Attention! It’s wrong to punish employees in this way!

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Is there any legal or regulatory support for imposing financial penalties on employees who violate rules? How to manage employees in accordance with laws and regulations? Let’s talk about this in today’s article. For clarity, this article outlines the origins and relationships of various regulations; please read the entire text, as the author’s views are presented at the end. This article is reprinted from ABC Safety; edited by Anquan Wuzhiying. ——————————————— I. Legal provisions granting enterprises the authority to impose economic penalties 1. Regulations on Rewards for Enterprise Employees (April 10, 1982), Article 4: These regulations apply to all employees of state-owned enterprises and urban collective-owned enterprises. Regarding the awarding of rewards or imposition of penalties on staff members in enterprises who are appointed by **administrative agencies, the authority for approval and the corresponding procedures are governed in accordance with the Interim Provisions of the State Council on Rewards and Penalties for Staff Members of **Administrative Agencies. (Note: It cannot be applied to enterprises of other types.) Article 11: Employees who engage in any of the following behaviors and fail to correct themselves after being reprimanded and educated shall, depending on the circumstances, be subject to administrative sanctions or financial penalties: (1) Violating labor discipline by frequently being late, leaving early, absenteeism, being lazy at work, or failing to complete production or work tasks ； (II) Failing to comply with work assignments, transfers, or instructions without proper reasons, or causing trouble deliberately, gathering to create chaos, engaging in fights, and disrupting production order, work order, and social order ； (III) Failing in one’s duties, violating technical operating procedures and safety regulations, or giving illegal instructions that result in accidents and cause losses to people’s lives and property ； (IV) Being irresponsible at work, frequently producing defective products, damaging equipment and tools, and wasting raw materials and energy, thereby causing economic losses ； (5) Abuse of power, violation of policies and laws, breach of financial discipline, tax evasion, retention of profits that should be submitted, unauthorized distribution of bonuses, squandering of assets, using public resources for personal gain, thereby causing economic losses to the organization and enterprises ； (6) Those who are involved in embezzlement, theft, speculation, smuggling, bribery, extortion, and other illegal and disciplinary offenses ； (7) Having committed other serious mistakes. Article 12: Administrative sanctions for employees include: warning, reprimand, serious reprimand, demotion, dismissal from office, suspension with pay, and expulsion. In addition to the aforementioned administrative sanctions, a one-time fine may be imposed. (Note: This means that fines imposed on employees should be one-time rather than continuous.) ) Article 16: The amount of the fine imposed on employees shall be determined by the enterprise, and it generally should not exceed 20 percent of the employee’s monthly standard salary. Article 19: When imposing administrative sanctions and financial penalties on employees, it is necessary to clarify the facts, gather evidence, conduct discussions in relevant meetings, seek the opinions of the labor union, allow the person subject to the sanction to present their defense, and make a careful decision. Article 20: The time limit for approving disciplinary actions against employees starts from the date when it is established that the employee has committed a mistake; the period for dismissal as a disciplinary action shall not exceed 5 months, while the period for other disciplinary actions shall not exceed 3 months. If an employee is subject to administrative sanctions, financial penalties, or dismissal, the enterprise shall notify them in writing and record it in their personnel file. (This regulation provides relatively specific legal provisions regarding the exercise of the power to impose fines (economic penalties) on employees, including the circumstances and scope under which fines may be applied, the number of times fines can be imposed, the range of fine amounts, as well as the procedures for imposing such fines.) ) Note! This regulation was repealed by Order No. 516 of the State Council of the People’s Republic of China, and replaced by the Labor Law of the People’s Republic of China, issued by Order No. 28 of the State Council on July 5, 1994, and the Labor Contract Law of the People’s Republic of China, issued by Order No. 65 of the State Council on June 29, 2007. The Labor Law enacted in 1995 does not grant enterprises such a right. In accordance with the provisions of the Legislation Law, any provisions in the regulations that conflict with higher-level laws become invalid; thus, it is clear that enterprise rules and regulations do not have the authority to impose financial penalties on employees. 2. Article 16 of the Regulations on Promoting Harmonious Labor Relations in the Shenzhen Special Economic Zone (November 1, 2008): When an employer imposes financial sanctions on employees in accordance with its rules and regulations, the amount of such sanctions for a single incident or for the entire month shall not exceed 30 percent of the employee’s monthly salary; moreover, the same disciplinary action shall not be imposed repeatedly for the same offense. 3. Article 22 of the “Measures for the Payment of Wages in Shanghai Enterprises” (dated April 1, 2003): If a worker causes economic losses to the employer due to his or her own reasons, and the employer requires compensation from him or her in accordance with the law and needs to deduct such compensation from the wage, the amount deducted shall not exceed 20% of the worker’s monthly wage income; moreover, the remaining wage after the deduction shall not be lower than the minimum wage standard set by the city. 4. Article 17 of the “Provisions on Wage Payment in Hebei Province” (December 18, 2002): The employer may deduct the following expenses from the worker’s wages: (1) Expenses explicitly specified in the labor contract signed in accordance with the law ； (II) Costs explicitly stipulated in the factory rules and regulations established by the employer in accordance with the law and approved by the workers’ representative assembly ； (III) Costs agreed upon through consultation between the employer and the employee. 