Employees leaving a job in China have statutory liability for completing several standard handover procedures, otherwise you can hold them liable for a wrongful resignation. The law supports requiring completion of three obligations: (1) requiring return of company property such as laptops, in addition to any intellectual property. (2) Delivering over credentials for company social media accounts the employee registered using their personal information. (3) Training and preparing successors to assume their job role post departure. In other words, China has legally codified human resources best practices around succession handovers.
Managers in China are often unaware of their rights and often lack appropriate human resources policies to protect their rights. This can create risks that the company outright loses property, institutional knowledge, or access to accounts. This article analyzes recent court decisions and offers practical steps employers can take to proactively control risk and enforce their rights when needed.
Contents
- Returning Company Property and Accounts
- Control of Social Media Accounts
- Preparing Successors
- Record of Employment Filings
- Enforcing Employer Rights
- What if They Refuse?
Returning Company Property and Accounts
China employees refusing to return property when departing is extremely common, enough to make this a high priority concern at many Chinese corporations’ legal departments. What’s the underlying cause? Cultural scholars at Georgia Tech have recently explained China famous for its brutal “996” work environment, is a culture where worker memes saying “we are corporate livestock” is a major social trend. HR research has long proven that employees who perceive injustice against them often react by choosing to steal from the company when a good opportunity appears.
Businesses routinely lose claims made to return the property due to outright carelessness on their part. In a lawsuit, the employer bears the burden to prove their ownership or a lease and the employee’s wrongful possession. In a precedent where an employee refused to return their former employer’s property, Beijing Case 0108-cv-25825 (2022), the court rejected the employer’s claim to a laptop and hard drive because it could not prove that the items had been issued to the employee.
Don’t let your team be so careless; have them organized and take a few minutes to protect your business. You can reduce risk with very little work. As a standard practice, employers should obtain a signed acknowledgment listing all assigned items, the return deadline, and the consequences for missing that deadline.
Assigning unique identification numbers and using tamper seals on valuable items can also make it easier to prove ownership claims, as this documentation can be introduced as dispositive evidence for employers during litigation.
Setting up the HR process described in this article is daunting, because effective execution requires expertise in local law and experience auditing follow-through. Fortunately, CBL has a turnkey legal service to connect you with our network of expert, affordable attorneys on the ground in China; we’ll take care of end-to-end legal management and translation so you can focus on your core business.
Control of Social Media Accounts
Managing corporate social media accounts is a typical duty for employees. Accounts linked to the company are typically easy to transfer, but employees often resist handing over accounts opened using their personal information. Worse, platform policies make it easier for tech companies to ignore your requests.
Courts in China are concerned with whether control of the account must be transferred and, if so, how. Courts inquire into whether the account was created for personal use or as part of the employee’s employment, what was posted through the account, the employer’s investment, and the overlap between the employee’s activity and job duties.
In Shanghai Case 01-cv-11587 (2023), a social media account opened in the employee’s own name was managed by several employees and primarily advertised the employer’s products. The court held that the account belonged to the employer because it was set up with the investment of company resources and team effort. However, in Zhejiang Case 01-cv-5899 (2020), the court denied an employer’s claim to a Rednote account opened by an employee in their own name at their own initiative. The court found that although some posts promoted company products, the account was primarily personal and the court rejected the employer’s claim due to a lack of a social media management agreement.
For the account transfer itself, courts in China have recognized that an employee merely giving the employer the password and linked phone number is inadequate since the employee could later change both and block access. This can be seen in Guangdong Case 0192-cv-2446 (2022) and Shanghai Case 01-cv-11587 (2023), where both courts ordered employees remove personal information and re-link the account to the company’s phone number.
Employers should document social media account control transfer in written agreements, particularly where accounts were opened using the employee’s personal information. These agreements should provide for the account’s purpose, ownership, management, and transfer procedures, in a manner consistent with the platform’s policy. Your written agreement should make ownership of the account clear. Don’t permit the employee to mix personal and private information on the account. If they fail to comply, you are entitled to discipline or terminate the employee.
