Hiring and Firing Workers in Asia and the Pacific · Hiring and Firing Workers in Asia and the Pacific ... and the Labor Contract Law provides that an employee can be ... Who is the

1 Hiring and Firing Workers in Asia and the Pacific

Questions and Answers

Hiring and Firing Workers in Asia and the Pacific

February 22, 2012 Sessions 1 and 2

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Does "in writing" include electronic formats, e.g., a .pdf document sent by e-mail? Phillipa Muir A: In NZ, electronic formats would generally be deemed to be "written" agreements. However they need to be signed by the parties. Cynthia Chung A: In HK, it can be by electronic means but I believe this question is more relevant for jurisdictions where written contracts are legally required. ________________________________________________________________ What is the best practice for termination in Korea for cause or due to restructuring? Paul Cho A: Because satisfying the “just cause” standard for termination in Korea is very difficult, particularly within a short period of time (i.e., termination for the employee’s poor performance), the general practice is to try to obtain the resignation, release and waiver of the employee in exchange for an ex-gratia payment (on top of statutory severance pay). To enhance both the company’s legal and strategic positions in this regard, the company should have already implemented a progressive disciplinary process, which is expected by the labor authorities and the courts. For purposes of a layoff (i.e., termination for business reasons), the requirements are very strict in this regard and unless the company is in severe financial distress, it is very difficult to meet “urgent business necessity” requirement for a layoff. Therefore, companies will try to obtain the resignation, release and waiver of the employees in exchange for an ex-gratia payment, provided that to enhance this possibility, the employees should understand that the company is in a crisis, which would hopefully encourage them to resign. ________________________________________________________________ In China, can a full-time employee for one company work as a non-full-time employee for another company? Jeffrey Wilson A: Yes, except for foreign nationals.


________________________________________________________________ Coming back to the above question, can the employment contract contain a restrictive covenant that the employees cannot work for another company? Jeffrey Wilson A: Yes, and the Labor Contract Law provides that an employee can be terminated if the employee works for another employer if there is substantial damage to the original employer. There would not be a need to include such a provision in the contract. ________________________________________________________________ Is it necessary to include the reason in a fixed-term employment agreement? Phillipa Muir A: Yes, in NZ that is a statutory requirement. Jeffrey Wilson A: In China, no. But there is a limit of two fixed-term contracts ________________________________________________________________ Is the employer required to confirm in writing when the probation period is completed? Ajay Raghavan A: Nothing in law requires you to do so, but it certainly is good practice to do it. Cynthia Chung A: Same with Hong Kong Richard Emmerson A: Not in Indonesia ________________________________________________________________ In Hong Kong, if you change the employment terms, do you need the employee's consent? Cynthia Chung: Yes; the employee's consent is required if the change relates to a fundamental term of employment and the change is detrimental to the employee. ________________________________________________________________ Do you recommend not using permanent, but rather full-time regular? Richard Emmerson A: In Indonesia, the only distinction is definite term or indefinite term ________________________________________________________________


Could a company have a policy to prevent an employee from working for another company no matter full-time or non full-time? If so, any conflicts? Jeffrey Wilson A: A company could prevent an employee from working for another employer if the second employer is a competitor or the employment interferes with the duties of the first employer. ________________________________________________________________ What is maximum period by which we can extend an employee’s probation as per law in India? Ajay Raghavan A: The law doesn't specifically refer to probation provisions, but typically companies try and keep it down to below a year so that they are not hit by the Industrial Disputes Act. ________________________________________________________________ For probation, we exclude management; do we have a legal definition to know who all are part of management? Ajay Raghavan A: Unfortunately 'management' as a term is not clearly defined anywhere. However courts have suggested that 'management' is typically someone who has the ability to control other employees and has the ability to hire and fire ________________________________________________________________ As per law or legal requirement, if an employee’s probation is extended, is the company legally responsible to issue an extension letter, especially in the service industry? Ajay Raghavan A: While there is no legal stipulation, it is good practice to expressly indicate to the employee that the probation period is being extended. If you don't then the employee might be able to claim that their service has been regularised. ________________________________________________________________ Does an employer have to compensate employees' salary loss during the non-competes period in Aus. and S. Korea? Paul Cho

A: When challenging a non-compete clause in Korea, the courts will rule whether or not the non-compete was reasonable in duration and scope. If they find that, for example, part of the non-compete is excessive, they will enforce only the period is reasonable. ________________________________________________________________


