Chinese occupational health and safety law is structured very differently from Western legal systems with respect to how it requires safety to be managed. China imposes personal liability on the entity’s responsible person and executives, which creates significant risks in order to force them to take their obligations seriously.
Regulatory agencies also have enforcement policies aimed at implementing the law and enforcing penalties to secure compliance with their vision of fewer workplace injuries. In this article, we will go over the China Occupational Health and Safety Act requirements and its current regulatory regime to provide an overview of who constitutes a “responsible person” and what the law mandates they do. Then, we’ll look at the possible regulatory fines and criminal liability that may be imposed for violating work safety laws in China.
Contents
How Work Safety Liability in China is Structured
How Work Safety Liability in China is Structured
Correctly understanding China’s Occupational Health and Safety Act should start with its terminology, as there are significant linguistic differences. Lawyers often have difficulty explaining the law in English—the word shengchan in its native title “Anquan Shengchan” lacks a direct English equivalent. Traditionally, it means “to give birth,” but in this context, it means roughly what the “product” in “Gross Domestic Product” means, i.e., goods or services that have value. Anquan, in Chinese, is a broad word that covers the safety, security, and avoidance of factors that may cause an illness.
Initially, the Occupational Health and Safety Act focused on the country’s notoriously dangerous factories, but more recent regulatory inspection checklists now include ergonomics standards aimed at preventing musculoskeletal disorders. The Chinglish title of the law is “Production Safety Law,” but you are also required to comply with rules to ensure the health and safety of non-production occupations, such as cashiers.
The China Occupational Health and Safety Act is directed at three categories of activities: manufacturing and natural resource production, maintenance work, and ergonomics. Criteria for identifying who is the responsible person are prominent in dozens of regulatory policy rules and documents, but are clearest in the Operating Entity Health and Safety Training Rules.
The responsible person identified for a particular entity is highly context-specific, but in general, the primary responsible person will be the statutory representative or the person with ultimate control over the entity. If you’ve read our article on China’s nominee shareholder law, you know that, since 2020, China’s law has authorized a fully anonymous shareholder to exert actual control over an entity through a trustee who exercises control through a trust agreement, but nonetheless holds them accountable for the full range of legal compliance. The OSHA principles in China thus foreclose the possibility of circumventing liability through any kind of corporate structuring techniques. These are serious legal risks with potential personal liability. To manage these risks, ask CBL to help you find a lawyer to make sure you are on the right track.
After the statutory representative, the next responsible persons in an LLC or Corporation will be the board’s Chairperson and the Managers, which under the Companies Act refers to the President, CEO, and other managers. For operators not organized as a company or corporation, the primary responsible person will usually be the General Manager of a plant or factory.
There are also local laws that expand the scope of who may be considered a responsible person. For example, a Shenzhen ordinance follows a “General Manager” approach, which includes anyone with general management responsibility over operations, including the statutory representative, investors, or anyone with the highest level of managerial control at the entity, such as a factory general manager. There is no exception for foreign persons or those who reside abroad.
In recent years, Chinese regulatory enforcement actions have attempted to prevent these individuals from evading their duties under the occupational health and safety regime by imposing liability on prior corporate officers and statutory representatives. For example, in the 2019 report by the emergency management ministry in its investigation into the Xiangshui chemical plant explosion, the task force referred the three prior statutory representatives and the company’s former Vice President for prosecution because they did not implement adequate hazardous material management protocols as required by safety regulations.
In Chinglish, the “statutory representative” position is called “legal representative,” so many foreign managers take this position thinking it simply means something like “registered agent,” or someone empowered to sign legal documents for the company. In reality, it’s someone who has statutory liability, including potential criminal culpability.
The Act at §25 lists the duties of the business entity’s responsible person for health and safety, which in practice is adjusted to the specific context of each business organization based on the type of industry, management structure, and work safety needs. Whether those duties have been discharged depends on the effectiveness of the work safety program on site.
The term “responsible person” is often translated as “person in charge” or “principal,” which could give the misleading impression that this position is the equivalent of the “competent person” under US/UK OSHA statutes. This would ignore an important cultural difference the West has with China: Chinese legislators have long wanted to impose heightened personal liability for the acts of a corporation, above and beyond corporate veil piercing, which they saw as an unacceptable limitation of the US OSHA regime.
China’s corporate law legislative experts were highly knowledgeable about US trust and tax law, with some having written books on the topic, and furnished a solution with a good track record, which was to consider the IRS responsible person approach.
Quite frequently, we see international business managers taking on personal liability without understanding what these words mean and imply. When working with China, ensure you make an informed decision by having advice and information translated by professional legal translators, and not someone lacking appropriate training, such as an LSP freelancer or attorney who attended one of the Legal English Summer Camps offered by law schools in China. Even if the attorney is very knowledgeable about the law itself, you aren’t really informed if you misunderstand what they’re saying.
