Employers beware: noose is tightening on unwanted or illegal foreign workers

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The National People’s Congress has passed the Law of the People’s Republic of China on Entry and Exit Control, which takes effect on 1 July 2013. The new law not only governs the exit and entry of citizens and foreigners, but also contains provisions concerning foreigners’ residence and employment in China. The new law supersedes the existing entry and exit control laws, which will be repealed.

 The new law reviews the work and residence status of foreigners, with tighter controls.

The new law reviews the work and residence status of foreigners, with tighter controls.

Key employment provisions

The new law expressly addresses the employment of foreigners in China. Specifically, the law requires foreign nationals to apply for work authorisation and prohibits employers from engaging foreign nationals who lack work authorisation. A foreign national is deemed to be illegally employed if he or she:

(1) works without having secured a work permit or related residence permit;

(2) engages in activities beyond the scope permitted by the work permit; or

(3) is a foreign student engaging in activities beyond the scope permitted by the work-study position.

On a broader level, the law requires in-country activities to match the type of visa held. Foreigners are prohibited from engaging in activities not consistent with the purpose of their visit or stay in China. Engaging in such activities can be a basis for being denied entry.

A foreigner would run afoul of these provisions, for example, by applying for an L visitor or tourist visa, but entering China to work.

Failure to comply

Compared to the current law, penalties for non-compliance have been increased (see table below).

Violation

Current law

New law

Illegal employment

Employer: RMB5,000 to 50,000, plus expenses for sending the foreigner out of the country

Employee: Up to RMB 1,000

Employer: RMB10,000 per person up to maximum RMB100,000, plus confiscation of income derived from the employment

Employee: From RMB5,000 to 20,000, plus possible detention of five to 15 days

Illegal stay (or overstay)

Warning, and possible fine of RMB500 per day up to maximum RMB5,000, or three to 10 days detention.

Warning, plus possible fine of RMB500 per day up to maximum RMB10,000, or detention of five to 15 days.

Fraud in issuing invitation letter (individual or entity issuing the letter liable under the new law for truthfulness of the invitation)

Not covered

Individual: RMB5,000 to 10,000

Entity: RMB10,000 to 50,000, plus confiscation of illegal income, and expenses for sending the foreigner out of the country

A foreigner may be removed from China for illegal residence or employment, and in such a case will not be permitted entry for up to five years. Violation of the new law under “serious” circumstances may lead to deportation, resulting in a 10-year ban from entry. What specific actions will lead to a removal or deportation under these provisions remain to be seen.

Noteworthy provisions

  • Few references are made to the “talent” visa, a new category highly anticipated by employers looking for options beyond the limited work and business visas currently available for sending foreign employees into China. It is hoped that implementing regulations define eligibility criteria and activities permitted under this visa type.
  • The education authority is mandated to issue regulations governing work-study activities for foreign students. Such regulations are expected to provide long sought after guidance to employers seeking to provide internships to student visa holders, particularly as violations of these regulations would constitute illegal employment under the new law.
  • Upon discovery of a foreigner’s illegal entry, residence or employment, Chinese citizens have an affirmative duty to report to the local public security authority. The new law does not state penalties for failure to report.
  • A unified platform for information sharing will be established for the relevant government authorities, which may include a system for the collection of fingerprints and other biometrics. This would bring China in line with other jurisdictions, such as Hong Kong and Singapore, which have biometrics requirements for the work permit process.

Conclusion

In the coming months, implementing regulations are expected on key provisions ranging from the new “talent” visa category to the employment of foreign students. The regulations are also expected to provide clarifying guidance on the validity of visas and residence permits, and to impact local practice and procedure.

The existing regulations governing the administration of the employment of foreigners may be impacted. Employers are encouraged to stay tuned for future updates, as businesses will need to remain agile to meet the legal changes ahead.

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-mail at: Zhang Danian (Shanghai) [email protected]