GC Agenda China: February 2020

Practical Law UK Articles w-024-2436 (Approx. 6 pages)

GC Agenda China: February 2020

by Brad Herrold, Consultant and Practical Law China

State Council, MHRSS and provincial governments issue rules in response to Covid-19

On 26 January 2020, the General Office of the State Council issued the Notice on Extending the 2020 Spring Festival Holiday.

The notice extends China's official Spring Festival holidays through 2 February 2020, two days beyond its scheduled conclusion on 30 January 2020, and indefinitely postpones the start of the new school term for tertiary institutions, primary and secondary schools and kindergartens. Employers generally are required to treat the extra two days as paid leave, and employees who are required to work are entitled to compensatory leave.

On 24 January 2020, the Ministry of Human Resources and Social Security (MOHRSS) issued the Notice on Properly Handling Labour Relations During the Prevention and Control of the Epidemic Due to the Novel Coronavirus, which among other provisions prohibits employers from terminating employees infected with the virus, suspected of being infected or isolated for precautionary purposes. The notice also contains provisions designed to ease the economic stress caused by disruptions due to the virus and tolls the statute of limitations on labour arbitrations.

In addition, various provincial level people's governments, including Shanghai, Guangdong, Beijing, Tianjin, Chongqing, Zhejiang, Jiangsu, Anhui, Sichuan, Shandong, Jilin and many others, as well as certain municipalities within these regions, have issued separate rules that apply only within their respective jurisdictions.

Many of these local rules (such as in Beijing, Shanghai, Zhejiang, Guangdong, Chongqing, Anhui, Shandong and so on) require companies to remain closed until 9 February 2020, except public utilities, companies engaged in the prevention and control of the virus, such as medical care facilities and medical equipment and pharmaceutical companies, and companies providing daily necessities such as logistics providers, supermarkets and housekeeping services. In appropriate circumstances, employees may be required to work from home, subject to local rules. Employees who are required to work may be entitled to overtime pay or compensatory leave under the applicable local rules.

Market reaction

Jeanette Yu, Partner, CMS China, Shanghai

"The extension of the Chinese New Year holiday and temporary work stoppage are obviously effective measures to control the spread of the coronavirus by reducing congestion during the rush hour commute and giving companies time to prepare a safer work environment when employees return to work. The legal basis for the temporary work stoppage is the Emergency Response Law, and most companies have followed the requirements. Some local policies, however, attracted widespread criticism for forcing companies to pay overtime or provide compensatory leave to employees who worked during the work stoppage and imposing an additional financial burden during an already difficult period."

Action items

GC for China-registered companies will want to work with human resources personnel and local authorities to ensure compliance with the notices and any applicable local rules, including overtime payments and compensatory leave. Counsel also may wish to confirm that no employees are unlawfully terminated during the control and prevention period.

Beijing implements employment rules related to Covid-19

On 31 January 2020, the Beijing Municipal People's Government issued the Notice on Flexibly Arranging Work for Enterprises in this City during the Prevention and Control of the Novel Coronavirus Infection Pneumonia Epidemic.

According to the notice, employees of companies in the following sectors may require their employees to attend work as normal prior to 10 February 2020:

Epidemic prevention and control, that is, medicine, protective supplies and medical device production, transportation, sales and related industries.
Safeguarding urban operations, that is, utilities, communications, public transportation and related industries.
Daily necessities, that is, supermarkets, food production and supply, logistics and distribution, real estate and related industries.
Construction of key projects and other projects of importance to the national economy and the people's livelihood.

Employers must take preventive measures such as taking the temperature of employees and promptly and accurately reporting relevant information to the authorities.

Employees of other companies are required to work from home, where the company's business and a specific employee's work responsibilities permit. Where these conditions are lacking, companies must schedule employees to work irregular hours or on flexible shifts in smaller groups to limit the potential spread of the disease.

In addition, on 31 January 2020, the Beijing Municipal Human Resources and Social Security Department (Beijing Labour Bureau) and the Beijing Municipal Health Commission jointly issued the Notice on Postponing the Care of Minor Children by School Personnel to Prevent and Control the Epidemic, which permits each household to have one employee care for minor children at home while the start of the new school semester is delayed in response to the epidemic, requires employers to pay these employees as if they worked in full attendance, and prohibits employers from terminating the labour relationship with these employees.

However, this employee-friendly position was revised on 12 February 2020 by a supplemental notice jointly issued by the Beijing Labour Bureau and the Beijing Municipal Education Department. According to the second notice, companies are required to co-operate with employees who need to care for minor children during the epidemic prevention and control period and arrange for them to work at home by phone and internet, to schedule flexible and off-hours shifts to enable them to work and to adjust the employee's leave days for the calendar year. The notice also asks families with elders capable of caring for minor children to pitch in.

