Sign a contract, penalty fees, probation period, termination

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Signing a contract, penalty fees, probation period, termination. . . It’s so useful. . . Students who are signing contracts for the 09th and 10th batches, pay attention: don’t forget the benefits brought to us by the New Labor Law! Source: Li Chao’s blog. The New Labor Law came into effect on January 1, 2008, and it can truly be considered a blessing for us. Currently, many employers are still using the employment provisions of the old labor law, and many students are not very familiar with the regulations of the new labor law. To avoid unnecessary labor disputes and protect our legitimate rights and interests in accordance with the law, we must study the new Labor Law carefully and sign labor contracts thoughtfully. (Please note the new regulations regarding the probation period.) 【If you like it, share it so that more students can be aware of it】 With the introduction of the new labor laws, there is a need to change the way we approach employment. First and foremost, it is no longer acceptable to engage in employment without signing a written labor contract. See the image. Article 10 of the Labor Contract Law stipulates that a written labor contract must be established in order to establish an employment relationship. This provision reiterates the requirement under the Labor Law that a written labor contract must be concluded to establish a labor relationship in our country. However, in practice, most companies still hold a mistaken belief: they think that signing an employment contract ties them down, and that without such a contract there is no labor relationship with the employees, allowing them to freely decide who to hire and fire without complying with legal requirements. They can also avoid paying or underpaying taxes and social insurance fees. Even if employees file lawsuits, these cases end up being dismissed due to a lack of evidence. In fact, this is not the case. The Ministry of Labor and Social Security issued a notice in 2005 titled \"Notice on Matters Concerning the Establishment of Labor Relations,\" which clearly stated that when an employer has not entered into a labor contract with an employee, the evidence that can be used to determine the existence of a labor relationship includes (1) payment vouchers or records of wages (rosters of employees’ salaries) and records of payments for various social insurance premiums ； (2) Identity documents such as “work permits” and “service cards” issued by the employer to the employees to prove their identity ； (3) Recruitment records such as “registration forms” and “application forms” filled out by workers for employment by the employer ； (4) Attendance records ； (5) Testimonies of other workers, etc. Among them, the employer bears the burden of providing evidence for items (1), (3), and (4). Furthermore, this Notice stipulates that employers who terminate de facto labor relationships are also required to pay economic compensation. Therefore, China’s labor laws, regulations, and policies explicitly prevent workers from being left without any means of recourse in case of labor disputes due to the absence of labor contracts, thereby narrowing the scope for enterprises to evade their responsibilities. More importantly, the Labor Contract Law also stipulates that employers who fail to enter into a written labor contract with employees from the date of employment will face various penalties. 1. If an employer fails to enter into a written labor contract with an employee within one month but less than one year from the date of employment, it shall pay the employee twice the salary per month. 2. If an employer fails to enter into a written labor contract with an employee within one year from the date of employment, it shall be deemed that an open-ended labor contract has been established between the employer and the employee. Once an open-ended labor contract is established, and there are no circumstances stipulated by law that permit the termination of the contract, the employer cannot dismiss the employee; otherwise, they will have to pay double the amount as economic compensation for unlawful dismissal. It is evident that, after the new law comes into effect, employers who fail to conclude written labor contracts will face significant legal risks. Therefore, employers must change their previous mindset and firmly establish the concept that \"a written contract must be signed when employing people.\" II. Labor contracts cannot be renewed on an annual basis. In past practices, employers tended to sign labor contracts on an annual basis. The main reason is that previous laws stipulated that when a labor contract expired, the employer was not required to pay severance compensation; therefore, signing labor contracts on an annual basis allowed companies to avoid the risk of having to pay such compensation upon termination of the contracts. However, this approach will no longer work after the new law is implemented. Firstly, Article 46 of the Labor Contract Law stipulates that, except in cases where the employer wishes to renew the labor contract on the same terms or under improved conditions and the employee refuses to do so, when a fixed-term labor contract is terminated in accordance with Item 1 of Article 44 of this law, the employer shall pay economic compensation to the employee. This means that when the term of the labor contract expires, if the employer refuses to renew the contract with the employee, or offers terms that are lower than those stipulated in the original contract, resulting in the employee’s reluctance to renew it, the employer is required to pay economic compensation. This provision helps to reduce the difference in the payment of economic compensation between the expiration of an employment contract and its termination. Therefore, the advantage of