Finally, don’t make one person the sole custodian of credentials to access the account, instead use company phone numbers for recovery credentials and use password managers to enable multiple key personnel to access the account.
Preparing Successors
Departing employees must provide reasonable assistance for a smooth transition. Without an explicit agreement, an employee’s obligation is generally limited to their regular job duties. (See China Employment Contracts Act § 50(b))
In Guangdong Case 0303-cv-9317 (2020), an employer sought to compel a warehouse worker responsible for organizing and recording inventory to verify transaction records and collect outstanding payments at the end of employment. The court subsequently rejected the employer’s demand, holding that these tasks were outside the employee’s original job responsibilities and therefore not required when they left the company.
Address succession and handoff risk in the company by putting detailed continuity obligations in the employment contracts and in company policy manuals. Create written checklists for each departing employee that covers what must be handed off to successors and ensure it’s derived from their job duties. Satisfactory completions should be signed off in writing, and if overdue, the company should issue a formal demand for completion. Failure to comply will result in breach of the express duty to cooperate in the transition, which gives rise to their liability.
Record of Employment Filings
The employer also has special handover duties that to the employee that must be satisfied or otherwise could result in liability. When doing so, observe that the obligation to perform these filings exists even if the employee has improperly failed to return property. Managers often try to coerce compliance with handover procedures by refusing to comply with employment filings, but this can result in liability.
In China, an employer must provide proof of termination and transfer filings within 15 days or otherwise be liable to pay damages and fines. (see Act § 50) The employer can be held liable for incidental damages, such as indemnity against loss of wages that would have otherwise been paid by a subsequent company or loss of social security benefits. As a standard practice, prior to the end of employment, meet with the outgoing employee to review all financial information, and get their written acknowledgement that they have received everything owed.
A record of employment is governed by the China Record of Employment Administrative Services Rules[1] and the Streamlining Record of Employment Administrative Services Circular.[2] Records must be transferred either to the new employer, and if there is none, the appropriate government agency.
Improper employment record transfers create risks for both employers and employees. Supreme Court Civil Standing Opinion Letter 47 (2004) recognizes civil liability, including negligence, for lost or mishandled employment records.[3] Employers should thus transfer employment records promptly upon an employee’s departure and document the entire process. If an employee does not cooperate with the transfer, the employer can contact the local government to directly deliver the record of employment and notify the employee when the transfer begins. If the agency declines to take the files, the employer can send the employee a written request to cooperate with the transfer, clearly stating that the company will not accept liability for incomplete transfers. All communication records should be retained for potential litigation.
Enforcing Employer Rights
Under case precedent, employers can claim damages for a wrongful resignation that causes loss, and this includes failure to perform statutory obligations. Thus, employers are entitled to seek damages whenever a departing employee does not return company property, transfer account access, or otherwise complete offboarding procedures.
To recover these damages, however, the employer needs to prove both that the employee breached their obligations and that the breach directly caused the loss, which can often be difficult as seen in Shanghai Case 0109-cv-4355 (2022). In this precedent, a calligraphy tutor resigned without preparing successors. Shortly after, six students dropped out of the course. The employer claimed damages in the amount of tuition fees refunded, but the court found its transaction records and chat logs did not show that failing to hand off work caused students to drop out.
When determining damages, courts in China generally consider factors such as the departing employee’s wage level and degree of fault in causing the loss. For instance, in Chongqing Case 05-cv-8769 (2023), an employee resigned mid-project and refused to complete handoff procedures, forcing the employer to hire temporary staff and pay damages for late delivery. Although the court held the employee liable, it significantly reduced the award because the employer failed to prove that the losses were directly attributable to the breach of obligations.
Departing employees can be required to facilitate transitions by providing documentation of their job responsibilities, current progress, and replacement recommendations. Notifying clients and suppliers of the employees’ departure can also help maintain continuity in business relationships.
