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Key Employment Law Developments in Mainland China, Hong Kong and Taiwan in 2024

Submitted by Firm:
Firm Contacts:
Cynthia Chung
Article Type:
Legal Article

In this episode, we discuss recent employment law developments in Mainland China, Hong Kong & Taiwan, including in the area of gender equality and sexual harassment, layoffs, independent contractors & more. Subscribe to our podcast today to stay up to date on employment issues from law experts worldwide.

Host: Elsie Chan (email) (Deacons / Hong Kong)
Guest Speakers: Elva Chuang (email) (Lee, Tsai & Partners / Taiwan) & Hongjuan Bai (email) (JunHe / China)

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Welcome to Employment Matters, the podcast brought to you by the Employment Law Alliance, the largest network of labor and employment lawyers from the finest law firms around the world. I’m Elsie Chan, your host from Deacons in Hong Kong.

Today, we're traversing the globe to gather updates on pivotal issues from ELA members in each region, with a specific focus on the key employment law developments in Mainland China, Hong Kong, and Taiwan for the year 2024.

We are joined by Hongjuan Bai, Partner at JunHe in Beijing, and Elva Chuang, Senior Associate at Lee, Tsai & Partners in Taipei. Both are here to share their insights on the evolving legal landscapes in their respective regions.

We begin today's discussion with Taiwan, where there have been significant legal strides in gender equality and the fight against sexual harassment. Elva will provide us with an overview of these changes, highlighting how they are set to impact both employers and employees in the region.

Enhancements in Taiwan’s Legal Framework for Gender Equality and Sexual Harassment

In response to the ongoing influence of the Me Too movement, Taiwan has made significant strides in strengthening legal protections against workplace sexual harassment and promoting gender equality. The Taiwanese government amended the Gender Equality in Employment Act, which came into effect on March 8 of this year. This updated law expands the definition of actionable sexual harassment to include unwanted behaviors from colleagues, business associates, supervisors, or employers during extended working hours.

The revised legislation also introduces harsher penalties for abuses of authority involving harassment, with punitive damages now potentially tripling the awarded amount at the discretion of the victim. Moreover, the law imposes new obligations on employers to actively prevent workplace sexual harassment. For instance, businesses with 10 to 29 employees are required to establish and publicize a formal complaint mechanism. Larger organizations, with 30 or more employees, must also create internal rules for handling such complaints and provide support services like medical or psychological consultations to victims.

Comparative Insights: Hong Kong and Mainland China

Hong Kong’s approach to tackling workplace sexual harassment parallels Taiwan's initiatives but with specific nuances tailored to its unique legal environment. Employers in Hong Kong are held vicariously liable for sexual harassment committed by their employees unless they can prove that sufficient preventive measures, like proper training and policy implementation, were in place.

Shifting focus to Mainland China, the discussion touches upon the economic challenges and layoff practices that have become prevalent due to economic downturns. It’s crucial for employers in China to transparently communicate the reasons behind layoffs, ensuring that they have a solid legal basis for any terminations. Additionally, mutual separation agreements are highlighted as a common and practical solution for reducing potential conflicts during workforce reductions.

Strengthening the Integrity of Financial Institutions in Hong Kong

To further safeguard its reputation as a global financial center, Hong Kong has implemented the Mandatory Reference Checking Scheme (MRC). This initiative aims to prevent the recruitment of individuals with past misconduct by requiring comprehensive background checks that span the last seven years of an employee’s career. Such measures are designed to enhance the transparency and integrity of the banking sector, boosting public confidence and investor trust.

HR Considerations and Legal Implications in Cross-Jurisdictional Employment

In the realm of Human Resources, there are several critical considerations that companies must address, particularly in light of Hong Kong's new Mandatory Reference Checking Scheme (MRC). HR departments need to ensure that their employment offers are contingent upon a satisfactory MRC check. This means revisiting and possibly revising employment contracts to include this stipulation, ensuring compliance with new legal requirements.

Furthermore, it is essential for organizations to maintain accurate and comprehensive employee records. Such diligence ensures that if an MRC request is received, the company possesses all necessary information to respond effectively. Additionally, HR should consider implementing standardized templates for communicating with other institutions regarding MRC checks, facilitating smoother inter-company correspondence and compliance processes.

Economic Changes and Legal Risks in Employing Taiwanese Workers

Turning our focus to Taiwan, significant shifts in the economic landscape have influenced employment practices, particularly concerning the burgeoning gig economy. This shift has led many foreign employers to increasingly hire Taiwanese workers as independent contractors. However, this practice introduces several legal risks that must be carefully managed.

