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CASE ANALYSIS
Analysis of the Case Report on Layoffs in the Closure of Business in China by Foreign-funded Companies
1. Background Overview
Due to the adjustment of its business in Asia, a foreign-funded enterprise has decided to cut costs and close its company in China, involving layoffs and the termination of labour relations. Employee departures should be handled in accordance with laws and regulations, with a focus on preventing legal risks, especially the special protection of female employees during the "three periods" (pregnancy, maternity, and lactation).
2. Legal Risks of Layoffs and Countermeasures
| 1. | Laws and regulations related to layoffs | ||
| A. | Economic Bank Layoffs (Article 41 of the Labor Contract Law) : | ||
| a) | For those who need to lay off more than 20 employees or less than 20 but accounting for more than 10% of the total number of employees in the enterprise, they must explain the situation to the trade union or all employees 30 days in advance and report to the labour administrative department. | ||
| b) | The situation must be explained to the trade union or all employees 30 days in advance and reported to the labour administrative department. | ||
| c) | The layoff plan must be reasonable, giving priority to retaining special groups such as those with open-ended contracts, long-term service, and female employees in the "three periods". | ||
| B. | Negotiated Termination (Article 36 of the Labor Reform Contract Law) | ||
| a) | It is suitable for enterprises with a smaller number of employees. | ||
| b) | The contract can be terminated through mutual agreement with the employee to reduce legal risks, but economic compensation must be paid. The specific amount of economic compensation will be determined based on the negotiation situation, generally being N or N+1. | ||
| 2. | Special protection for female employees in the third phase | ||
| A. | The company shall not terminate the labour contract with female employees during pregnancy, maternity leave or lactation in accordance with the economic bank's layoff (Article 41 of the Labor Contract Law). | ||
| B. | The company shall not reduce the salary of a female employee, dismiss her, or terminate her labour or employment contract due to her pregnancy, childbirth or breastfeeding (Article 5 of the Special Provisions on the Protection of Female Employees' Labor Rights). | ||
| C. | The lactation period is one year. | ||
| 3. | Other relevant legal provisions as required | ||
| A. | The company requires special treatment for the following personnel: | ||
| a) | Workers engaged in operations involving occupational disease hazards who have not undergone pre-departure occupational health examinations or suspected occupational disease patients who are in the period of diagnosis or medical observation. | ||
| b) | Those who have contracted occupational diseases or been injured at work in their current units and have been confirmed to have lost or partially lost their ability to work. | ||
| c) | Being ill or injured not due to work and within the prescribed medical treatment period. | ||
| d) | Have worked continuously in the company for at least fifteen years and are less than the legal retirement age. | ||
3. Calculate the Relevant Severance Pay
4. Assist in Negotiating Resignation Talks
- Explain to all employees of the company the adjustment of the company's business and relevant supporting documents (such as the resolution of the board of directors, relevant process description documents).
- Communication with individual employees to negotiate compensation plans.
- Draft an agreement on the termination or dissolution of the labour contract based on the communication with the employee.
- The company signs an agreement with the employee and handles the subsequent resignation procedures.