Below, we’ll break down the specific duties of the responsible person under the regulation, and how they may lawfully be delegated and supervised, noting that China’s regulatory agencies are gradually increasing the range of enforcement action to impose more stringent standards against responsible persons.
A business entity’s principal responsible person who violates Occupational Health and Safety Act requirements can be fined an amount equal to 80% to 100% of their entire annual salary, and regulators can impose an exit ban on individuals, including foreigners, until they pay the fine.
Enforcement under China’s Social Credit system can also be imposed to deter non-compliance, including placement on a list of dishonest persons and denial of the right to work in the industry. A business entity’s responsible person in China must:
- Implement the requirements listed under the Act to assess risks and abate hazards, provide a report on occupational health and safety status to a meeting of the employees, and then conduct emergency response drills and proficiency training.
- Provide education, case studies, and post notices about safety law, increasing awareness that personal liability is imposed and that regulators will make criminal referrals to prosecutors in serious cases.
- Increase accountability for safety-related accidents and capabilities to apply lessons learned to improve safety and cooperation with the criminal law enforcement referral system.
- Provide effective performance assessments for all responsible persons.
- Continuously improve performance assessment materials and impose stringent qualification requirements for all responsible persons.
- Improve the responsible person’s safety management capabilities by evaluating their proficiency in managing hazardous materials, such as chemicals, fireworks, and metals.
- For business entities working with hazards, implement three levels of management control: (1) statutory representative level, (2) executive level, and (3) line manager level, assigning specific duties for the responsible person at each level to manage hazards.
China’s current regulatory policies place a strong emphasis on ensuring that responsibility is personally undertaken by the primary responsible person, which it believes is an effective way to ensure that work safety is achieved.
Penalties for Violating OSHA Requirements in China
- Section 112 of China’s Occupational Health and Safety Act provides for daily accumulating penalties to deter non-compliance, which is strictly enforced to avoid possible circumvention. § 112 provides that daily penalties accrue for “any violation of this law,” which applies broadly to any operator but is ambiguous as to whether other laws, such as the Hazardous Chemical Safety Oversight Procedures, fall under the ambit of this provision.
The Act requires that an operator in violation be issued an “order for abatement and pay a fine,” which means that regulators will impose a sufficient financial penalty as to be effective in deterring future violations. The order for abatement will include the amount of time permitted within which compliance must occur, after which inaction by the operator constitutes a failure to abate.
Typical failure to abate fact patterns include simply ignoring the order or refusing to comply. Attempts at circumvention through “cosmetic compliance,” that is, pursuing a superficial abatement plan that does not actually comply with the government agency’s also constitute a failure to abate. The same applies to partial compliance through partially implemented plans—the legal definition of a failure to abate is where the requirements in the order for abatement are not fulfilled within the time permitted.
Amount of Penalties
The work safety bar in China has complained that regulators have not publicized sufficient penalty case precedents for businesses to adequately understand how penalties will be calculated under different circumstances, and the statute only provides the base penalty number and method of calculation. Nonetheless, the rules themselves are detailed and provide a significant amount of information for consideration.
The statute gives the administrative agency authority to determine timelines for abatement, which can be either immediate or deadline-based. Penalties for immediate abatement orders begin accruing daily on the day following the date on which an order is issued. Deadline-based orders work a bit differently, as no penalty is owed if you abate by the deadline. However, penalties accrue retroactively from the day following the order’s issuance should you miss the deadline.
Under the China Occupational Health and Safety Act, the base penalty amount is defined as the “amount of the original penalty imposed by the government agency” on the operator in the order for abatement.
For example, § 98 of the Act provides that an operator that has committed a violation shall be ordered to cease construction or production activities and make an abatement within a specified time, with a penalty of no less than ¥100,000 and no more than ¥500,000. Assume hypothetically that a regulatory agency imposes a ¥250,000 fine; under the statute, the “amount of the original penalty” is also ¥250,000.
The same approach is used under China’s environmental law for daily accruing penalties. The amount of the daily penalty is assessed by multiplying the original penalty amount by the total number of days with a continuing violation. According to a published section-by-section analysis of the act by lawmakers, one legislative intent is to avoid excessive penalties. Therefore, regulators cannot calculate daily accruals by compounding the penalties or other non-linear calculation methods. Similarly, US OSHA penalties are also non-compounding.
The China Occupational Health and Safety Act imposes an additional penalty for failure to abate hazards within the time allowed. Consider the following hypothetical scenario: a regulatory agency applying § 102 finds on Day 1 that an operator has an ongoing hazard at its work site and issues an order for immediate abatement with a ¥50,000 penalty. On day 5, the regulator makes a follow-up visit and finds that the operator has not taken action to eliminate the hazard. Therefore, the regulator issues a daily penalty starting from Day 2 in the amount of ¥50,000 and an additional penalty in the amount of ¥200,000, for a total penalty of ¥250,000.