Who is the retrenchment process in Malaysia? Do we need to get approval from the Ministry and how long? Sivabalah Nadarajah A: You do not have to get approval from the Ministry but you are required to notify them, in a prescribed form, at least 1 month before the retrenchment. ________________________________________________________________ Can notification to employees be conducted before approval from Ministry in Malaysia? Sivabalah Nadarajah

A: Yes, they can be notified before the Ministry is notified but the termination of service should take effect at least 1 month after the notification to the Ministry. ________________________________________________________________ Cynthia -- we do not sign a non-compete agreement with our HK employees. Can we protect the company’s interest by inserting a non-compete clause in the termination letter (e.g., mutual separation agreement)? Is it enforceable? Cynthia Chung A: It would be enforceable in a termination agreement only if supported by consideration, e.g., a discretionary payment. ________________________________________________________________ In NZ, if the employee transfers to new position, does he need to sign the new contact? Phillipa Muir A: Usually all that is required is for a variation to be drafted and signed by the parties recording the new role etc. and confirming that all other terms and conditions remain unchanged. ________________________________________________________________ In Indonesia, do you recommend permanent contracts or fixed-term contracts? Richard D. Emmerson A: A: Fixed-term contracts have various restrictions but may be useful in certain circumstances. A fixed-term contract can only be offered for an initial term of 2 years maximum plus an extension of 1 year maximum. After that, if there is a 30-day clean break, then the employee can be offered one additional fixed term of 2 years maximum. Permanent employees can be subject to a 3-month maximum probation period during which termination at will is permitted. No probation period is permitted for fixed-term employees. The key difference is that permanent employees are entitled to the full range of termination benefits including court approval of any termination (unless settled by agreement in writing). By contrast, fixed-term employees do not enjoy any of those severances, long service, and other


compensation benefits. However, upon any early termination of a fixed-term contract, the employee is entitled to their full salary for the entire agreed fixed term unless the employer can demonstrate breach of such contract by the employee. In conclusion, some employers will begin with a fixed-term contract (the initial term depending upon the employer’s confidence that the relevant employee will work out well) and extend that contract one time. After that, a productive employee will normally be granted permanent status or possibly utilize the 30-day clean break mechanism to offer the third and final fixed term. ________________________________________________________________ In China, do you recommend fixed-term contracts? Jeffrey Wilson A: Yes, because a fixed-term contract has an end date when the employer can decide whether to extend the contract. There is no such option with an open-term contract, thereby forcing the employer to rely upon statutory termination grounds, which are often difficult to show. ________________________________________________________________ Why is termination so difficult in China? Jeffrey Wilson A: Because: 1. The grounds are very limited. 2. Even when the grounds are available, the government make actively discourage termination

(e.g., mass layoffs) 3. Procedural barriers (e.g., showing that an employee is “incompetent”) 4. Employer fail to follow termination procedures or collect evidence 5. Employers fail to have company rules, which could provide termination grounds 6. Evidence is difficult to introduce in PRC litigation. ________________________________________________________________ Do any countries exclude "management" or "supervisory: employees from its employment legislation? Cynthia Chung A: Not in Hong Kong Ajay Raghavan A: India does. Some of the more significant legislations in India do create the exclusion. Richard Emmerson A: Not in Indonesia except for overtime pay and a special type of separation pay payable upon resignation or deemed resignation due to absence without leave ________________________________________________________________


In India, can company terminate a poor performer? Ajay Raghavan A: Yes and I will be talking about this in more detail in the coming slides. ________________________________________________________________ You mentioned that you can have electronic agreements, but parties must sign. Will an electronic signature suffice (e.g., click on acceptance, digital signatures, etc). Phillipa Muir A: The issue hasn’t arisen in NZ yet, but I would advise against it as it may be difficult at a later date to prove that the contract was actually signed. ________________________________________________________________ What is the Indian courts’ view on the fixed-term employment contract for employees in India, given the fact that firing an employee is difficult under Indian law ? Ajay Raghavan A: If the contract is a genuine fixed-term and has not been renewed time and again, then courts will normally not interfere in such contracts. ________________________________________________________________ Does the concept of collective bargaining agreements exist in NZ like in Australia? Phillipa Muir A: Yes - collective agreements apply to unions and employees who come within the work coverage of the union. ________________________________________________________________ If the employer reserves the right to change working location with reasonable ground in the contract, can the employee raise objection or even terminate the contract and ask for compensation? Phillipa Muir A: If the employment agreement provides for the workplace changing, then, in NZ, if the move is to a reasonable location, the employee is consulted, and reasonable notice is given, the employee can't generally object to the move (or claim compensation). ________________________________________________________________


