With the recent outbreak of COVID-19 in multiple locations throughout China, some communities have pressed the pause button in order to better prevent the disease from spreading and endangering the lives and health of the general public. The impacted people might have been requested to quarantine themselves at home in order to prevent and control the disease properly. Individuals are not allowed to move, gather, or depart from their communities with limited exceptions. Employees are unable to perform routine labor in this circumstance, putting both employers and employees in trouble.
To handle labor relations during the COVID-19 preventive and control phase, governments at all levels have released normative documents encouraging companies to negotiate with employees to use the paid annual leave on priority. This approach takes into account both employers’ and employees’ legitimate rights and interests. From companies’ perspective, this approach can assist employers in minimizing losses caused by the impact of COVID-19, further stabilizing labor relations, and promoting the resumption of work and production, as well as the sustainable development of businesses.
In light of this, we address a fundamental question – do employers in China have the unilateral right to arrange for paid leaves for their employees? In a previous article – Managing HR in China during the Coronavirus Outbreak: Work Delays, Annual Leave Entitlements, we analyzed this issue during the first outbreak of COVID-19 in China in early 2020. This current article provides some more practical guidance to employers who are experiencing the new round of COVID-19 outbreaks by studying a typical case released by relevant authorities.
The following case is from the Typical Cases of Labor and Personnel Disputes (First Batch), which was jointly released by the Ministry of Human Resources and Social Security and the Chinese Supreme People’s Court in July 2020.
Li earned RMB 8,000 per month as a chef in a catering company. Li could have five days of paid annual leave per year from 2019. He requested to carry his unused annual leave from 2019 over to 2020 in writing and gained the catering company’s approval. On February 3, 2020, the local municipal government required that all enterprises not involved in the COVID-19 pandemic prevention and control delay the resumption of work and production until February 17, 2020. The catering company promptly informed Li of the delay in resuming work and asked Li to take paid annual leave of 2019 and 2020 from February 3 to February 14, 2020. Li expressed his disagreement, while the catering company requested him to comply with the arrangement and paid Li’s salaries from February 3 to February 14, 2020. Li argued that it was illegal for the catering company to unilaterally arrange the leave without his consent and that wages paid by the catering company to him during this time period should be considered as wages during the period of work and production suspension. So, he requested the company to pay for his untaken annual leave in 2019 and 2020. The catering company, on the other hand, refused. Li then filed the dispute at the local labor arbitration.
In the labor arbitration, the applicant requested the catering company to pay for the wages of unused paid annual leave from 2019 and 2020 of RMB 6, 620.69 (RMB 8,000/21.75 days × 6 days × 300%). However, Li’s arbitration request was denied by the Labor Arbitration.
The key dispute in the above case is whether it is legal for the catering company to arrange Li to take paid annual leave during the epidemic prevention and control period without Li’s agreement.
Let us have a glance at the relevant laws and regulations.
According to the abovementioned applicable rules and regulations, the employer has the authority to make overall arrangements for employees’ annual leave in accordance with production and work conditions. Consultation with employees is a mandatory procedure that employers are required to perform but there is no requirement that “consensus must be reached”. No matter whether the employees agree or not, enterprises can arrange the paid annual leave after performing the negotiation procedure. This legal interpretation has been supported by Opinions on Proper Dealing with Labor Relationship Related to Epidemics issued by the Ministry of Human Resources and Social Security and the Chinese Supreme People’s Court (Ren She Bu Fa  No. 17).
Back to the case example, the employer arranged Li to take paid annual leave after active communication with Li, and paid wages accordingly. The employer’s practice was in accordance with applicable laws and regulations. Li’s arbitration request was rejected by the labor arbitration for lacking legal and factual basis.
Employers and employees are clearly directed by Document No. 8 to use paid annual leave, welfare leave additionally provided by enterprises, and other types of leaves in priority, in order to minimize the impact of the COVID-19 pandemic on both employer‘s business operations and employees’ labor income.
In general, when an employer arranges employees to use paid leaves during COVID-19 in priority, the employer should make every effort to take the employees’ actual situation into consideration, conduct the negotiation procedure in accordance with the law, and pay wages for the paid leaves in accordance with the law.
Employees, on the other hand, should have a thorough and accurate understanding of relevant laws and policies, and accept the employer’s arrangements.
After all, the COVID-19 pandemic is a crisis faced by the whole human society. The legislator wants to guide employers and employees to take responsibility and overcome difficulties jointly.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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