How to Deal with Labor Disputes Under the Shanghai Lockdown: FAQs

On April 28, 2022, the Shanghai High People’s Court and Human Resources Bureau published FAQs on handling pandemic-related labor disputes. In this article, we will walk you through the official guidance on some typical labor dispute issues. 

China’s labor regulations are designed to maintain social stability by balancing the rights of the employers and employees – a top priority for Beijing.

However, during the COVID-19 pandemic, the country’s labor legislation has been subject to various stress tests as existing legal enforcement practices may be viewed as inadequate to sufficiently address such unique circumstances.

To fill this gap in legal understanding and regulation, the Supreme Court and local high courts have issued successive judicial guidance and “opinions” on the application of law in response to disputes arising during this special period.

These opinions must be noted by companies who are struggling with human resource management, or have questions about payment of employees’ wages, social security, and so on.

A new document published in FAQ format by the Shanghai High People’s Court and the Human Resources Bureau on handling pandemic-related labor disputes, addresses several questions on the matter. It shall be noted that, as per the Shanghai government, labor disputes arising in these circumstances shall be resolved according to four fundamental principles – namely harmony, negotiation, balance, and diversification.

In this article, we intend to share some of the key takeaways for employers, shedding some light on the most noteworthy information.

Frequently asked questions regarding labor disputes during Shanghai’s lockdown

Democratic consultation and notification procedures

Under the current lockdown, how should employers implement democratic consultation and notification procedures when formulating, modifying, or deciding rules or major issues directly related to the immediate interests of employees?

During the period of epidemic prevention and control, employers can use emails, internal office automation (OA) systems, WeChat groups, and other forms to share information with trade union or employee representatives and let them solicit opinions from employees regarding important matters. Important matters here refer to suspension of work and production, changes in wages and salaries, adjustments in work hours and methods, work shift and rest, and other rules or major issues directly related to the immediate interests of employees.

Where employers determine rules and matters through consultation in the way as described above, only apply the rules and matters during the period of epidemic prevention and control, and have informed the employees, the democratic consultation and notification procedures can be deemed to have been fulfilled.

Contract signing and renewal

During the lockdown, how will the court decide the legal consequences where the employer fails to sign or renew the employee’s contract in a timely manner?

If the employer is unable to conclude or renew labor contracts with employees in writing in time due to the epidemic situation or the epidemic prevention and control measures, the employer may resort to electronic solutions or reasonably postpone the conclusion or renewal of a written labor contract through democratic negotiations.

Where the employee requests double salary for the period of not signing or renewing written labor contract, such request won’t be supported by the court.

Wages and salaries payment

How should employers pay wages to employees who are recognized as COVID-19 confirmed patients, asymptomatic cases, or close contacts to a confirmed case during their isolation treatment or medical observation period?

Where an employee is recognized as COVID-19 confirmed patient, asymptomatic case, or close contact to a confirmed case due to reasons not attributable to himself or herself, is placed under quarantine or medical observation accordingly, and thus cannot provide normal work, according to Paragraph 2 of Article 41 of the Law on the Prevention and Control of Infectious Diseases of the People’s Republic of China, the employer shall pay the wage of the employee according to the wage standard for normal working hours during the period of isolation treatment or medical observation.

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Where the employee still needs to stop working to have treatment after the isolated treatment or medical observation period, the employer should pay wages and salaries to the employee according to standards for the recuperation period.

Recuperation period is a specific type of sick leave in which the employer cannot terminate the employee suffering from non-occupational sickness or injury and is responsible for paying a proportion of salary by law. The payment standard for recuperation period in Shanghai is as below:

How should the employer pay wages to employees who are unable go to work because of reasons related to the epidemic situation or the epidemic prevention and control measures?

Where the employee cannot go to work normally due to the epidemic situation or the epidemic prevention and control measures, and claims that the employer should pay wages, the claims can be treated differently according to the following circumstances:

• Where the employer can arrange for the employee to work remotely, it shall be regarded as the employee’s normal attendance, and the employer shall pay wages to the employee according to the standard of the normal attendance; and
• Where the employer hasn’t arranged remote working or the employee is unable to provide work in the way arranged by the employer, the employer can ask the employee to use their paid annual leave or other leaves that the company provides – on priority – and pay wages and salaries according to the payment standard of corresponding holidays.
• If the above two cases are not an option, the employer may refer to the state’s regulations on wages paid during the suspension of work and production:
• Accordingly, if the suspension period is within one wage payment cycle, salaries shall be paid according to the standards stipulated in the labor contract.
• If the suspension period goes beyond one wage payment cycle, the living allowance shall be paid by the enterprise. The living allowance is usually at 70~80 percent of the local minimum wage and shall be implemented in accordance with the relevant local regulations.

If the employer has difficulties in production and operation due to the impact of the epidemic or epidemic prevention and control measures, can it delay the payment of employees’ wages?

According to the relevant guiding opinions of the Ministry of Human Resources and Social Security and other departments and Article 10 of the Wage Payment Measures for Enterprises in Shanghai, under such circumstances if a company is temporarily unable to pay wages on time, after consultation with the trade unions or employee representatives, the payment of wages to employees may be temporarily postponed.  However, the time of deferred payment generally shall not exceed one month.