signing an employment contract on an annual basis is not obvious. Secondly, Article 14 of the Labor Contract Law stipulates that after two consecutive renewals of a fixed-term labor contract, if the employee requests to enter into an open-ended labor contract upon another renewal, the employer must agree to it. This means that if an enterprise chooses to enter into a labor contract on an annual basis, then after two years it has only two options: either not renew the contract and part ways with the employee after paying economic compensation, or ； Either choose to renew the labor contract ； Choosing to go our separate ways might result in the loss of the employees we have trained, which is like preparing clothes for someone else ； Choosing to renew may expose one to the risk of entering into an open-ended labor contract. It is evident that choosing to enter into labor contracts on an annual basis is extremely disadvantageous for enterprises. After the new law comes into effect, companies should pay attention to a reasonable combination of labor contract terms. III. Liquidated damages cannot be set arbitrarily. View image. Whether it is permissible to include clauses regarding liquidated damages for employees in labor contracts is a rather controversial topic. The Labor Law does not provide very clear regulations on this issue. Local legislation varies greatly across different regions on this matter; some allow for the stipulation of liquidated damages, while others impose restrictions on such damages. The introduction of the Labor Contract Law brought uniformity to this issue. The Labor Contract Law stipulates that an employer may agree to have the employee bear liquidated damages only in two circumstances: one is by specifying liquidated damages in the training service agreement. If an employer covers the costs of specialized training for an employee in order to provide them with professional technical training, it may enter into an agreement with the employee regarding a service period. If a worker breaches the terms regarding the service period, they shall pay liquidated damages to the employer as agreed. The amount of the penalty shall not exceed the training costs provided by the employer. The penalty that the employer requires the employee to pay shall not exceed the share of the training costs applicable to the unfulfilled portion of the service period. Second, stipulate a penalty fee in the non-compete agreement. The employer and the employee may agree in the labor contract to keep the employer’s trade secrets as well as confidentiality matters related to intellectual property. For employees who are subject to confidentiality obligations, the employer may include non-compete clauses in the labor contract or confidentiality agreement, and stipulate that economic compensation shall be provided to the employee on a monthly basis during the non-compete period following the termination or end of the labor contract. If an employee violates the non-compete agreement, they shall pay a penalty to the employer as stipulated in the agreement. The persons subject to non-competition restrictions are limited to senior management personnel, senior technical personnel, and other individuals with confidentiality obligations in the employer’s organization. The scope, jurisdiction, and duration of non-competition restrictions shall be agreed upon by the employer and the employee, provided that such agreements do not violate any laws or regulations. After the labor contract is dissolved or terminated, the period during which the persons specified above are subject to non-compete restrictions, by working for other employers that produce or operate similar products or engage in similar business activities as that of their current employer, or by starting their own business to produce or operate similar products or engage in similar business activities, shall not exceed two years. It is thus evident that, after the implementation of the new law, except in the above two cases, employers may not agree with employees that the employees shall bear liquidated damages, nor may they stipulate that the employees shall assume liability for breach of contract under other names such as compensation, penalty for breach of contract, or fine for breach of obligation. IV. The probation period is no longer a cheap period – View image. The probation period is originally a period designated through negotiation between the employer and the employee in the labor contract, intended for evaluating one another. However, the abuse of the probation period by employers is quite serious. The Labor Contract Law continues some of the provisions of the Labor Law regarding the probation period; for example, the probation period is considered a clause that can be specified in the labor contract, and both parties may decide whether to include it or not ； The probation period is included within the term of the labor contract ； The trial period shall not exceed six months at most. At the same time, in response to issues in practice where some employers abuse the probation period – such as setting excessively long probation periods, drastically reducing employees’ salaries during this period, or terminating employment contracts arbitrarily during probation – the Labor Contract Law introduces several new provisions that differ from those of the Labor Law: 1. There are rules regarding the relationship between the duration of the probation period and that of the labor contract; that is, if the labor contract lasts for more than three months but less than one year, the probation period shall not exceed one month ； If the term of the labor contract is more than one year but less than three years, the probation period shall not exceed two months ； For fixed-term labor contracts with a duration of more than three years and open-ended labor contracts, the probation period shall not exceed six months. For labor contracts with a term set to complete a specific task, or those with a term of less than three months, no probation period may be stipulated. 