Market reaction

Paul McKenzie, Partner, Morrison & Foerster, Beijing and Shanghai

"The municipal government is under intense and conflicting pressure to prevent the spread of Covid-19 as the city's workforce gradually returns from Chinese New Year travel and at the same time to facilitate resumption of normal business operations in the capital. Parents of school-aged children applauded the employee-friendly January 31 notice but employers, whose businesses are reeling from the effects of Covid-19, were very critical. The balance of opinion has swung in the direction of easing the burden on employers. Nonetheless, with schools in Beijing still closed for the time being, childcare for working parents will remain a challenge and employers in Beijing and other cities whose businesses can support flexible work arrangements will be in a better position to manage through the coming weeks."

Action items

GC for companies in Beijing and other locations throughout China will want to regularly communicate with local human resources and social security departments to ensure internal employment policies and workplace conditions comply with all relevant policies as local governments struggle to adapt to rapidly changing circumstances and equitably allocate the burdens resulting from the Covid-19 epidemic.

State Council introduces special policy on social insurance contributions during epidemic

On 20 February 2020, the State Council held a press conference to outline a special policy to permit companies to reduce, eliminate or defer the payment of contributions to their employees' pension funds, unemployment insurance, work-related injury insurance, basic medical insurance and housing provident funds for a limited time, depending upon the size and location of the enterprise and the type of social insurance, during the Covid-19 epidemic.

According to a report on the press conference:

All enterprises in Hubei Province, as well as small and medium-sized enterprises outside Hubei Province, are permitted to make no contributions to pension funds, unemployment insurance and work-related injury insurance from February through June 2020.
Large enterprises outside Hubei Province may reduce contributions to employee pension funds, unemployment insurance and work-related injury insurance by one-half from February through April 2020.
Enterprises with serious difficulties in production and operation due to the epidemic may apply to postpone payment of these contributions for up to six months without penalty.

In relation to basic medical insurance, the policy permits each provincial level government to reduce the premium payments of enterprises within their jurisdiction by one-half for up to five months beginning in February 2020, depending on the actual situation in their respective region.

The policy also permits all enterprises in all provinces to apply to defer payment of housing provident fund contributions through the end of June 2020. During the deferred payment period, the time for making deposits will continue to be calculated without affecting the normal withdrawals and applications for housing provident fund loans of employees. Companies in areas where the epidemic is severe may make voluntary contributions after consulting with employees.

Market reaction

Paul McKenzie, Partner, Morrison & Foerster, Beijing and Shanghai

"Social insurance contributions constitute a significant part of employers' overall labour costs in China. Suspending or reducing employers' liability for these contributions represents a huge fiscal stimulus measure. Other like measures will be sure to follow. A number of local governments have already announced various stimulus measures of similar types, such as providing for refunds of certain social insurance contributions that eligible companies have already made."

Action items

GC for entities with employees in China will want to be aware of the relief available under the temporary nationwide social insurance policy, as well as any relevant local policies, and work with government relations and human resources personnel to determine the specific rules that apply to each entity. To head off unnecessary disputes, counsel also may wish to assist senior management in communicating the underlying policies and any changes in the payment of social insurance contributions to all employees.

CAC issues notice on protecting personal information collected during effort to control epidemic

On 9 February 2020, the Cyberspace Administration of China (CAC) issued the Notice on Doing a Good Job Protecting Personal Information while Using Big Data in Supporting Joint Prevention and Control.

The notice supplements the Cyber Security Law 2016 by addressing the unauthorised collection, use and disclosure of personal information in the effort to control the spread of Covid-19.

The notice restricts the collection of personal information in response to the epidemic to those entities and individuals authorised by the National Health Commission (NHC) under applicable laws (except where a data subject gives consent) and orders these institutions to adopt strict management and technical protection measures to prevent theft and leakage of the data.

Personal information collected to control the epidemic must comply with the relevant national standard, the Personal Information Security Specification (see Quick guide: Cybersecurity and data protection: China: Personal information security). Collection must be narrowly tailored to key groups (as opposed to broad geographic areas), such as diagnosed persons, those suspected of exposure and those in close contact with diagnosed or suspected individuals. The data must not be used for purposes other than controlling the epidemic, unless it is de-sensitised by removing the data subjects' name, age, home address and so on.

The notice also permits any organisation or individual who discovers the collection, use or disclosure of personal information in violation of laws and regulations to report it to the relevant office of the CAC or the local public security department.

Market reaction

Chen Jihong, Partner, Zhong Lun Law Firm, Beijing

"The notice reveals the government's desire to strike a balance between limiting the spread of the epidemic and protecting personal information in the use of big data to fight the Covid-19 epidemic. Since there are huge amounts of sensitive personal information involved, entities involved in efforts to control the epidemic must demonstrate a lawful, limited purpose for processing personal information without a data subject's consent, strictly honour the principle of data minimisation and retain processing records to demonstrate compliance. In the longer term, these entities must establish mature and comprehensive mechanisms for protecting personal information when dealing with similar emergencies."

Action items

GC for entities that collect and process personal information while using big data to control the spread of Covid-19 must ensure their activities are expressly authorised by the NHC under applicable law and adopt appropriate data collection and usage measures in accordance with the Personal Information Security Specification. Counsel may wish to advise senior management to co-ordinate relevant activities directly with the relevant office of the CAC or the local public security department.

GC Agenda China: February 2020 | Practical Law