Employment Policies Issued for Coronavirus Outbreak

This Client Alert summarizes key national and local rules governing employer obligations that have been issued in response to the effort to contain the outbreak of coronavirus. 

The current situation in China is very fluid with national and local authorizes expected to introduce new regulations and policies on a daily basis. Thus, contents of this Client Alert are intended only as general information reflecting the situation as of January 31, 2020. 

For more details on local regulations, please refer to our Chinese-language update of January 29, 2020 as well as our regular email employment updates and WeChat posts. 

I. National Policies

On January 24, 2020, the Ministry of Human Resources and Social Security issued a notice that included the following major points:

• Employers must continue to pay employees, during their treatment or medical observation, who are infected, suspected to be infected, or have been in close contact with infected persons or persons who are suspected to be infected. Employers must also continue to pay employees who are otherwise unable to work as a result of government quarantine measures or due to other government-mandated emergency measures.

• Employers may not terminate any such employees based on grounds under Article 40 of the Labor Contract Law (i.e., individual redundancy, expiration of medical treatment period, and non-performance) or under Article 41 (i.e., mass layoff). 

• Employment contracts that expire for such employees shall automatically extend to the latter date of the end of the statutory medical treatment period, medical observation period, period of isolation, quarantine, or emergency measures taken by the government. 

• If an employer’s operations are adversely affected by the outbreak, employers may take such steps as reducing pay, changing work schedules, and shortening working hours, provided employees agree to such measures. While this provision does not reflect a change in the law, the stated government goals are avoiding and minimalizing layoffs. 

• Employers may take advantage of existing law regarding suspension of business operations and production (停工停产) with reduced salary requirements after a full wage cycle, which is usually one month. The inclusion of this reference to existing law may help an employer justify such a reduction in pay if the outbreak of coronavirus causes an employer to take such steps. 

• The deadline for filing labor arbitration claims by employers and employees will be tolled if a party is not able to timely file due to the outbreak. Arbitration proceedings may likewise be postponed. 

The State Council on January 26, 2020 issued a notice extending the Spring Festival Holiday three days to include January 31, February 1, and February 2, with normal work resuming on Monday, February 3.

II. Local Regulations

On January 27, 2020, the Shanghai city government issued a notice stating that most employers may not “resume work”(复工) before February 10, 2020. “Resume work” is not defined in the notice, and otherwise appears to be a new concept in Chinese law. The notice states that its purposes are to reduce the congregation of employees and to protect employee health. Thus, the January 27, 2020 notice may be interpreted as restricting the right of employers to require employees to report to work locations, rather than a requirement that employers must suspend operations or business until February 10, 2020. 

Initial uncertainty regarding the concept of “resume work” was clarified the next day at a press conference by Fei Yuqing, deputy director of the Shanghai Municipal Bureau of Human Resources and Social Security. Mr. Fei clarified February 3 to February 7 should be treated as “rest days” (i.e., not statutory holidays). Moreover, February 8 and 9, being Saturday and Sunday, should also be treated as rest days. Mr. Fei’s comments were later posted on the bureau website.

Subsequent to the Shanghai notice, more than 15 cities and provinces have issued notices regarding “resume work” with relevant dates for the resumption of work ranging from February 3 (e.g., Beijing) to February 14 (Hubei province).  

Note that much of the contents of recently-issued local regulations and policies merely restate existing employer legal obligations regarding employees who fall ill.

III. Specific Issues

This section has been prepared based on rules applicable in Shanghai. The provinces of Jiangsu, Zhejiang and Guangdong have issued local policies similar to those issued in Shanghai.

A. Work during January 31 – February 2

1.  What is the nature of the leave for the extended Spring Festival Holiday period of January 31—February 2?

January 31 and February 1 should be considered to be “special” national holidays, similar to one-off holidays that have been announced in the past, such as the September 3, 2015 national holiday to celebrate the 70th anniversary of the end of World War II. At that time, a notice was issued requiring employers to provide a day off or pay 200% of salary to employees who worked on the holiday. 

February 2, as a Sunday, should be considered a normal rest day.

2. May employees be required to work during the extended Spring Festival Holiday period of January 31—February 2? If employees do work, how is any overtime compensated? 

Strictly speaking, employees who are not covered by labor bureau exemptions may not be required to work on rest days. Any such work would be considered overtime, with employers having the option of providing employees time off in lieu or overtime pay at the rate of 200%. 

3. May employees work from home during the extended Spring Festival Holiday period of January 31—February 2? May employees be placed on standby?

Employees may work from home during this period. Any work would be deemed to be overtime on rest days with the compensation requirement of time off in lieu or overtime pay at the rate of 200%. 

Employees who are on-call are generally considered to not be working and thus would not be accruing overtime. However, if employees were required to perform services during the on-call period, then the actual time of the work would be deemed as overtime with compensation requirements being time off in lieu or 200% overtime pay. 

