China Labor Law: What Happens When the Employment Agreement and the Handbook Disagree?

A client’s Human Resources manager contacted the office yesterday seeking our China Lawyer’s advice on the client’s proposed new standard Employment Agreement and Employee Handbook. When looking at these documents, we noticed several discrepancies between them in addressing some important topics. For example, the terms and conditions for paying the annual bonus and the situations for terminate the labor relationship with the employee did not match up.

According to Chinese labor related laws and regulations, the lawfully concluded Employment Agreement is binding on both the employer and the employee. For a company’s rules and regulations, contained in the handbook, if these are decided on and implemented through a “democratic process” and are not in violation of law or regulations, they must be observed by both sides.

It is important to note that even though company regulations are supposed to be passed via a a “democratic process” in practice most companies do not seek employee’s input in preparing and implementing such rules. In contrast, the Employment Agreement is typically negotiated and reviewed closely by the employer and the employee before signing in mutual agreement on its terms. The Employment Agreement therefore exhibits the principles of lawfulness, fairness, equality, voluntariness, negotiated consensus and good faith.

So, where there is a discrepancy between the Employment Agreement and the Employee Handbook, which will be controlling? Given the practical differences between the Employee Agreement and the Handbook, it is no surprise that the China Supreme People’s Court has stated that courts should generally support an employee’s request to apply the terms of the Employment Agreement itself, rather than the Handbook.

Of course, it is always better to avoid having to have these matters decided by labor arbitration or by a court. When signing Employment Agreements with new employees, be sure that your China lawyer takes a look at the contracts, and perform regular reviews of your Employee Handbook, as these should be updated often to keep up with changing laws and regulations.

Published by Bonnie Zhang on December 22nd, 2016 tagged Uncategorized

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