How to Properly Conclude an Electronic Labor Contract in China: Clarifications Issued in New Guideline

• China recently clarified the legitimacy of electronic labor contracts in the country and explained important considerations when concluding, transferring, and preserving an electronic labor contract.
• The newly released Guideline adds obligations for employers in the process of concluding the labor contract with employees and notes protection of employee interests.
• Several regions in China have already implemented local rules pertaining to concluding electronic labor contracts and settling disputes. It is recommended that employers keep abreast of local e-labor contract dispute cases, or consult local legal professionals when signing e-labor contracts.

On July 1, 2021, the Ministry of Human Resources and Social Security (MHRSS) of China issued the Guideline for the Conclusion of Electronic Labor Contracts (“the Guidelines”). As a second important document on e-labor contracts issued by the MHRSS, it provides comprehensive guidance for businesses to conclude electronic labor contracts with their employees.

In March 2020, given the restrictions on social interaction during the COVID-19 pandemic and in recognition of the practical difficulties in signing a paper contract, the MHRSS issued the “Letter on Information of Electronic Labor Contracts Related Issues” (“the Letter”). For the first time, the authority confirmed the legitimacy of electronic labor contracts in China.

However, the Letter did not provide more details on how to conclude a legally compliant electronic labor contract. For example, what constitutes a “reliable electronic signature” and how to ensure that the “electronic labor contracts are complete, accurate, and untampered with”.

To better guide employers and employees to enter into an appropriate electronic labor contract, the Guideline was compiled based on China’s Labor Contract Law, Electronic Signature Law, and Civil Code.

Consisting of five chapters and 21 articles, the Guideline further endorses the legal effect of a “lawfully concluded” electronic labor contract and elaborates on such issues as the conclusion, acquisition, preservation, and use of electronic contracts.

Checklist for properly concluding an electronic labor contract

1) Choosing an appropriate electronic contract management platform

First of all, if the employer and the employee agree to conclude a labor contract in digital form, the contract must be concluded through an electronic contract management platform.

The platform can be self-built, purchased from a third party, or provided by the government. But in any case, the platform must meet the qualification requirements set out in the Guideline:

• The platform enables users to sign, access, store, and use the electronic labor contract by providing effective means of modern information technology.
• The platform is able to verify the identity of the parties to the contract, apply the electronic signature, confirm the willingness of the parties, and ensure the security of contract data.
• The platform can ensure the conclusion, generation, transfer, and storage of the electronic labor contract comply with relevant laws and regulations.
• The platform can ensure that the electronic labor contract is authentic, complete, accurate, tamper-proof, and traceable.

What’s more, the fourth chapter of the Guideline, about “data security and protection”, puts forward higher requirements on the information protection system of the platform.

As the information stored in the platform is related to the right of privacy stipulated in China’s Civil Code, the platform must abide by the rules and not allow outside parties to illegally access the contract data.

Taking these points together, choosing which platform for the conclusion of the electronic labor contract is crucial. It is recommended that employers first consider a platform provided by the local government or a platform that meets the requirements of the Guideline and is recognized by the local judicial authorities.

2) Verifying the identity and willingness of signatories

Before moving on to the terms of the agreement, it is essential for the platform to identify the parties to the contract and their willingness to sign a labor contract in electronic form.

Pursuant to the Guideline, both the employer and the employee are obliged to submit factual, complete, and accurate identity information to the contract management platform.

The platform should verify the identity and willingness of the signatories through technical means – such as digital certificate, networked information verification, biometric identification verification, and mobile short message verification code. The employer can also use the electronic social security card to conduct real-name authentication, the Guideline says.

At the same time, the platform should record and retain the verification and confirmation process.

3) Applying reliable electronic signature and credible timestamp

Conventionally, a labor contract is effective once the employer and the employee have signed or sealed the text of the contract. For electronic contracts, it can be done through an electronic signature or an electronic shop, which has to comply with China’s Electronic Signature Law.

To make sure the electronic signature is reliable, according to the Guideline, the parties to the contract should use the “digital certificate” and “key” issued by the legally established electronic authentication service agency in compliance with the E-Signature Law.

The contract should also be affixed with a credible timestamp to pinpoint the exact effective date of the contract.

4) Obligations of the employer

To protect employees’ right to know and other interests, the Guideline sets out the employer’s obligations before and after signing an electronic labor contract.

Before the conclusion of the electronic labor contract

Before concluding the electronic labor contract, the employer bears the obligation of explicitly informing the employee of the procedures, operating methods, precautions, and channels to view and download the complete text of the labor contract and should not charge fee from the employee.

This would require employers to familiarize themselves with the procedure of concluding an electronic labor contract through the platform in advance and undertake the relevant costs.

After the conclusion of the electronic labor contract

After signing the electronic labor contract, the employer should also notify the employee that the contract has been concluded by mobile text message notification, WeChat, e-mail, or APP message prompt, or other means.

The employer should also remind and assist the employee to timely download and safely keep the text of the electronic employment contract. The employee should be ensured to view, download, and print out the complete contents of the electronic employment contract at any time by using the common equipment, and not be charged any fee.

Further, if an employee requires a hard copy of the electronic labor contract, the employer should at least provide one copy free of charge and prove the consistency between the hard copy with the original of the data message through affixation of seal.

This is because in practice, even there is an electronic labor contract, employees may still need a hard copy with a fresh company chop to deal with some personal affairs. And the employers should cooperate with the employee.

Staying abreast of the latest regulations and local employment dispute rules

Since the HRMSS issued the Letter on Electronic Labor Contract-Related Issues last March, several localities, such as Suzhou Industrial Park, Beijing, Tianjin, Guangdong, and Shenzhen, successively rolled out local rules on electronic labor contract disputes.

The local rules include articles that stipulate the requirements for evidence production, certification procedures, and other steps relating to electronic labor contracts. They are of strong practical operation and have significance as a guide and reference point for judicial practice in electronic labor contract disputes.

Businesses should stay abreast of the new compliance standards and regulations on electronic labor contracts and pay attention to how particular operational changes like digitization can impact their business process management, cybersecurity compliance, as well as legal compliance. For more personalized information on how to appropriately conclude an electronic labor contract in China, please feel free to email us at china@dezshira.com.

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