Re: a contract in China: is it also necessary to provide a Chinese translation for expats who are localized, even though they are Chinese. Jeffrey Wilson A: All foreigners must have at least summaries of their contracts or assignment letter submitted as part of the work permit process. So, yes, translations are required as a practical matter. ________________________________________________________________ For China, can the contract be in both languages? Meaning in the same document? Jeffrey Wilson A: You can have the contract in both languages, but as a practical matter the Chinese version will prevail, even if the contract says the English will govern. The reason is that the contract must be translated for litigation. ________________________________________________________________ What other countries have mandatory language requirements? Cynthia Chung A: Nil in HK as long as the employee understands that language- Richard Emmerson A: In Indonesia, fixed-term and permanent employment contracts should be in Indonesian or in a bilingual English-Indonesian format . ________________________________________________________________ Does Thailand have the language requirement for local employees? Andrew Wynne

A: No. As a matter of fact Thai law does not in most circumstances require that employment contracts be made in writing, or that any written statement of employment terms be given to the employee. As a matter of practice it is nevertheless common for employment contracts to be made in writing, and it also common for them to be a language other than Thai, which most often would be English, when either party to the contract is non-Thai. The only downside to this is that the contract then has to be translated if there is a dispute that goes to the Thai courts, where proceedings are conducted entirely in Thai. ________________________________________________________________


Paul mentioned that terms in an employee handbook can be incorporated by reference in the labor contract. Does that work for the other jurisdictions as well (I believe that works in China, but would like Jeffrey Wilson to confirm)? Jeffrey Wilson A: Yes Cynthia Chung A: Yes for HK as well. Phillipa Muir A: In NZ, employer handbooks usually sit outside the employment agreements, but are referred to in the agreement and can be amended from time to time Val Gostencnik

A: Yes in Australia but I generally advise against it because of the generalised nature of the drafting of policies and handbooks and also because it may limit to capacity of an employer to alter the policy or handbook. Sivabalah Nadarajah

A: I also advice against reliance on handbooks for the same reasons as Val. If a handbook is to be used, I would advice that it should state that the terms are merely guidelines and the employment contract terms would prevail. I would also state expressly that the company has the discretion to depart from those terms in the handbook ________________________________________________________________ Jeff, do we need to record labor contract template with the competent governmental authority in China? Jeffrey Wilson A: There still are old regulations that require recordal or even review. As a practical matter, this is not required. Collective contracts may need to be recorded, or even approved in some places. ________________________________________________________________ In China, for this situation, can the person sign an agreement with non-full-time employer? Jeffrey Wilson A: Yes, in fact no written contract is required for part-time work. But to prevent disputes, it's probably better to have written contracts. ________________________________________________________________


Ajay - how effective is enforcement of non-compete & confidentiality clauses in Indian courts in the event of a breach? Ajay Raghavan A: Non-compete provisions beyond the term of employment are not enforceable in India and courts take a very strong view on such clauses and will normally refuse to enforce them. Confidentiality on the other hand is certainly enforceable, as long as you can show evidence of the fact that there was breach of confidentiality. ________________________________________________________________ In mainland China, if you have a “mutual separation,” are you required to pay an employee to leave? For example if n=# of years employment you pay n months’ salary when the employee leaves? Jeffrey Wilson A: Yes, employees are entitled to severance in a mutual termination – one month for each year of service, subject to a cap. Most employers pay more to get the agreement of employees. ________________________________________________________________ Hiring Professional Technical Foreign Q in Malaysia Employees – is the Company required to pay them per Expatriate package/follow per local employees’ package ? Sivabalah Nadarajah

A: For technical professional expatriates, there is no necessity to follow the local employee package and, in fact, local terms are rarely followed. For foreign workers in factories, there is a requirement that the terms they are given should not be less favourable than the local workers. ________________________________________________________________ In China, could we terminate the dispatched employees without paying any severance or do we just need to return them to FESCO and have FESCO do the termination? The dispatched employee has been working in our office for 3 years. Jeffrey Wilson A; In China, could we terminate the dispatched employees without paying any severance or we just needed to returning them to FESCO and have FESCO do the termination? The dispatched employee has been working in our office for 3 years. Usually the FESCO service contract will require that termination grounds under the Labor Contract Law apply in order to return the employee to FESCO. Some termination grounds will require severance (e.g., performance). It may be possible to return the employee to FESCO without cause, but the host company may have to pay a minimum salary for the term of the dispatch period, plus severance.


