CMS, China | PRC Labor Law Update | May 2019

CMS, China

{briefanrede} {name},

Please find enclosed our update on the latest developments on PRC Labor Law.

Kind regards,
CMS, China

News Brief Impact/Risk Recommended Actions
Chinese government issued the Circular on Further Regulating Recruitment Practice to Promote Female Employment (the "Circular") on 18 February 2019 aiming at facilitating equal employment of females and eliminating gender discrimination in recruitment activities. The following behaviours are expressly prohibited in the recruitment process:

To impose limits on gender or have gender preference in preparing recruitment plans, posting recruitment information or during the recruitment process;
To reduce employment opportunities for females or refuse to hire females because of gender;
To ask the females about their status of marriage or childbirth;
To include the pregnancy test as one of the on-board physical examination items;
To set the limitation on childbirth as one of the recruitment conditions;
To distinguish and raise the recruitment standard for females.
Based on the reports or complaints through hotlines, onsite visits or regular inspection system, competent authorities may carry out investigation, make mediation and require making rectification on the companies or human resource service agencies which are suspected of conducting or conducted gender discrimination behaviors in the recruitment process.

If any involved company or human resource service agency refuses to make rectification, a penalty from RMB 10,000 to RMB 50,000 may be imposed. In serious cases, the license of the human resource service agency can be revoked. In addition, the aforesaid administrative sanctions may be recorded at the company’s human resource integrity record system and be announced to the public.
Companies may wish to review whether the existing recruitment information either posted by themselves or by human resource service agencies contain any gender-discriminative description, and to review whether any gender discrimination behaviors occur during their internal recruitment/on-board process, and make prompt self-rectification, if necessary.
Chinese central government issued the Comprehensive Scheme on Reducing Social Insurance Contribution Rates on 1 April 2019 (“Comprehensive Scheme”) to adjust the social insurance policies. Starting from 1 May 2019, some social insurance policies shall be adjusted. Please find below the key points:

The contribution rate to the pension fund payable by the employer for employees shall be reduced/adjusted to 16%.
The reduced contribution rates to the unemployment insurance and work-related injury insurance funds shall continuously be applied until 30 April 2020. In the areas where the accumulated balance of the work-related insurance fund is sufficient for the payment of benefits for a period of 18 months or above, the contribution rate can be further reduced by 20% or 50%.
The calculation basis of social insurance contribution shall be weighted by the average salary of employees from both privately-owned business units and non-privately-owned business units at the provincial level.
Since 2018, the PRC central government makes continuous efforts to reduce labor costs of companies. The adjustment of social insurance policies is one of the actions.

The exact social insurance contribution rates and calculation basis applicable at specific locations are decided and implemented by local governments.

It is noticed that on 30 April 2019, Beijing announced to decrease the pension fund contribution rate payable by the employer from 20% to 16% and so did Shanghai. Further, Shanghai also adjusted the calculation basis according to the new standard. Unfortunately, based on such new standard, the minimum and maximum calculation basis in Shanghai are respectively increased by RMB 228 and RMB 1,137 amounting to RMB 4,927 and RMB 24,633. But in most other locations, the pension fund contribution rate and calculation basis are not adjusted yet.
With the implementation of new social insurance policies, the companies’ labour costs for social insurance will be reduced to some extent. However, with the increase of statutory minimum wage and average monthly salary of employees every year, the actual labour costs might still increase. Therefore, companies shall not rely on reducing labour costs by the adjustment of social insurance policies by governments.
The PRC Anti-unfair Competition Law was further amended and became effective on 23 April 2019 focusing on strengthening protection of trade secrets. The key amendments are as follows:

The scope of “trade secrets” is extended from mere technical and operational information to any business information, including but not limited to technical or operational information, which is unknown to the public, has commercial value and for which the obligee has adopted proper measures for confidentiality.
Obtaining trade secrets by the way of electronic intrusion is expressly added as one of the illegal ways of infringement in addition to theft, bribery, fraud and intimidation.
The party which instigates, allures or assists others in breach of confidentiality obligations or the requirements of the obligee on confidentiality to obtain, disclose, use or allow others to use trade secrets will also be regarded as the infringer.
The infringer can be an individual, legal entity or unincorporated organization even if they are not business operators.
In case of malicious infringement of trade secrets in serious cases, a punitive compensation of one to five times of the actual losses of the obligee or the benefits obtained by the infringer (if the actual losses cannot be determined) can be imposed on the infringer. The maximum compensation amount is increased from RMB 3 million to RMB 5 million where the actual losses or the benefits obtained by the infringer are difficult to be determined.
The amount of administrative penalty on the infringement of trade secrets is increased to, at the maximum, RMB 1 million for normal cases and RMB 5 million for serious cases. Any illegal income shall be confiscated.
Under some circumstances, after the obligee provides preliminary evidence on the infringement, the burden of proof will be transferred to the infringer.
The amendment of the law will facilitate employers to claim for liabilities of the employee/former employee infringing the trade secrets of the employer.

An employee/former employee who is not a business operator can be accused of legal liabilities for the infringement of the employers’ trade secrets according to the PRC Anti-unfair Competition Law.
An employee/former employee, who, although did not infringe the trade secrets directly but indirectly engaged in the infringement activities can also be accused of legal liabilities.
After the employer provides preliminary evidence proving that its trade secrets have been infringed, under certain circumstances, the suspected employee/former employee is obliged to prove that he/she did not make infringement, otherwise, the employee/former employee can be liable for the infringement.
The employee/former employee who infringed the trade secrets of the employer can be subject to much more severe punishment under the PRC Anti-unfair Competition Law.
If an employee/former employee infringes the trade secrets of the employer, employers may consider filing the case on the ground of the PRC Anti-unfair Competition Law. This will be more helpful for the employers to protect their interests.

This information is provided for general information purposes only and does not constitute legal or professional advice.  Copyright by CMS, China.

For further information, please contact:

Jeanette Yu
Head of Employment
& Pensions Practice Area Group
CMS, China

T +86 21 6289 6363


This information is provided for general information purposes only and does not constitute legal or professional advice. Copyright by CMS, China.

If you no longer wish to receive any news via e-mail please use this link to unsubscribe. If you wish to receive the latest information on other topics, please click here to subscribe.

CMS, China
“CMS, China” should be understood to mean the representative offices in Mainland China of CMS Cameron McKenna Nabarro Olswang LLP, CMS Francis Lefebvre Avocats and CMS Hasche Sigle, working together. CMS, China is a member of CMS Legal Services EEIG, a European Economic Interest Grouping that coordinates an organisation of independent member firms. CMS Legal Services EEIG provides no client services. Such services are solely provided by the member firms in their respective jurisdictions.   Disclaimer   Privacy Statement

Shanghai Office Beijing Office

2801 Plaza 66, Tower 2
1266 Nanjing Road West
Shanghai 200040, China



Room 1909, China Youth Plaza,
No. 19 Dongsanhuan North Road,
Chaoyang District
Beijing 100026, China