At this juncture, when the Chinese economy is facing a major turning point, the outward flow of Chinese factors and the transformation and upgrading of international industry are comprehensively taking place. As Chinese enterprises respond to the Belt and Road Initiative, the cross-border flow of enterprise capital and talent will necessarily follow, and labour law issues, both domestic and foreign, will be unavoidable.
YOURSELF, YOUR COUNTERPARTS
(1) Due diligence on the host country’s legal environment. The legal environment risks of overseas investment projects vary in myriad ways depending on the legal systems of the host countries. An investor needs to carry out, with the assistance of its legal counsel, comprehensive and in-depth due diligence of the host country’s legal environment at the outset of the project. In the course of the foregoing, understanding of the host country’s labour laws, trade union laws, immigration regulations, dispute resolution mechanisms and laws on corporate tax and personal income tax is necessary.
(2) Basic approach to the cross-border personnel arrangement. First, consideration needs to be given to whether the laws of the host country require an investor to establish an entity in the host country and establish employment relationships with its workers. Financial costs and the human resource structure, particularly the tax burden of an individual when he or she provides services on a global scale, are of major concern to both employers and employees.
The major issues that require attention include: (i) the conditions necessary to secure a working permit and right of residence in the host country; (ii) whether the host country has mandatory legal provisions regarding the execution of employment legal documents by an enterprise; (iii) the link with a Chinese employment contract; (iv) whether dual employment is constituted for the employee; (v) the respective domestic and foreign tax filing and payment obligations of the entity and individuals; (vi) assessment of the risks of a local permanent establishment based on the laws of the host country; and (vii) other issues relating to an employment relationship, e.g., whether there is an obligation to establish a labour union in the host country, different legal obligations in respect of the protection of personal information and data, etc.
(3) Determining the employer’s liability and ensuring personnel safety. Enterprises that “go global” often draft and formulate, either themselves or with the assistance of a lawyer, systems for managing the workplace safety of employees overseas and, before such persons go abroad, arrange for the necessary training to strengthen safety risk prevention awareness. Such an enterprise should also formulate precautionary measures and contingency plans and progressively improve its safety and security systems so as to reduce the employer liability and lessen the compensation obligations of the enterprise “going global”.
(4) Emergency response to unforeseen safety-related incidents abroad. A Chinese labour law lawyer should additionally assist the client in formulating an emergency response plan, specifying that the person in charge of the overseas entity must promptly report to his or her supervisor and the Chinese embassy or consulate any incident occurring abroad that poses a threat to the safety of the life and property of Chinese individuals and establishments abroad or that causes a loss, and duly deal with the same.
CROSS-BORDER LABOUR LAW
(1) Selection and recommendation of legal team. The handling of host country legal matters should be entrusted to local practicing lawyers or other persons with the appropriate qualifications. Practicing lawyers should be selected based on their specialties and practice experience.
The Chinese labour law lawyer can also manage local legal counsel in the host country for the Chinese investor, predict work quantities, allocate working hours of the local legal team and control costs. Importantly, the Chinese labour law lawyer should transform legal opinions provided by the local legal team into concepts easily comprehended by the Chinese investor, to assist the investor in rendering comprehensive and correct decisions.
(2) Application of bilateral agreements. When engaging in the provision of Belt and Road related services, it is sometimes necessary to issue legal opinions on such issues as employment relationships, visas, immigration, taxation, social insurance, etc. in the host country. In terms of social insurance, the Chinese government had entered into bilateral social security agreements with 10 countries by the end of 2017 and just on May 9, 2018, the latest bilateral social security agreement were executed between the Chinese and Japanese governments. Signing bilateral agreement serves the objective to resolve the issue of their investing enterprises and individuals thereof paying social insurance premiums twice and to reduce enterprises’ investment costs abroad. Accordingly, legal opinions on social insurance that involve these eleven countries can be issued directly based on the above mentioned agreements and the domestic social security laws and regulations of China.
(3) Handling of labour union matters and labour disputes. The handling of foreign labour union matters and collective labour disputes, including strikes, etc., is not at all the same as in China, and cannot be treated lightly. Many countries along the Belt and Road hew to the principle of “freedom of association”, permitting the establishment of various forms of labour organizations, with some countries continually strengthening labour-management dialogue mechanisms and increasing the costs of dismissing a worker.
The labour laws of each country are in service at a certain level to the political, legal and social realities of that country. When assisting investors in dealing with labour law issues in countries along the Belt and Road, Chinese lawyers can turn their eye to the logic, reasons, policies and legal principles, and even to the history, philosophy and culture behind the legal rules to ultimately come up with a solution that is conducive to achieving business objectives and is in keeping with the entire benefit arrangement.
Furthermore, there are also relatively large differences between the legislation and judicial practice in foreign countries and China on sexual harassment and the protection of personal data and privacy. When a Chinese labour law lawyer is dealing with cross-border labour-management relations and personnel matters, he or she needs to remind the domestic investor to fully respect local laws and practice.
Qi Bin is the PRC employment law services leader at Xin Bai Law Firm and Jin Shan is a counsel at Rui Bai Law Firm. Rui Bai and Xin Bai are independent law firms and members of the PwC global network of firms.