________________________________________________________________ Is it an acceptable practice to include a 'claw back' clause in employment contracts for costs like training, relocation, sign on bonus, etc. in India? Ajay Raghavan A: While it is common to see claw back clauses in certain types of jobs - typically where training abroad is involved, but its not easy to enforce in court. ________________________________________________________________ What are the basic requirements for non-compete and confidentiality clauses in Taiwan? Elizabeth Pai:

A: Basic Requirements for Non-compete Clauses: Non-compete clauses in an employment agreement are enforceable in Taiwan as long as they satisfy certain criteria. However, the court's opinion regarding the specific criteria is still changing and no clear-cut guidelines have been established. Nevertheless, the courts will generally examine the following standards in determining whether non-compete clauses are enforceable:

1. Whether the employers' interests in the non-compete clause are worth protecting; 2. The job position and skill of the employees in the original company. For example, a non-

compete clause for an employee with common skills and a lower position is more likely to be unenforceable than a non-compete clause for an employee with special skills and a higher-level position.

3. Whether the scope of the restriction is reasonable with respect to the period, area, and occupational activity of employment.

4. Whether the employee is compensated to his or her detriment due to the non-compete clauses.

5. Whether the employee is obviously disloyal or, in bad faith, competes with the employer after leaving his or her original job. Should this occur, the non-compete clause is more likely to be enforceable, since the employee is not worth protecting.

Basic Requirements for Confidentiality Clause: A typical confidentiality clause in an employment agreement is generally enforceable under the Taiwan law. ________________________________________________________________ How about the situation in China regarding the workplace changing? Jeffrey Wilson A: Depends on how far away the new location is. If it is a substantial distance or imposes an undue hardship (e.g., no public transport), then employee consent would be required. We usually use a general description for the location (e.g., Shanghai). ________________________________________________________________


Is there any distinction in China between a "consulting" agreement signed directly with an employee and a short-term employment agreement? Jeffrey Wilson A: A consulting agreement would mean the person is an independent contractor not an employee, and so governed by the Contract Law, not the Labor Contract Law. There are a few rules how to distinguish independent contractors from employees, such as control. ________________________________________________________________ Must the employer prove the employees can understand other languages such as English if there is any dispute? Jeffrey Wilson A: Not necessarily, but if the contract is only in English, was provided by the employer, and the employee does not understand English, a labor arbitration tribunal or court is likely to favor the employee in a dispute. ________________________________________________________________ How effective is enforcement of non-compete & confidentiality clauses in Indian courts in the event of a breach? Ajay Raghavan A: We will discuss non-compete clauses in the next slide, but the answer in summary is that non-competes are not enforceable beyond the term of the contract, although confidentiality clauses can be enforced. ________________________________________________________________ How about clauses preventing solicitation of the company's employees after termination --are they enforceable? Ajay Raghavan A: In India - yes they are enforceable. Richard Emmerson A: We include non-solicitation of employee clauses for senior employees which may or not be enforceable in Indonesia Cynthia Chung A: Yes, they are enforceable in HK provided they are reasonable in scope ________________________________________________________________


If we have the contract in English but attach a Chinese translation (prepared by the employer) for reference, how likely do you think this Chinese translation will be accepted for use in litigation? Jeffrey Wilson A: Unless the translation is signed by both parties, you would probably need to get a certified translator to prepare a translation. They would probably refer to your translation. ________________________________________________________________ Can probation periods in China be extended? Jeffrey Wilson A: Probation periods can't be extended, even if the employee agrees. It puts the employee and employer in a bad position, because the employer will usually be forced to terminate the employee. On the other hand, if you could extend the probation period, many employers would abuse this and simply keep employees on probation. ________________________________________________________________ Could an employee sign a Labor Contract to work in one city but later on be assigned to work in other cities within the country? Do we need to re-sign another contract with the employee? Jeffrey Wilson A: For PRC nationals, that is permitted; in fact it is somewhat common to sign contracts with the home office, but the employees work at branches. There is an issue of where the social insurance will be paid though. ________________________________________________________________ What is the severance payment amount in China? Jeffrey Wilson A: The statutory amount is one month's compensation for each year of service, subject to a cap of 300% of the local average wage. ________________________________________________________________ If we decide to terminate an employment during the probation period, does the company need to pay compensation, say an employee got terminated due to poor performance or terminated based on integrity grounds? Ajay Raghavan A: If the employee has completed more than one year of probation, then yes it’s very likely that you will need to pay retrenchment compensation.