China’s Occupational Safety Law Requires Referring All Criminal and Regulatory Violations to the Appropriate Agency
Regulators are mandated to refer any criminal violations discovered during the course of their investigation to prosecutors. Conversely, regulatory violations discovered during a criminal investigation must also be referred to regulators. The information-sharing process extends to any staff at prosecutors, police, and courts. The Act provides specific conduct that constitutes a crime and has specific examples of dangerous operations that must be prosecuted.
The Ministry of Justice began defining criminal penalties for occupational and health safety violations with a 2015 statutory interpretation, and the Justice, Police, and Emergency Management ministries jointly developed the Occupational Health and Safety Interagency Cooperation Procedures to establish how criminal law enforcement would be involved.
The most recent PRC Criminal Law Act criminalizes several categories of workplace conduct:
- Conducting dangerous work activities;
- Ordering or directing dangerous operations;
- Continuing work despite known hazards;
- Falsifying documents, including inspections, assessments, or reports;
Published enforcement actions have emphasized the following types of cases:
- Illegal storage and operations involving hazardous chemicals, where the appropriate permit has not been issued and safety protocols for chemical storage are not followed.
- Falsification, alteration, or sale of any relevant documentation; in particular, providing falsified educational, training, or work documentation, or non-compliant testing and certification for certain skilled workers.
- Unauthorized transportation of hazardous chemicals; for example, one case involved shipping large quantities of liquefied gases without a permit.
- Failure to abate major hazards and continuing production despite risks; for example, one case involved the risk of fatality due to the risk of a possible molten steel spill and explosion at a plant.
Knowing about OSHA enforcement trends for yourself is essential in this context, because English-speaking lawyers in China are usually staffed for their language skills, and have shallow legal knowledge about enforcement trends. They usually haven’t even read the cases about these issues, which leaves them unprepared to recommend how to minimize the risk of liability.
Strategies for Compliance with China Occupational Health and Safety Law
In China, the responsible person is liable to ensure occupational health and safety, and thus needs to establish an effective policy throughout the organization. Therefore, start by identifying who all of the responsible persons are in the hierarchy from the top to the bottom of the organization, starting with the statutory representative or person with ultimate control over the business entity, down to line managers.
Establish a business policy covering the health and safety duties for each position and require formal performance evaluations and audits to measure success in achieving those goals. Each responsible person should sign an acknowledgment that they have received a copy of the policy and understand their duties. Clearly establishing the duties of each responsible person in the business organization affords you much greater leverage to ensure compliance.
Each responsible person in the business organization should undergo the appropriate occupational health and safety training and competence evaluation, hold a certificate for their demonstrated proficiency, and be required to engage in continuous learning to improve their abilities. Provide all levels of personnel with training to improve their competence and hold emergency response drills, ensuring that even executive-level employees personally participate.
Expert commentators point out that workers in China generally do not take safety seriously enough and will casually take unacceptable risks. Therefore, to address this, you should provide workplace safety awareness programs and training in order to develop a culture of on-site safety compliance and ensure that all personnel are thoroughly familiar with the appropriate safety protocols.
Adopt commercially reasonable risk management protocols to inspect for hazards and classify potential risks, and periodically direct personnel to abate identified hazards. Use a cyclical risk management process to monitor, identify, estimate, and abate any risks identified to eliminate hazards at the source.
Industrial psychology studies in China have found that workers respond well to extrinsic motivations. In this context, it means that the most successful compliance programs will be those that implement incentives and penalties for personnel, which encourage proactive monitoring and reporting of potential hazards. Involve outside auditors and experts to conduct occupational health and safety evaluations using science-based methodology and scoring criteria.
Proactively cooperate with inspections or requests from regulators, and promptly address identified hazards. Seek assistance from outside consultants or experts to develop abatement plans that fully comply with regulators’ expectations to avoid larger penalties for failure to abate. Ensure that outside experts are not under the sole control of local management, and have English language versions of expert reports prepared by professional legal translators familiar with the subject matter to remain well informed of compliance problems and the effectiveness of approaches taken by local management.
Set up an effective internal investigation policy to ensure that all information will be lawfully reported in the event of a safety accident, allowing government emergency response personnel to take action to mitigate damage.
Conclusion
China now imposes significant penalties for work safety violations on businesses to deter non-compliance. However, there is still some uncertainty about the total amount of penalties a regulator may lawfully impose. Note that, in recent years, China’s regulators have pursued criminal prosecution for violations more vigorously to increase deterrence for illegally hazardous business operations. China’s law is unique from other regimes in that it relies heavily on the responsible person to implement a work safety plan and effectively delegate responsibilities throughout the organization. The responsible persons approach used in China created serious legal risks with potential personal liability. To manage these risks, ask CBL to help you find a lawyer to make sure you are on the right track.
FURTHER READING
Get authoritative insights about this topic from official government guidance translated by CBL:
For a general overview of this topic, see also CBL’s China Employment Law FAQ.