Overtime pay may be owed to China employees if not structured compliantly. If staff are on call or perform work during their breaks, that time may constitute worked time and could trigger overtime pay obligations. In a case discussed below, a group of 88 employees filed claims for ¥8.7 million in unpaid overtime. The employer only prevailed because its policies sufficiently proved its legal compliance. Employers who may be subject to these claims can reduce risks by writing workplace policies that match how work is actually done. In this article we will explain Chinese law on when employee breaks may constitute work hours, and provide best practices for using a structure that is legally compliant.
Contents
- Case Study: Li et al. Overtime
- What Constitutes Work Hours
- How Chinese Courts Determine Work Hours
- Meal and Rest Breaks
- Recordkeeping and Documentation
Case Study: Li et al. Overtime
Li joined Company S on February 13, 2006, and worked a rotating shift schedule as an equipment maintenance technician. On February 26, 2015, Li and the company negotiated termination of their employment relationship and agreed that no disputes remained except those already filed for arbitration or litigation. On August 27, 2014, Li and 87 other employees filed a demand for arbitration with the Suzhou District Employment Arbitration Tribunal, seeking more than 8.7 million yuan in unpaid overtime compensation for regular, weekend, and holiday-period overtime. On January 12, 2015, the tribunal issued a decision in Suzhou Huqiu Employment Arbitration Case 517 (2014), denying their claims.[1] Li and the other employees then filed suit in court.
Company S’s Work Policy, revised on July 1, 2004, provides two work schedules: straight day shift or a rotating shift schedule. The straight day shift is 8:30 a.m. to 5:30 p.m.; the rules list a 40-minute lunch break, 30-minute dinner break, and two 10-minute rest breaks, and state a total of 8 hours of work. The rotating day shift is 8:30 a.m. to 8:40 p.m., and the night shift is 8:30 p.m. to 8:40 a.m., both of which include meal and rest breaks. Employees take turns for breaks, and any time worked beyond eight hours a day is counted as overtime hours. Overtime hours are paid at a rate of 1.5 times the regular wage, 2.0 times on a day off, and 3.0 times on legal holidays.
In China, Company S informs new employees of these rules, and Li has been working under these rules since joining the company. The company has a cafeteria, break area, and smoking area, and employees are free to use their time for their own purposes during meal and rest breaks; they do not need to monitor equipment. Employees may attend to personal needs, such as using the restroom and drinking water, during work hours.
The 2007 and 2012 versions of the Company S Employee Handbook state that employees must obtain written authorization before working overtime; otherwise, the time worked will not be treated as overtime. The company uses a dedicated Overtime Request Form, which includes the department, date of overtime, and applicant and explicitly states that meal and rest breaks are deducted from total overtime hours. Employees working under a rotating shift schedule do not need to fill out an overtime request form for routine overtime of up to 2.5 hours but must submit a request for overtime exceeding 2.5 hours or for work on days off.
Each month, Company S issues Li a wage statement that itemizes total overtime hours and overtime compensation for each type of overtime. The Employee Handbook also requires employees to carefully review their wage statements and raise any questions with the human resources department within one month.
Court Ruling: Breaks not Worked Time
The trial court in China held that the law does not define employees’ meal and rest breaks as work hours. Company S’s attendance policy, in effect before the China Employment Contracts Act, sets specific work hours and excludes meal and rest breaks from overtime. The court found the policy lawful, as it had been in effect for many years without violating any mandatory provisions of law, and was not manifestly unreasonable.[1]
The appeals court held that the issue in dispute is whether the employee’s meal and rest breaks should be treated as work hours and whether overtime compensation is owed. The court reasoned as follows: The appellate court found that Company S’s rules were adopted in 2004 and are binding on the employee because they do not violate the China Employment Contracts Act or any other statute and were provided to the employee when they joined the company. The rules are reasonable and clearly define work hours, meal breaks, rest breaks, time worked, and overtime hours; employees use them to calculate overtime.[2]
The court also found that employees were free to use their meal and rest breaks as they wished, and they were not required to monitor equipment. The court relied on site camera footage showing employees leaving the site and using the company restaurant, break room, and smoking room during meal and rest breaks. Employees were also allowed to go to the bathroom or drink water during work hours. The court therefore found that the employee had adequate time to attend to their bodily needs and to rest, and that the meal and rest breaks were not worked time, because employees were not required to perform any work-related activities in China.[2]
Also, the appellant had followed the Company’s work schedule since joining. The wage statements that the Company gave the Appellant documented the overtime hours and overtime compensation. The Appellant knew how the overtime compensation and overtime hours were calculated and should have complained within one month of receiving the wage statements, as the Employee Handbook required, but failed to do so for many years, which amounted to consent to the overtime policy. The appellant’s belated objection violated the principles of good faith and fair dealing.
What Constitutes Work Hours
Here, we analyze whether employee meal and rest breaks are treated as work hours and count toward overtime compensation under Chinese law. Chinese academic commentators recommend four different definitions of work hours under statutory rules:
- time worked to fulfill job duties;
- time spent on job duties for the employer;
- time spent on job duties during a day or week; and
- time spent on production or work during a day or week, that is, the daily work hours required.
Although these definitions differ, they share a common underlying concept; even without a statutory definition, there is an understanding about the basic nature of work hours. Employees’ time is divided into work hours and non-working hours, and the two are inversely related; the more time is worked, the less non-working time remains. Employers have control over employees during work hours, and work hours are the time employees spend working or engaging in work activities under the employer’s direction, management, or control.