One common misconception among foreign employers is that agreeing to foreign law as the governing law in employment contracts with Taiwanese workers exempts them from the Taiwan Labor Standards Act. However, case law and legal precedents indicate that this is not necessarily the case. Regardless of any agreement on foreign law, as long as the worker is a Taiwanese national, the Taiwan Labor Standards Act may still apply.

Additionally, even if a contract specifies that a worker is an independent contractor, Taiwanese courts will examine the factual circumstances of the employment relationship. They will consider various factors, such as whether the worker sets their own hours and workplace, can refuse assignments, or is allowed to provide services to other entities. If a court determines that a de facto employment relationship exists, the worker cannot be unilaterally terminated without just cause as prescribed under the Taiwan Labor Standards Act.

Revisions in Company Law in Mainland China: Implications for Labor Rights

The legal framework in Hong Kong shares similarities with the developments in Mainland China, particularly with the upcoming amendments to the company law scheduled for July this year. These amendments are significant, emphasizing the protection of employees' rights and interests, a legislative priority that has become increasingly prominent.

New Requirements Under the Amended Company Law

Under the new company law in Mainland China, there are several critical changes that directly impact employee representation within companies:

  • Board of Supervisors: If a limited liability company establishes a board of supervisors, it must include at least three supervisors, with no less than one-third being employee supervisors. This provision ensures that employees have a substantial voice in overseeing the company’s management.
  • Employee Director Requirement: Companies with more than 300 employees are required to appoint at least one employee director, unless an employee supervisor is already in place. This role allows employees to have direct involvement in the company’s strategic decision-making processes.
  • Election of Employee Directors and Supervisors: These representatives must be elected through what the law describes as "democratic forms," which can include an employee representatives' congress or an all-employees' congress. This democratic approach aims to make the process of selecting employee directors and supervisors transparent and representative of the workforce's interests.

Clarifications and Implementations Concerns

A frequently asked question concerns whether senior management members can concurrently serve as employee directors or supervisors. The amended company law specifies that senior management members are prohibited from serving as employee supervisors. However, the law does not explicitly prohibit them from being employee directors, although some local regulations have imposed such a restriction. The specifics of these roles and their eligibility criteria will be further detailed in the implementation rules of the company law, expected later this year.

Regarding the election of employee directors and supervisors, although the law suggests that an employee representative congress should be the standard form of democratic management, it allows for flexibility. Elections can be conducted either online by all employees or offline by temporarily elected representatives. Importantly, all elected employee directors or supervisors must be registered with the Administration of Market Regulation, which may require submitting proof of the election process. This registration is crucial to ensure that the election process is transparent and meets regulatory standards.

Closing Discussion: New Regulations and Future Outlook

As we wrap up today's discussion, it's important to highlight the new regulations concerning the export of personal information in Mainland China. The Cyberspace Administration of China issued new provisions in March that regulate cross-border data flows. These rules allow for certain exemptions from the standard data export formalities such as government security assessment, standard contract filing, or certification. Specifically, the export of employee personal information may be exempted in two scenarios:

  • Necessity for Cross-Border Human Resource Management: If the export of employees’ personal information, including sensitive personal information, is necessary for cross-border human resource management as per the company’s legally formulated employment policies.
  • Volume of Data Exported: The export involves personal information of no more than 100,000 individuals accumulatively as of January 1st of the current year, excluding sensitive personal information.

However, the criteria for what constitutes 'necessary' for cross-border human resource management have not been explicitly defined, which necessitates a thorough internal review by companies of the personal information they plan to export.

Moreover, the exemption does not extend to non-employees’ personal information, such as that of job applicants, employees' family members, or emergency contacts. These data types must still undergo the standard data export formalities.

Upcoming Changes in Hong Kong’s Employment Law

Turning our focus to Hong Kong, legislators are considering significant amendments to the definition of continuous employment under the Employment Ordinance. This change could have a profound impact on employment law, as it aims to include more employees under the protection of the Employment Ordinance by adjusting the service hours required for continuous employment status. The proposed amendment is still under discussion, and we will continue to keep our audience informed as it progresses.

Reflections and Future Engagements

I'd like to thank Elva and Hongjian for their insights today. The intersection of changes in law, economic conditions, and government policy significantly affects labor relations and will continue to warrant close observation in the future.

As we conclude today's episode, we encourage our listeners to connect with us via our profiles in the podcast description or reach out to other ELA lawyers through the ELA website. The site also offers resources such as upcoming webinars, white papers, and access to the exclusive Global Employer's Handbook.

Thank you all for tuning into Employment Matters. We hope you found the discussion enlightening and we look forward to bringing you more insights in our future episodes.