5. Article 19 of the “Interpretations on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases”: Rules and regulations formulated by an employer in accordance with Article 4 of the Labor Law through **proper procedures, which do not violate any laws, administrative regulations, or policy provisions, and have been made known to the employees, may serve as a basis for people’s courts in handling labor dispute cases. (2001, Judicial Interpretation regarding the Labor Law) Summary of views: Labor laws and regulations such as the Labor Law and the Labor Contract Law do not prohibit employers from imposing fines on employees. In accordance with the principle that \"anything not prohibited by law is permissible,\" employers may establish legitimate rules and regulations through proper procedures (such as through trade unions or employee representative assemblies) to deal with employees, as long as such fines do not exceed a certain percentage of the monthly salary specified in the Interim Provisions on Wage Payment and the wage payment regulations of various provinces (usually 20%). II. Legal provisions restricting enterprises’ power to impose economic penalties 1. The Regulations on Labor Security Supervision in Guangdong Province: (issued in 2012, implemented in 2013) Article 51: If an employer’s rules and regulations stipulate fines, or if its provisions for deducting wages lack legal or regulatory basis, the human resources and social security administrative department shall order it to make corrections and issue a warning. If an employer imposes fines on employees or deducts their wages without any legal or regulatory basis, the human resources and social security authorities shall order it to make corrections within a specified time frame ； If the violation is not corrected by the deadline, a fine of not less than 2,000 yuan but not more than 5,000 yuan shall be imposed on each person who was fined or had their salary deducted. 2. Labor Law: Article 102 If a worker terminates the labor contract in violation of the conditions stipulated in this Law or breaches the confidentiality obligations agreed upon in the labor contract, thereby causing economic losses to the employer, such worker shall bear liability for compensation in accordance with the law. (Editor’s note: That is, compensation can only be claimed in such cases.) 3. Article 90 of the Labor Contract Law: If an employee terminates the labor contract in violation of the provisions of this law, or breaches the confidentiality obligations or non-compete agreements stipulated in the labor contract, thereby causing losses to the employer, such employee shall bear liability for compensation. (Editor’s note: That is, recovery is only possible.) Summary of viewpoints: 1. Fines fall under public authority, and the exercise of such authority must be based on legal grounds. In accordance with the Legislation Law, wages are considered private property of citizens and must be regulated by law, thereby reflecting the fundamental principle that \"nothing shall be done without legal authorization.\" The Regulations on Rewards and Punishments for Enterprise Employees were repealed on January 15, 2008; consequently, it is unlawful for employers to punish employees, and such punishments lack legitimacy. According to the Administrative Penalty Law of the People’s Republic of China, only **authorized agencies have the right to impose penalties in accordance with laws and regulations. Enterprises are not administrative law enforcement agencies and have no authority to impose fines on employees for illegal acts. Article 3 of the Administrative Penalties Law of the People’s Republic of China: Where citizens, legal persons, or other organizations commit acts that violate administrative management order and are subject to administrative penalties, such penalties shall be prescribed by laws, regulations, or rules in accordance with this Law, and shall be imposed by administrative organs following the procedures stipulated in this Law. A company only has the right to seek compensation in two situations: when an employee violates the confidentiality and non-competition obligations stipulated in the contract, and it is the arbitration body or court that must determine these conditions, rather than the company unilaterally. III. Practices abroad Based on available literature, the following conclusions were reached: France explicitly prohibits companies from imposing fines, while Switzerland, Japan, and **allow such rights for companies. While France prohibits the right of companies to impose fines, employers have the right to require employees to pay a certain deposit to ensure their faithful performance of duties, thereby safeguarding the interests of employers to some extent. IV. Summary of views: Currently, the department responsible for managing employment relations in enterprises is the Ministry of Labor and Social Security, not the work safety supervision department. Disputes in this regard are handled by the Ministry of Labor and Social Security, through labor arbitration or court litigation. Based on the above information, the following two conclusions can be drawn: 1. In civil law, there is a tendency to protect workers, and punishment is not permitted ； In commercial law, within business contracts, enterprises are granted the right to claim compensation in order to protect their legitimate interests. 2. Enterprises have the power to impose financial penalties. Before 2008, certain regulations allowed enterprises to do so, but in recent years, legislation and court rulings have tended to protect workers, no longer permitting enterprises to have such power. Especially recently, many companies have suffered losses in this regard. V. Solutions to such problems: 1. Avoid using the term “fine” in company regulations and policies such as our labor handbook. Based on some cases, when terms such as “fines” appear in internal company documents, companies tend to face unfavorable outcomes in arbitration and court rulings. 2. Adopt a compensation approach. If an employee causes losses to the company for personal reasons, the company shall, in accordance with the contract provisions, have that employee compensate for the economic losses; such compensation can be deducted from the employee’s salary, but it must not exceed 20% of the salary for that month. Legal reference: Article 22 of the Measures for the Payment of Wages to Employees in Shanghai, etc. 3. Adopt a performance appraisal system: (This is a reliable and widely used approach.) This requires the involvement or cooperation of the human resources department, which involves dividing the salary paid by the company to employees into a base salary and a performance-based bonus. Wages are civil property protected by the Legislation Law, but performance-based pay and bonuses are not clearly defined. Regarding performance, the company has the right to award or deduct performance bonuses in accordance with its internal regulations. VI. Other matters: There is no right or wrong when it comes to terminating employment contracts; it is not a form of punishment by the company. It has a wide range of applicability; companies have no valid reason to do otherwise, and as long as they provide reasonable compensation in accordance with labor law, they can terminate the contract with employees. Regarding “dismissal,” it is simply the old term that is still in use; only **within a system** is there such a concept of dismissal. In businesses, contracts are either terminated with economic compensation or without it. The above is my analysis regarding a company’s right to impose financial penalties on its employees, in relation to criticism. ——END—— Note: This article is reprinted from ABC Safety.