Sivabalah Nadarajah A: For poor performance, the Courts take the view that the employer is the best judge of the performance and so long as the employer can show that he had genuine grounds for his unhappiness, the termination will be upheld. ________________________________________________________________ If a company has recently been set up (2 yrs ago) and has not yet made a profit, is it required to pay under the Payment of Bonus Act? I believe there is a 100 rupee minimum? Ajay Raghavan A: No, you don't need to pay it. New companies have a 5-year window where they don’t make profits. ________________________________________________________________ For a company doing business in several countries, since the host law seems to have quite a wide variation, standarization within the company seems problematical. Is that correct? Phillipa Muir A: Yes - you will generally need to have specific employment agreements (with specific terms) for each jurisdiction. ________________________________________________________________ Our understanding of probation is that it is followed by permanent employment. How about probation followed by fixed-term employment in India? Ajay Raghavan A: Labour courts tend to be pro-employee and if courts find that the employer is trying to avoid making someone regular by trying to use things like fixed-term contracts, then they are likely to rule in favour of the employee. ________________________________________________________________ For China, is there any probation terms for part-time worker? Jeffrey Wilson A: No, probation is not necessary because part-time workers may be terminated at will. ________________________________________________________________ Is there a maximum limit for the probation period in India? Ajay Raghavan A: Under the Shops & Establishments Acts in different states in India, the notice period for termination can start after a certain period, for instance, in some states it says that any employee who has completed 3 months is then entitled to 1 week’s notice. ________________________________________________________________


Can we include several cities, or even several countries, as the working location in the contract? Jeffrey Wilson A: For China, no. But the contract could provide that the employee is required to travel or could be assigned on a temporary basis. ________________________________________________________________ If it crosses 6 months, is it mandatory for the company to regularize the employee? Ajay Raghavan A: That leads to companies being more careful about the termination period during probation. Six months in itself doesn’t require you to regularise the employee, but you may need to give them notice. Repeated extensions of probation can eventually lead to regularisation. ________________________________________________________________ Will it cause discrimination concern in China if we include terms in the offer stating that the position offered by the company is not suitable for a pregnant candidate? Jeffrey Wilson A: Yes, if your company is a coal mine or transports hazardous materials. Otherwise, you could have liability for discrimination, even though those claims are relatively rare. ________________________________________________________________ For China, about termination, if a company changes one's job title, but the majority of working content is the same, can it be seen as a big change and a need to pay compensation if the individual refuses the change? Jeffrey Wilson A: Probably not, if the compensation remains the same. It would probably be easier to implement such a change if there was company-wide restructuring affecting many employees. ________________________________________________________________ What should be the key points in severance policy? Phillipa Muir A: In NZ you generally set out the notice period employees will be given and whether they will be paid severance (it is not mandatory to pay compensation for redundancies here). ________________________________________________________________


For Australia, regarding non-competes, is the compensation on that paid when the persons is working or after leaving company or per mutual agreement? Val Gostencnik A: In Australia, a non-compete clause is usually included in an employment contract at the time of entering into the employment and no compensation is paid (other than the amounts payable for the performance of work under that contract). However, if a non-compete is entered into at the time of termination of a contract, it would be usual for compensation to be paid in respect of that arrangement at that time. ________________________________________________________________ Do we need to record labor contract template with the competent governmental authority in China? Jeffrey Wilson A: Generally no, even if there is an old rule on the books. The government doesn't really have time to review thousands of contracts.-� ________________________________________________________________ For China, when a company terminates an employee's 3-year contract upon expiry, does the company need to pay severance of 1 month / year service & termination notice? Jeffrey Wilson A: Severance needs to be paid at one month for each year of service, subject to the applicable cap on severance. Notice depends on the jurisdiction. For example, some jurisdictions require 30 days’ notice. If no notice is given, then an extra 30 days pay may be required. ________________________________________________________________ Are disciplinary proceedings (reasoning) in India mandatory in all termination cases (service & manufacturing industry)? Ajay Raghavan A: Disciplinary proceedings are normally linked to misconduct-related cases, and if it is a misconduct-related termination, then yes you have to go through the disciplinary proceedings. ________________________________________________________________ For consulting agent, if providing business cards with employer's logo, what major risks may it cause? Jeffrey Wilson A: The risk is that the consultant could be deemed to be an employee. If so, the consultant could demand a contract, salary, benefits, and severance. If a business logo is used, it would be best to list multiple business logos of the different clients of the consultant.