Employers should determine whether to enforce any non-compete obligations for technical or critical roles with access to sensitive information. Learn more about how to use non-competes in China at this article.
What if they Refuse?
It’s not uncommon for disgruntled employees to refuse to perform their obligations or even deliberately delete data from employer devices. This exposes them to potential civil or criminal liability. For example, the Employment Dispute Adjudicative Guidelines (Shenzhen Lower Appeals Court) § 99 allows employers to claim damages paid in lump sum against employees who cause harm during the performance of an employment contract.[4] The court determines awards based on the employee’s degree of fault and the extent of the losses. Moreover, China Criminal Law Act § 276 treats damaging employer property or data during termination as a crime.[5] Employers can thus protect their interests by including clear offboarding provisions in employment contracts and company policies, providing for obligations, deadlines, and liability.
Regardless, some managers attempt to coerce completion of returning property or doing offboarding procedures by withholding salary payment, or by refusing to issue proof of termination or transfer the employee’s social security filings. However, doing so risks a lawsuit and may even give rise to government enforcement actions if mishandled.
Under China Employment Contracts Act § 50, employers can withhold severance payments until the employee completes their obligations. However, employers aiming to avoid disputes should have agreements with their employees that include the offboarding procedures and provide that severance would be contingent on completion. Employers should also document and retain evidence of any employee’s failure to complete offboarding to protect themselves against potential lawsuits.
Nevertheless, China Wage Payment Temporary Rules § 9 requires that all wages be paid in full on termination. Therefore, an employer cannot make any deductions to or delay an employee’s final wages to force them to complete offboarding. If an employee’s refusal causes loss, employers can claim damages under § 16 of the Rules.
Similarly, it is illegal for an employer to force compliance by withholding payment or refusing to transfer their record of employment.
How do we handle these situations to secure compliance the legal way? The winning solution is to work with a respected local China attorney knowledgeable about enforcement trends within their jurisdiction, who can recommend an effective strategy. While this sounds difficult, CBL can make that easy for you; we offer a turnkey legal service to resolve your issue by connecting you with local legal experts, while we take care of the legal project management and translation so you can focus on your core business.
FURTHER READING
Get more insights about Chinese law:
For a general overview of this topic, see also CBL’s China Employment Law FAQ.
FOOTNOTES
[1] China Record of Employment Administrative Services Rules, (流动人员人事档案管理服务规定), (China Ministry of Human Resources, Dec. 29, 2021), https://www.mohrss.gov.cn/xxgk2020/fdzdgknr/zcfg/gfxwj/jy/202201/t20220110_432603.html (in Mandarin)
[2] Streamlining Record of Employment Administrative Services Circular, (关于简化优化流动人员人事档案管理服务的通知), (China Ministry of Human Resources, May 25, 2016), https://www.mohrss.gov.cn/xxgk2020/fdzdgknr/zcfg/gfxwj/jy/201606/t20160601_241109.html (in Mandarin)
[3] Supreme Court Civil Standing Opinion Letter 47 (2004), (最高人民法院关于人事档案被原单位丢失后当事人起诉原用人单位补办人事档案并赔偿经济损失是否受理的复函), (China Supreme Court, 2004), http://yhqfy.ahcourt.gov.cn/article/detail/2021/08/id/6180022.shtml (in Mandarin)
[4] Employment Dispute Adjudicative Guidelines (Shenzhen Lower Appeals Court), (深圳市中级人民法院关于审理劳动争议案件的裁判指引), (Shenzhen Lower Appeals Court, 2015), https://www.sgcourts.gov.cn/sgzyweb/web/content?gid=798 (in Mandarin)
[5] China Criminal Law (中华人民共和国刑法), (China Supreme Procuratorate, Feb. 6, 2018), https://www.spp.gov.cn/spp/fl/201802/t20180206_364975.shtml (in Mandarin)