Shanghai Municipality, Several Questions Concerning the Implementation of the «Shanghai Municipality, Labour Contract Regulations» Circular

Issued: April 17 2002
Applicability: The rights and obligations of foreigners, and people from Taiwan, Hong Kong and Macao, approved to be employed within the administrative area of the municipality are determined by the board of directors or the management and specified in the labour contract (Item 26).

Main contents: Part One of the Circular clarifies the applicability of the Shanghai Municipality, Labour Contract Regulations (the Regulations). According to the Circular, the Regulations apply to all types of enterprises, individual economic organizations and institutions employing enterprise management that form a labour contract relationship with workers who have reached the statutory employment age, fulfil the employment requirements specified by the State and the municipality and possess working capability (Items One and Three). The Regulations do not apply to domestic workers, professional insurance agents, full-time students working for profit and those who provide independent services (Item Two).
Part Two of the Circular covers the establishment of labour contracts. Where the necessary provisions in a labour contract are not complete but this does not affect the performance of the main rights and obligations of the contract, the labour contract is valid (Item Three). If the liquidated damages as agreed in the labour contract are more than the employer's actual loss caused by the default of the employee, the employee should bear the liquidated damages as agreed. If the liquidated damages are less than the employer's actual loss, the employee should pay the compensation according to the actual loss when the employer requests compensation (Item Seven). An anti-competition clause may be included in the labour contract or confidentiality agreement (Item Eight).
Part Three concerns the performance of and changes to the labour contract. Item 10 stipulates that the change of the name or legal representative (the principal person in charge) of an employer does not affect the performance of the labour contract. If a labour contract is suspended according to the Regulations, the rights and obligations under the labour contract are also suspended unless laws, regulations and rules provide otherwise or the parties agree otherwise. The employer may suspend payment to the social insurance account during the suspension (Item 12).
Part Four covers the dissolution and termination of labour contracts. For the purpose of calculating economic compensation, wage income consists of wages, bonuses, allowances and subsidies, but excludes various types of taxes paid by an individual. Stock, stock options, dividends and other income and interests that are related to investment but not listed in the total amount of wage should not be included (Item 22).
Related legislation: Shanghai Municipality, Labour Contract Regulations, Nov 15 2001, CLP 2001 No.10 p13