________________________________________________________________ Phillipa -- what is another type of probation period that you have mentioned in the last section? Phillipa Muir A: It is a trial period under Section 67A Employment Relations Act (for up to 90 days). The employee doesn't have a right to bring an unjustified dismissal claim if he/she is then dismissed in the 90-day period. ________________________________________________________________ How should we properly structure the secondment agreement between US parent and the JV in China to minimize the PRC tax implication? One thing I am thinking of is to describe the nature of the relationship as secondment rather than service. Jeffrey Wilson A: You should make sure there is no mark up if there if a payment from the JV to the US parent. Also, the employee is under the control of the JV with duties for the JV. ________________________________________________________________ Is the concept of garden leave gaining prevalence in India? Is it enforceable by law? Ajay Raghavan A: Yes, it’s certainly becoming more popular with companies. Unfortunately very little case law exists, so it’s difficult to say how courts will enforce it.� ________________________________________________________________ If an employee rejected the compensation of non-competes, does he join in the competitor? Jeffrey Wilson A: Even if the employee rejected the compensation, the employee would still be bound by the non-compete. ________________________________________________________________ For HK, is consideration with monetary nature necessary for non-competition undertaking? Can it just be part of the salary paid to the employee? Consideration with monetary nature is not necessary for non-competes but this will go to prove reasonableness. It follows that the consideration can be part of salary but there is more chance that the clause is enforceable if there is a separate consideration paid post termination. ________________________________________________________________


Are you saying those with a fixed-term contract of 3 years, at the end of contract the company may choose to end the contract without any severance ? Jeffrey Wilson A: No, an employer may end the contract upon the expiration, but statutory severance must be paid for service after January 1, 2008. ________________________________________________________________ For non-compete in CHN, if the term is put in the employment contract & not highlighted in the way of compensation, but the company doesn't pay the compensation when the employee leaves, is the term still enforceable to the employee? Jeffrey Wilson A: Depending on the jurisdiction, the non-compete could be enforceable if the employee complies with the non-compete obligation. In such case, the employer should timely waive the non-compete. ________________________________________________________________ Given the position in India and Malaysia on restraint of trade, is it common for employers to use garden leave periods to effectively prevent an employee from working for a competitor? Ajay Raghavan A: It’s becoming more common to see garden leave provisions in Indian contracts. Unfortunately there's been little judicial precedent and hence it’s difficult to saw how courts will view it. Sivabalah Nadarajah A: Although it is increasingly being used, it is still not commonly practised in Malaysia. There has been no judicial precedent on this yet and, like Ajay, I am not certain how likely the Court is going to uphold such garden leave provisions. ________________________________________________________________ Do Chinese employment agreements include non-discrimination clauses normally? Jeffrey Wilson A: No, China does not require these and I have never seen one included in a contract here. ________________________________________________________________


How can an employer prove that an employee has broken the non-compete? i.e., that the employee is working at the same titled position (and, what if the name is different), or must the employer prove that the employee is using the confidential information in his/her new position? Jeffrey Wilson A: One way of proving competition is that the employee is working at a competitor of the original employer. The title and job responsibilities generally do not matter, or that the employee is using confidential information. The principle factor is that the two companies are competitors. ________________________________________________________________ If the termination is because of insubordination with female staff and she claims discrimination, how should the employer handle such matters? Ajay Raghavan A: If the matter is only about insubordination that is linked to a violation of company policy, you can take action against the employee - typically by putting him/her on warning and then you can take more serious action against the employee if repeated.� ________________________________________________________________ What's the maximum bonding-time in China for the employee with the non-competes? Jeffrey Wilson A: Two years. ________________________________________________________________ For US expats assigned to China JVs, are you saying a contract is not a mandatory requirement? Jeffrey Wilson A: Some localities require a "contract" for the work permit application. In that situation, we state the "contract" is only for immigration purposes. An assignee's employment should be governed by non-PRC law, so no PRC contract. ________________________________________________________________ What is the contribution level for the employer & employee for PF in Malaysia? Sivabalah Nadarajah A: It is 11% for the employee and 12% for the employer. With effect from January 2012, the employer will have to contribute 13% for employees earning less than RM5,000.00 per month. ________________________________________________________________


