PRC Employment Contract Law

中华人民共和国劳动合同法

July 02, 2007 | BY

clpstaff &clp articles &

New employment contract law imposes greater requirements on employers.

Clp Reference: 2200/07.06.29 Promulgated: 2007-06-29 Effective: 2008-01-01

Promulgated: June 29 2007
Effective: January 1 2008

Main Contents: The Law allows an employer to specify in the employment contract of, or a confidentiality agreement with, a worker who bears an obligation of confidentiality an anti-competition clause and monthly compensation for the anti-competition period after the termination or ending of the employment contract. If the worker breaches the anti-competition restriction, he/she shall pay the employer liquidated compensation as agreed.

Persons subject to an anti-competition restriction shall be limited to the employer's senior management personnel, senior technical personnel and other persons with an obligation of confidentiality. Once an employment contract is terminated or ends, the term of the anti-competition restriction that prohibits a person from serving with a competitor that produces or deals in the same type of product or engages in the same type of business as the employer, or prohibits him/her from opening his/her own business to produce or deal in the same type of product or engage in the same type of business may not exceed two years.

Article 46 requires an employer to pay a worker severance pay if:

(1) the worker terminates his/her employment contract pursuant to Article 38 of the Law (for example, the employer failed to pay labour compensation on time and in full);

(2) the employer proposes the termination of the employee's employment contract and reaches a consensus on the termination thereof with the worker through consultations;

(3) the employer terminates the worker's employment contract pursuant to Article 40 of the Law (for example, the worker is incompetent);

(4) the employer terminates the worker's employment contract pursuant to the first paragraph of Article 41 of the Law (for example, the employer needs to carry out a personnel cutback due to a restructuring in accordance with the Enterprise Bankruptcy Law);

(5) the worker's fixed-term employment contract ends upon expiration, unless the Employer proposes its renewal on the same or better terms and the worker does not agree thereto;

(6) the worker's employment contract ends because the employer is declared bankrupt, has its business licence revoked, is ordered to closed, is closed down, or decides to dissolve early; or

(7) another circumstance specified in laws or administrative regulations exists.

Full Analysis & Translation: See page 26

clp reference:2200/07.06.29prc reference:中华人民共和国主席令 (十届第65号)promulgated:2007-06-29effective:2008-01-01

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