2. The same employer and the same employee can only agree on a probation period once. When renewing an employment contract, no probation period shall be stipulated, regardless of whether the position changes or not. 3. The probation period shall be included within the term of the labor contract. A separate probation contract is invalid; such a probation contract is considered to be an employment contract, and it is deemed that the employer has waived the probation period. 4. New standards have been set for trial period salaries. The new law stipulates that during the probation period, an employee’s salary must not be lower than 80% of the lowest salary for the same position in the company, or 80% of the salary specified in the labor contract; it must also be no lower than the local minimum wage standard. 5. Compensation must be paid for illegal trials. The new law stipulates that if an employer enters into an agreement regarding a probation period with an employee in violation of the provisions of this law, the labor administration department shall order it to make corrections ； If the probation period stipulated in violation of the law has already been served, the employer shall pay the employee compensation based on the employee’s monthly salary after the probation period ends, for the period during which the probation period exceeded the statutory limit. That is, in addition to paying the salary for the trial period, those on an extended trial period are also paid an amount equal to the salary after full employment as compensation. Therefore, after the new law comes into effect, the probation period will no longer be a period of low costs, and employers’ actions during this period will be subject to more restrictions. V. Terminating employment is no longer as easy. As stipulated in the Labor Contract Law, which builds upon the provisions of the Labor Law, there are three main categories of situations in which an employer may terminate an employee’s employment: termination with immediate notice, termination with prior notice, and economic layoffs. However, employers are subject to certain conditions in each category of circumstances for dismissing employees. For example, when terminating the employment contract with immediate notice, the employer must bear the burden of proof – that is, the employee fails to meet the requirements for employment during the probation period, commits serious violations of discipline or gross negligence, engages in fraudulent activities that cause significant losses to the company, the employment contract is invalid, the employee’s concurrent employment has a serious impact on the performance of tasks for the company, or the employee is held criminally liable ； To notify the termination of the labor contract in advance, it is necessary to meet the statutory conditions and follow the statutory procedures ； Economic layoffs must also meet the conditions for such layoffs and go through the required legal procedures. In addition to specifying the circumstances under which an employer may dismiss an employee, the law also outlines six circumstances in which an employer is not allowed to terminate the employment contract. Article 42 of the Labor Contract Law stipulates that in any of the following circumstances, an employer shall not terminate the labor contract in accordance with Articles 40 and 41 of this Law: (1) Workers engaged in work involving exposure to occupational disease hazards have not undergone pre-departure occupational health examinations, or workers suspected of having an occupational disease are under diagnosis or medical observation ； (2) Those who have contracted an occupational disease or been injured at work in this unit and have been confirmed to have lost or partially lost their working capacity ； (3) Sick or injured not due to work, during the specified medical treatment period ； (4) Female employees during pregnancy, childbirth, and lactation ； (5) Those who have worked continuously in this unit for fifteen years and are less than five years away from the legal retirement age ； (6) Other circumstances stipulated by laws and administrative regulations. Furthermore, in cases where there is a union, the employer must notify the union of the reasons in advance before unilaterally terminating the employment contract. If an employer violates laws, administrative regulations, or the provisions of the labor contract, the trade union has the right to demand that the employer make corrections. The employer shall consider the trade union’s opinions and notify the trade union in writing of the outcome of the handling. Finally, the law stipulates the legal consequences for employers who dismiss employees illegally. Article 48 of the Labor Contract Law stipulates that if an employer terminates or ends a labor contract in violation of the provisions of this law, and the employee requests that the labor contract be continued, the employer shall do so ； If the worker does not request to continue performing the labor contract, or if the labor contract can no longer be carried out, the employer shall pay compensation in accordance with Article 87 of this Law. Article 87 of the Labor Contract Law stipulates that if an employer terminates or ends a labor contract in violation of the provisions of this law, it shall pay the employee compensation equal to twice the economic compensation standard specified in Article 47 of this law. In summary, after the implementation of the new law, employers face stricter conditions and more complex procedures for dismissing employees, and the cost of unlawful dismissals doubles. Therefore, firing employees is no longer a matter of \"inventing charges if one wants to\". 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