Can employees in Indonesia be terminated for whatever reason during the probation period or does the termination need to follow the same principles as if we were dealing with a confirmed employee? Richard Emmerson A: In Indonesia, probationary employees can be terminated immediately upon written notice without cause and without compensation. ________________________________________________________________ In India, what is the policy for hiring temporary workers? In case the 2-year limit is reached, but the job still needs the person, but the company does not have a regular position, what is the common practice to the keep the person? Ajay Raghavan A: Typically temporary workers are hired on fixed-term contracts or through external contractors. If the temp workers’ fixed-term contract (of 2 years) has come to an end, then any further extension could lead to a risk that the employee will claim regularisation. ________________________________________________________________ Are there any real legal consequences for breaching the non-discrimination requirements under PRC law? Jeffrey Wilson A: Yes, the employer could be sued with damages awarded or the employee reinstated. But these cases are relatively rare, except for hepatitis cases. ________________________________________________________________ For US expatriates in China, in the secondment contract we will say they will remain the parent's employee during the secondment. Does PRC law allow non-company employees like those secondees to serve in a management position? Jeffrey Wilson A: Yes, it is common for secondees in China to have management positions. ________________________________________________________________ In Korea, for the registered representative director, are they under the same severance pay rule? Or can the company set up different policy? Paul Cho A: For representative directors, the company should have a separate severance regulation for officers that is adopted via a shareholders' resolution. ________________________________________________________________


How can an employer prove that an employee broke the non-compete? i.e., that the employee is working at the same titled position (what if the name is different?)? Must the employer prove that the employee is using the confidential information in his/her new position? Jeffrey Wilson A: Competition is at the employer level. Thus, regardless of what the employee was doing before at the old company, or now does, the employee would be deemed to be competing. It is not required to show that the employee used the confidential information. ________________________________________________________________ If Chinese citizens are employed outside of China, is it still important that we have the employee sign off on an employment contract drafted in Chinese as was mentioned is in place in certain parts of China? Jeffrey Wilson A: If PRC nationals are employed outside of the PRC, then the contract details should be a matter of the jurisdiction where the employees are employed. If the PRC nationals are employed in China, and then assigned abroad, then they should have local contracts, and best to be in Chinese. ________________________________________________________________ Does the minimum wage apply to Malaysia / still pending? Sivabalah Nadarajah A: A national minimum wage has not yet been implemented in Malaysia. The government recently announced that it will be doing so soon and the Prime Minister is expected to make an announcement on this soon. ________________________________________________________________ If the employee decides to end the contract when his fixed contract ends with the company, does the company need to pay the severance? What should the employee or company do in advance? Jeffrey Wilson A: Yes, severance is required. Local regulations differ whether notice must be given to the employee that the contract will not be renewed. ________________________________________________________________ Is there a mandatory retirement age in India by law? Ajay Raghavan A: No there isn’t in the private sector. Companies tend to regulate retirement through internal policies and employment contracts.


________________________________________________________________ Are locally hired foreign nationals in China covered by mandatory benefits? Jeffrey Wilson A: Under recent regulations, all foreign nationals working in China must be covered by social insurance, both direct hires and assignees. As a practical matter, most foreigners are not participating and enforcement is weak. ________________________________________________________________ If a Chinese employee is assigned to work in the US and an assignment letter is signed for this, but some terms in the letter & employment contact are different, which one will prevail during the assignment period? Jeffrey Wilson A: Probably the assignment letter, because it would be deemed an amendment of the contract. ________________________________________________________________ What are the overtime pay requirements in China? Jeffrey Wilson A: OT pay is statutory. 100% for regular work days, 200% or time off for "rest days," 300% for national holidays. ________________________________________________________________ In Indonesia, what would be the situation for termination due to poor performance? Richard Emmerson A: Poor performance: 3 warning letters, basic severance and basic service pay plus 15%. ________________________________________________________________ Do we just need to pay the service pay? Richard Emmerson A: For poor performance, all three types of compensation are payable. If it is serious misconduct, then only untaken leave and salary. For downsizing, it is double severance, basic service pay, plus 15% unless there are 2 years of continuous losses in which case the severance is basic only. ________________________________________________________________


