展后风险频发，暴露出各种问题，其中对从业人员的过度激励问题，引起国家高度关注。中国监管部门发布多项监管规定，要求金融机构建立健全内部问责机制、增强薪酬管理的约束力，对造成风险人员薪酬止付、追索扣回已发放奖金。

These regulatory requirements have been implemented by major financial institutions, and many listed banks such as Industrial and Commercial Bank of China, China Merchants Bank, and Bohai Bank have disclosed the establishment and implementation of systems for reclaiming performance-based bonuses in their 2022 annual reports.

上述监���规定也在各大金融机构予以纷纷落实，工��银行、招商银行、渤海银行等多家上市银行均在2022年度报告中披露了绩效薪酬追索扣回制度的建立和实施情况。

For financial institutions, further implementation of regulatory requirements for withholding and reclaiming payment of performance-based bonuses is imperative in 2024, and it needs to be combined with a compliance system in labour law to make it more effective, including establishing a sound performance payment system, improving assessment systems and criteria, strengthening accountability mechanisms, and standardising the implementation of internal rules and regulations. This not only needs comprehensive and inclusive systems, but also to be specific and clear, making it more operable. Only in this way can the withholding and reclamation of payment systems be implemented in accordance with the law and regulations, and obtain recognition in the courts successfully when disputes arise between employees and employers and are brought to court. It is also the focus and difficulty of this work.

对于金融机构而言，进一步落实薪酬止付、追索扣回的监管要求为2024年的题中之义，而这又需要与劳动法合规体系相结合才能达到应有效果，包括建立健全绩效薪酬制度、完善考核体系及考核标准、严格问责机制、规范规章制度实施等。这不仅需要全面、概括，同时又需要具体明确、注重细节，具有可操作性。如此才有可能让薪酬止付及追索扣回得以依法依规实施，并在员工与企业产生争议诉诸法庭时，获得裁审机构的认可，亦是这项工作的重点与难点。

Greater Emphasis on Compliance Requirements of Labour Law in Equity Incentives

股权激励更应当重视劳动法体系的合规要求 

In addition to traditional payment for labour, employers increasingly provide employees with equity incentives to reward and motivate core employees who continuously create value for the employers. Based on the trend of classifying equity incentive disputes as labour disputes in national judicial practice, in 2024, employers shall pay greater attention to compliance requirements of the labour law system when implementing equity incentives, including but not limited to the following:

企业为奖励和激励关键核心员工长期持续为企业创造价值，在传统劳动报酬之外，越来越多地向员工提供股权权益。而基于国家司法实践将股权激励争议定性为劳动争议的趋势，2024年企业实施股权激励，更应当重视劳动法体系的合规要求，包括但不限于如下：

1. When employee equity incentives are considered as a special form of labour payment, equity incentive plans or schemes will be recolonised as important matters which have a direct bearing on the immediate interests of employees, and shall undergo the democratic and publicised procedures under Article 4 of the Labour Contract Law of the People's Republic of China.

员工股权激励权益作为一种特殊劳动报酬时，股权激励计划或方案则属于直接涉及员工切身利益的重大事项，应当根据《中华人民共和国劳动合同法》第四条履行民主、公示程序。

2. If employee equity incentive plans or schemes violate related law and cause damage to employees, employers shall be liable for compensation in accordance with Article 80 of the Labour Contract Law of the People's Republic of China. For example, provisions in equity incentive plans or schemes that stipulate when an employee voluntarily resigns, the employee’s equity incentive rights granted and unlocked/exercised shall be repurchased free or at a low price. Such provisions may be deemed by judicial authorities as violating labour law provisions, excluding employees' labour rights and interests, and therefore posing a legal risk of invalidity. If employers directly apply such provisions without evaluating the actual situation, they may be liable for compensation for the damages caused to employees.

员工股权激励计划或方案违反法律规定，给员工造成损害的，应当根据《中华人民共和国劳动合同法》第八十条承担赔偿责任。例如股权激励计划或方案规定在员工主动离职时，无偿或低价收回员工已获授并解锁/行权的股权激励权益。此类规定可能被司法机关认定为违反劳动法规定，排除员工劳动权益，存在无效的法律风险，如企业未根据实际情况评估即直接适用，可能要承担给员工造成损害的赔偿责任。

3. Provisions in employee equity incentive plans or schemes regarding the withdrawal due to termination of the employment contract should match the regulatory rules and regulations compliant with the labour law system's compliance requirements, especially provisions regarding employees' dismissal from employers due to serious misconduct or causing serious damage to employers. Otherwise, if the lack of compliance with rules and regulations for labour employment management results in a dismissal being deemed as illegal by judicial authorities, employers may face significant compensation liability for the equity incentive rights to employees.

员工股权激励计划或方案中因员工劳动合同解除而退出的规定应匹配符合劳动法体系合规要求的规章制度，尤其是员工因严重违纪或给企业造成严重损害而被企业解聘而退出的规定。否则，若因缺乏合规的劳动用工管理规章制度致使解聘被司法裁判机关认定为违法解除的，企业可能面临向员工承担股权激励权益的巨额损害赔偿责任。

Response of the Judicial Interpretation II on Labour Dispute (Draft for Comments)

《劳动争议司法解释二》征求意见稿对司法实践的回应 

On December 12, 2023, the Supreme People's Court published the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Labour Dispute Cases (II) (Draft for Comments) (hereinafter referred to as "the Draft"). Some provisions in the Draft, such as the effectiveness of non-competition agreements, liability for breaching non-competition agreements, and liability for not paying social insurance premiums, affirm prevailing views in current judicial practices. At the same time, for contentious issues in practice such as the nature of equity incentive disputes, special arbitration time limits, and liability for breach of special treatment, the Draft also made explicit explanations. In terms of value orientation, provisions regarding subcontracting, outsourcing, affiliation, mixed employment, and unilateral job transfers further increase the social and economic responsibilities imposed on employers based on the original legal provisions, reflecting the judicial interpretation's inclination towards protecting employees.

2023年12月12日，最高人民法院网站公布《最高人民法院关于审理劳动争议案件适用法律问题的解释（二）（征求意见稿） 》（以下简称“《征求意见稿》”）。其中部分条款如竞业限制约定的效力、违反竞业限制协议的责任、不缴纳社会保险的责任等内容对当前司法实践中通行做法给予了肯定；同时针对股权激励争议的性质、特殊仲裁时效、特殊待遇违约责任等实践中存在较大争议的问题，《征求意见稿》也进行了明确规定。在价值取向上，转包、分包、挂靠、混同用工、单方调岗等条款内容在原法律规定的基础上进一步加重对企业的社���和经济责任的要求，体现了司法解释对员工的倾向性保护。

The Draft further clarifies the direction for subsequent compliance with labour employment regulations by employers. We recommend that employers further optimise and improve their human resources compliance system on the basis of self-risk assessment.

《征求意见稿》为企业后续劳动用工的合规建设进一步明确了方向。我们建议企业在风险自查评估基础上，再对自身的人力资源合规体系进行针对性优化完善。

It can be observed that labour employment issues are becoming increasingly diversified and complex, posing higher requirements for employers' compliance in human resources management. In 2024, employers should broaden their horizons, consider various compliance factors comprehensively, and gradually improve their human resources management.

由此可见，劳动用工问题越来越多元化、复杂化，对企业的人力资源管理合规提出了更高的要求。2024年，企业应放宽眼界，综合考虑多方面合规因素，完善企业人力资源管理。