The Shenzhen Intermediate People’s Court released the full text of its Guidance on Dealing with Labour Dispute Cases in early December, clarifying some major employment issues in this special economic zone.
Non-compete. According to the guidance, if there is any discrepancy between Shenzhen’s non-compete rules and the Supreme People’s Court’s guiding interpretations, the Shenzhen local rules prevail.
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This means that although the Supreme People’s Court’s interpretations set 30% of the employees’ average monthly salary in the past 12 months as a reasonable rate of compensation, in Shenzhen, companies should still offer at least 50% of the average monthly salary as monthly compensation.
Hiring non-mainland residents. The employment relationship will be regarded as not having been established if foreigners or Hong Kong/Macau/Taiwan residents are hired without a valid work permit, or if they change employer without the details of the new employer being updated in the work permit.
Open-term contract. The Guidance specifies that if an employee satisfies the conditions for signing an open-term employment contract, the employee should raise the request for an open-term contract before the expiration of the current fixed-term contract.
Unused annual leave compensation. If the employment contract, collective contract or the company’s policies do not specify the compensation standard for the company’s additional annual leave days, the compensation standard for statutory annual leave should apply to those additional annual leave days.
In addition, the Guidance clarifies that if an employee wishes to claim for compensation for accrued but unused annual leave during the time of employment, the one-year statute of limitations period for bringing such a claim will begin from 1 January of the third calendar year following when the annual leave originally accrued. If the employment relationship is terminated or expires, the limitation period should start from the last date of employment.
Salary for wrongful termination period. If an employee is wrongfully terminated by the employer and is reinstated by a labour arbitrator or a court, the salary standard for the period of wrongful termination should be the employee’s average normal salary over the previous 12 months before the wrongful termination took place.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at:danian.zhang@bakermckenzie.com