Termination and compensation

How will the court or the labor bureau handle employees’ claims to terminate labor contract and obtain economic compensation where the employer fails to pay wages and contribute to social insurance schemes in time due to production suspension or temporary difficulty in production and operation caused by epidemic situation or epidemic prevention and control measures?

For labor disputes caused by the circumstance where the employer, especially in the case of micro-, small-, and medium- sized enterprises, fails to pay wages and contribute to social insurance schemes in time due to production suspension or temporary difficulty in production and operation caused by epidemic situation or epidemic prevention and control measures, the guidance encourages the disputes to be resolved through conciliation, mediation, and other non-litigation means, so as to restore employment relations and continue the labor contracts.

Where the employee insists upon termination of the labor contract and asks for economic compensation according to Article 38 of the Labor Contract Law, the court shall deal with the claims adhering to the principle of prudence and generally shall not support such claims.

How will the court or the labor bureau handle employees’ claims to terminate labor contract and obtain economic compensation where an employee does not agree with the employer’s remote working arrangement and claim that the employer fails to provided working conditions ?

According to the official answers from the court and the labor bureau, the remote work arrangement is regarded as a reasonable response to the epidemic that should be accepted by both enterprises and employees. It plays a positive role in protecting employees’ labor rights and maintaining normal operation of enterprises.

If the remote work arrangement is  reasonable and does not infringe on the legitimate rights and interests of the employees, employees should actively cooperate.

Where the employee insists termination of the labor contract and asks for economic compensation on the basis that the employer failed to provide work condition as stipulated on the labor contract, the court shall not support such claims.

Termination

Are employers allowed to return the dispatched employees who cannot provide normal work due to being recognized as COVID-19 confirmed patients, asymptomatic cases, or close contacts to a confirmed case during their isolation treatment or medical observation period?

According to the opinions jointly released by the MHRSS, the China Federation of Trade Unions, and other relevant departments, enterprises are not allowed to terminate the labor contract of employees or return the dispatched workers to the dispatched agency on the basis that the employees or dispatched workers cannot provide normal work due to isolation treatment or medical observation.

Can employers terminate the labor contract with employees who are investigated for criminal responsibility or are subject to administrative punishments, such as public security detention for failing to cooperate with the government’s epidemic prevention and control measures?

During the epidemic prevention and control period, if the employee is investigated for criminal responsibility for not cooperating with the epidemic prevention and control measures of the government, the employer may terminate the labor contract according to the provisions of Item (6) of Article 39 of the Labor Contract Law.

If an employee is subject to administrative punishment, such as public security detention due to his/her failure to cooperate with the prevention and control measures of the government, the employer can terminate the labor contract, if the company rulebook formulated according to law stipulates so for such circumstance.

Protection to workers

How to guarantee the legitimate rights and interests for employees who are transferred under the mode of “shared employment” during the epidemic prevention and control period?

In principle, it is not suitable to identify the dual labor relationship between the lending unit, the borrowing unit, and the transferred employee under the shared employment mode. During the period of shared employment, the transferred employee and the lending unit remain in a single labor relationship, and the labor rights and obligations of both parties remain unchanged.

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To protect the legitimate rights and interests of the transferred employees, the lending unit, the borrowing unit, and the transferred employee are encouraged to sign a shared employment agreement following the principles of equality, integrity, fairness, and legitimacy, and in conformity with public laws and regulations. The agreement should contain provisions stipulating the period of shared employment, job position, work content, working hours, settlement method of remuneration, settlement cycle and payment method, labor protection conditions, and vacation, etc. The agreed daily or hourly compensation shall not violate the city’s minimum wage standards.

Litigation and arbitration

How should the time limit of arbitration or litigation for labor disputes be determined during the epidemic prevention and control period? What shall the parties do if they cannot normally participate in relevant arbitration or litigation activities?

If the parties concerned are unable to apply for arbitration or file a lawsuit within the legal period due to the epidemic, the limitation of arbitration shall be suspended and the affected period shall not be counted within the time limit for filing a lawsuit.

If the parties are unable to participate in arbitration or litigation activities due to the epidemic, the provisions on the suspension of arbitration or litigation procedures may be applied in accordance with the law, except as otherwise provided by law. The procedures of labor supervision shall be handled in accordance with the relevant provisions of labor supervision.

Key takeaways

In the wake of COVID-19 flare-ups, employment stability is the top priority for the government. According to what is stipulated in the FAQs, the government is trying not to overly favor any party. Rather, it wants both the employers and employees to take the epidemic situation into account and share the burden caused by the epidemic. After all, the government thinks it is in the best interest for all parties to maintain harmonious and stable labor relations, rather than to break it.

Bearing that in mind, it is not difficult to notice and understand the government’s efforts revealed in the FAQ on balancing the right and interests of the employers and employees.

On the other hand, however, the FAQs do not go beyond the existing legal framework. All the official answers have their legal basis in labor laws and regulations.

What the FAQs do is to clarify the application of relevant laws and regulation in atypical circumstances, such as under the current lockdown. In this way, both the employers and employees can have a better assessment of the result of their actions and thus have a better chance to strive through the difficulties together.

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