In China, can we adjust the position of a pregnant employee but keep her salary unchanged? Jeffrey Wilson A: Reasonably and with good cause, probably yes. ________________________________________________________________ Will providing or not providing employment benefits to a fixed-term hire have more exposure of hired employee claiming regularization? Ajay Raghavan A: Employees under fixed-term contracts are entitled to all the statutory benefits other than retrenchment compensation. The risk of regularisation is largely where the fixed-term contract has been renewed on more than one occasion. ________________________________________________________________ I understand the terminated employees are given 60 days after termination to go the labor reconciliation office. Does this still stand? Sivabalah Nadarajah A: Yes, that still stands. ________________________________________________________________ Siva, could you address FIFO and native preferences? Sivabalah Nadarajah A: I take it you meant LIFO and not FIFO. LIFO (LAST IN FIRST OUT) means that the employee who is the most junior serving in the affected category will have to be the first to be retrenched unless the employer has good reason for departing from this rule. When you mention "native preference," I take it you mean are local employees given priority when selecting employees for retrenchment? Generally, the Court expects that foreign workers should be retrenched first before selecting local or Malaysian employees. Among the Malaysian employees, no preference should be given for race or gender. ________________________________________________________________ In China, can the company ask a departing staff member to return the performance bonus if the fault is found after the person's departure? Jeffrey Wilson A: Probably not if the employee qualified for the performance bonus. However, if the employee cheated to earn the bonus, then the company may be able to make a deduction for any other compensation owed to the employee, or sue the employee. ________________________________________________________________


LIFO - does it only apply for employees within the same function and level? Sivabalah Nadarajah A: LIFO applies for employees within the same function and level. However, it does not necessarily mean that they must be in the same salary grade. Sometimes employees doing the same functions may be in different salary grades because of their respective lengths of service. In such cases, LIFO would apply to them even though, their salary grades may differ. ________________________________________________________________ Sometimes the PF dept delays in PF settlements; in such instances, does the liability of the same lay with the employer? With LIC for gratuity in the court of law? Ajay Raghavan A: If the PF authorities have delayed the PF payment, then the liability is likely to be on the PF department (if the company has filed all the required forms). ________________________________________________________________ If the company suffers any damages due to an employee's act, could the company directly make a deduction from the employee's salary? Jeffrey Wilson A: Yes, but the employer should state that right in the employment contract. Also, there is a limit of 20% of deductions. ________________________________________________________________ Also, does the legal enforcement differ from foreign companies to local companies? Let's say, for the termination matter. Jeffrey Wilson A: Generally, no. The treatment is the same. ________________________________________________________________ Contact information: Paul Cho Kim & Chang Seyang Building, 223, Naeja-Dong, jongno-gu Seoul, 110-720 South Korea [email protected]

Cynthia Chung Deacons 5th Floor Alexandra House 18 Chater Road Central, Hong Kong [email protected]

mailto:[email protected]



Contact information (cont’d): Richard D. Emmerson SSEK Mayapada Tower 14th Floor Jln. Jend. Sudirman Kav. 28 Jakarta, 12920 Indonesia [email protected] Val Gostencnik Corrs Chambers Westgarth Bourke Place 600 Bourke Street Melbourne, Australia [email protected] Phillipa Muir Simpson Grierson 88 Shortland Street Auckland Private Bag 92518 Wellesley Street Auckland, 1036 New Zealand New Zealand [email protected] Ajay Raghavan Trilegal The Residency 7th Floor #133/1, Residency Road Bangalore - 560 025 India [email protected]

Sivabalah Nadarajah Shearn Delamore & Co. 7th Floor, Wisma Hamzah-Kwong Hing No. 1 Leboh Ampang 50100 Kuala Lumpur, Malaysia [email protected] Elizabeth Pai Lee, Tsai & Partners 9th Floor 218 Tun Hwa S. Rd., Sec. 2, Taipei 106, Taiwan, R.O.C. [email protected] Jeffrey Wilson Jun He Law Offices China Resources Building, 20th Floor 8 Jianguomenbei Avenue Beijing 100005, P. R. China [email protected] Andrew Wynne Price Sanond Prabhas & Wynne 16th Floor Q House Sathorn 11 South Sathorn Road Bangkok 10120 Thailand [email protected]









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