B. Work during February 3 – February 9

1. What is the nature of the work performed during the February 3—9 period before “resume work”? What are the compensation requirements?

As discussed above, Shanghai has clarified that these days would be considered rest days with the resulting compensation requirements of time off in lieu or 200% overtime pay. 

Some local jurisdictions have adopted different compensation requirement. For example, notices issued by authorities in the cities of Suzhou, Nanjing, and Wuxi (all in Jiangsu Province) require employers to pay only normal salary for the days of February 3—7. In other words, in these cities, these days are not treated as rest days with corresponding overtime compensation requirements.

2. In Shanghai, which employers are exempt from the restriction of resuming work at the work site during the February 3—9 period? 

The January 27, 2020 Shanghai notice provides that exempt employers include employers necessary to ensure the city's operation (e.g., water supply, gas supply, power supply, and communication), necessary for the prevention and control of the coronavirus outbreak (e.g., medical equipment, medicines, protective product production), and those otherwise necessary for the daily life of residents (e.g., supermarkets, food production and supply). These exemptions are understood to include both qualifying public and private employers.

At the January 28, 2020 press conference, Fei Yuqing, the deputy director of the Shanghai Municipal Bureau of Human Resources and Social Security, reportedly stated that other employers could start work before February 10 if these employers had "specific reasons" for doing so. Still, these employers would first need to obtain approval from the relevant industrial parks, or subdistrict or town government. Mr. Fei indicated that the application for such approval must include the locations visited by employees outside of Shanghai, measures the employer would take for the prevention for spread of coronavirus, and an employer pledge that no coronavirus cases will result from the return of employees to employer’s work location. At the current date, no further information has been publicly released regarding application details or approvals issued.

On January 30, 2020, officials of the Shanghai Municipal Financial Regulatory Bureau at a press conference reportedly expanded the list of exempt employers to include banks, securities, futures, insurance, funds, trusts and other financial institutions, as well as financial markets and financial infrastructure-related institutions providing necessary financial services “for the society and for citizens”. While these officials did not mention any approval or reporting requirements, they recommended to follow any regulations issued by the People's Bank of China, China Banking Regulatory Commission, and the Securities Regulatory Commission. To date, we not aware of any such regulations issued by these agencies.

The current understanding is that employees in Shanghai exempt employers who work are still considered to be working on rest days and entitled to time off in lieu or pay of 200%.

3. In Shanghai, may employees work from home during the February 3—9 period? 

Mr. Fei at the press conference indicated that employers that need employees to work before February 10 should have the employees work from “home” (i.e., not merely work remotely where they might be in contact with more people). This recommendation is understood to apply regardless if the employers are in an exempt industry. As discussed above, because these days would be treated as rest days, the overtime requirements of time off in lieu or 200% pay would apply.

4. May employees be placed on annual leave if employees do not work from home during the February 3—9 period?

According to the opinion expressed by Mr. Fei, because this time period is characterized as rest days, the employer may not treat days not worked as use of annual leave.

5. For employees subject to the flexible working hours system, do they need to be provided with time off in lieu or overtime paid if they work any time during the period of January 31-February 9? 

Shanghai authorities have not publically addressed this issue. Still, because employees who are subject to the flexible working hours system are not entitled to compensation for work performed on rest days, and these days are characterized as rest days, these employees should not be entitled to time off in lieu or overtime pay. 

For employees subject to the comprehensive working hours system, the obligation to pay overtime would depend on whether the actual hours worked exceeds the approved limit for the applicable time period.

C. Employer liability

1. Are there any new penalties or sanctions that could be imposed on employers resulting from the recent national and local regulations?

We are not aware of any new penalties or sanctions. 

2. May an employer be held liable for causing the spread of coronavirus?

Existing law provides both civil and criminal liability. The Law on the Prevention and Treatment of Infectious Diseases could impose civil liability on the legal entity and any individual, which could include the legal representative and general manager, for causing the spread of infectious diseases and resulting physical damage or property loss to others. There may also be liability under the Tort Liability Law.

The Criminal Law provides that a legal entity that violates the Law on the Prevention and Treatment of Infectious Diseases by causing the spread or a great risk of a Class-A infectious disease, which may include coronavirus, could be subject to fines. Senior management, which could include legal representatives and general managers, could also be held criminally liable if their legal entity commits a violation. Punishments include prison terms of up to three years or criminal detention; if the consequences are especially serious, the prison term could be three to seven years. Moreover, individuals who refuse to implement disease preventive and control measures could be fined and subject to prison terms up to seven years.

3. May an employer be held liable for medical costs if an employee gets infected on the job?

A medical industry employer who fails to enroll an employee in statutory occupational injury insurance could be required to bear the full cost of the benefits that an infected employee would otherwise enjoy from the insurance fund.