How Chinese Courts Determine Work Hours
Work is analyzed by looking at the purpose, relevance, and control over employee conduct. Work time occurs when an employee’s conduct is for the employer’s benefit. Employers hire employees and pay wages to generate value for their business. Work time also requires that employee conduct relate to the job duties. Job duties are a mandatory provision in an employment contract and are the main reason the employer hires and pays the employee. Although an employment contract without a job duties provision is not necessarily void, and the employee’s position and duties can change, both are somewhat stable. Therefore, work activities must relate to the job duties.
Employer control over job location and work activities determines whether employees have control over certain time. The activities must be purposeful, relevant, and controlled by the employer. Thus, time outside the employer’s control is not considered work hours or overtime. Employer control extends to directing employees to work outside their regular duties or to perform non-work activities. These departures from regular duties fall within the employer’s right to control. Employees can be directed to perform activities unrelated to their job duties as long as the activities are lawful, and the employee’s performance is considered work performed.
Meal and Rest Breaks
Because the law in China lacks specific provisions, this definition cannot fully cover complex factual scenarios. Although employers often state that meal and rest breaks are not work hours, they may nevertheless retain control over this time, leading to disputes over what constitutes work hours and non-working hours. Several factors determine whether meal and rest breaks are work hours.
Compliance with law and internal policy determines whether meal and rest breaks count as work hours. The Employee Work Hour Rules (State Council) provide for an eight-hour workday and a 40-hour workweek.[3] Within this framework, the employer may set work hours and breaks as needed for business operations, as long as this does not violate applicable law or the employment contract, but employees must first be notified. Whether meal and rest breaks count as work hours when the employee is on-call, and whether wages or overtime compensation are owed, varies case-by-case.
Employers should also give written notice of any company policies affecting work hours. The China Employment Contracts Act § 4 requires employers to hold discussions with the employee representative body or workforce as a whole, and consult on equal terms with the labor union or employee representative when adopting, amending, or deciding on company policies or major matters directly affecting employees’ interests, such as compensation and benefits, work hours, and breaks and time off. Employers should therefore adopt work hour policies through stakeholder engagement and notify employees of those policies and major decisions affecting their interests.
Next, determine whether an employee is free from the employer’s control and supervision. Meal and rest breaks not counted as time worked must be purely for personal comfort activities, and the employee must be able to use that time for their own purposes. If the company policy clearly informs employees that meal and rest breaks are excluded from work hours, employees should be completely free to use their time for their own purposes, and not be on-call, or given work tasks. If an employer tells employees lunch is unpaid, but uses that time for work or keeps employees on-call, then meal and rest breaks are work hours.
Recordkeeping and Documentation
China Employment Dispute Judicial Interpretation #1 § 42 provides that if an employee can prove that the employer has evidence of overtime but refuses to provide it, an adverse inference is drawn.[4] The Wage Payment Temporary Rules provide attendance records should be kept for at least two years. Even if excluding meal and rest breaks is allowed by company policy, the burden of proof rests with the employer. In the S Company case, judgment in favor of the employer turned on years of site camera footage and monthly wage statements showing deducted rest break time, which prevented the employee from overturning the ruling.
Employers should document meal breaks as part of day-to-day supervision, rather than after being sued. Companies using rotating shifts should document in the schedule who is covering for employees on meal breaks, and where they went for their meal break. If the documentation shows that others covered the employee’s duties during the meal break and that each employee’s assigned workload remained unchanged, the break will be treated as time worked.
Provide employees with separate break rooms and dining areas, and keep images and sign-in records of their meal breaks. Wage statements should show the total meal and rest break deductions each month; allow employees one month to object to the deductions. This documentation, accumulated over years without complaints, supports an argument that an employee’s later objections were not made in good faith. (See Supreme Court Adjudicative Guidelines for Employment Dispute Cases #1 § 23)[4]
These are only a handful of common suggestions to mitigate risks, but ensuring predictable legal outcomes requires expert review of the workplace practices in the context of local law. If you need help with employment issues in China, ask CBL to connect you with a lawyer who can handle these issues for you.
FURTHER READING
Get more insights about Chinese employment law:
For a general overview of this topic, see also CBL’s China Employment Law FAQ.
Footnotes
[1] Huqiu Case 1795 (2015), ((2015)虎民初字第1795号), (Huqiu District Court, Aug. 26, 2016), (in Mandarin)
[2] Jiangsu Case 05-cv-9047 (2016), ((2016)苏05民终9047号), (Suzhou Lower Appeals Court, Dec. 23, 2016), (in Mandarin)
[3] Employee Work Hour Rules (State Council), (国务院关于职工工作时间的规定), (State Council, March 25, 1995), (in Mandarin)
[4] Supreme Court Adjudicative Guidelines for Employment Dispute Cases #1, (最高人民法院关于审理劳动争议案件适用法律问题的解释（一）), (Supreme Court, Dec. 29, 2020), (in Mandarin)
Bibliography
Some opinions in the What Constitutes Work Hours section are derived from the following publications
Wang Quanxing, Employment Law, Law Press, 2008 ed., p. 269.
Shen Tongxian, An Analysis of the Criteria for Determining Work Hours, Law Science, no. 5 (2011), p. 136.