Coronavirus Emergency Measures Legal Brief | Q & A Update 2
Last updated at 1300 February 3, 2020
Below we address some more questions and concerns we have recently received from clients, colleagues, and friends.
Please kindly note that the following opinions are mainly based on the regulations and policies related to Shanghai, and they should also not be interpreted as formal legal advice. The development of the epidemic and related emergency measures are happening quickly and with uncertainty, and the regulations and rules can and likely will be adjusted by the competent authorities at any time. We will pay close attention to the development of the situation and the updates of related rules and policies and adjust our opinions accordingly.
1/ Quarantine periods
Unless you are working in Wuhan or Hubei province, or if you or your immediate family members have traveled to these regions in past 2 weeks, or unless your medical condition is considered a contamination risk, none of the currently imposed emergency measures involve any kind of mandatory quarantine period.
That said, we are aware that:
- there are travel restrictions in place throughout the country and now also internationally, which in effect may prevent people from travelling back to their place of residence/work (see further comments on this below under 4), and also that
- some employers are imposing a “medical observation period” on employees who have travelled in recent weeks before they are allowed back to the workplace. Such self-imposed observation periods are a decision of the employer. As such, it is the employer who assumes the risks and consequences thereof. In other words, if an employer wants an employee to stay home after the authorized work resumption day, to make sure the employee is “safe”, the employer is obligated to pay the employee’s salary and other allowances normally.
Note, however, that employers take such measures as a precaution to reassure all other employees. Hence, we believe it may be disputable whether or not employees should be expected to arrange their travel in such way as to be available to work on site from the first day of authorized work resumption. This should be left to a case-by-case determination, but we believe that if an employer expects an employee to undertake an observation period, it should give sufficient prior notice to allow them to arrange travel accordingly.
2/ What happens to salary payment and other employer obligations during mandatory resting period
All labor bureaus and other HR authorities have made it very clear that employers should continue to pay salaries normally and abide by all other obligations under the employment contract during the mandatory resting period, currently set to end on February 10th in most places.
However, looking a bit forward, should the emergency situation continue beyond Feb. 10th, for instance all the way until March (we have no information to that effect and are not making any assumption in this respect) it is not difficult to imagine that some employers may rapidly encounter serious financial difficulties which, by themselves, could create justification for the employer to request authorization from the local labor bureau to apply temporary or permanent economic preservation measures to ensure the financial continuity of the company in the medium to long term. Such measures may include salary limitations, temporary redundancy of all or some personnel (technically an interruption of the employment contract), or others. If the labor bureau decides that the economic difficulties attested to by the employer justify an amendment to the employment contracts, such amendments must in principle still be agreed to by the employees or their representatives in the company.(For more details about what a company can do when encounters serious financial difficulties , please see Question 6 below)
3/ When can an employer request an employee to report back for work?
An employer may request that its employees report to work as early as the first authorized day of work resumption, whenever that will be authorized for the relevant places and industries. This is currently February 10th, for most places/industries. Note that this date may vary depending on industry. For instance, international schools in Shanghai will remain closed until February 17th (March 3rd for Beijing and HK).
However, even prior to work resumption, during the mandatory resting period, your employer may request you to perform some assignments either from home (this is formally authorized and even encouraged by most administrations) or even at your workplace, subject to authorization of the labor bureau or the administration having authority over your industry. For instance, in the education industry, most international schools are organizing on-line teaching solutions at the recommendations of the local education commissions. If you are a teacher, that implies in practice that your employer is authorized to ask you to be available at least on-line, during normal working/teaching hours. Note that in such cases it is our opinion that your employer should provide or at least facilitate the on-line solution.
4/ What if an employee is unable to report back to work
It may be impossible or at least practically impossible for an employee to return to work due to travel restrictions or other valid reasons (illness, for example). If an employee is unable to report back to work – either on the authorized work resumption day or on the day the employer is requesting the employee to work, from home or at the workplace, during the mandatory resting period – the employee shall immediately inform his employer of the circumstances and explain in detail the travel restrictions they encountered and the various alternative solutions they have considered.
Whenever possible, we recommend that the employee provide documentary evidence of such circumstances. If they are ill, they should provide a doctor’s certificate as per usual rules in the employee handbook. If the employee cannot provide a reasonable justification/evidence to justify his absence, we would suggest that the employer may deem that that the employee has effectively applied for leave either for personal reasons or as part of his annual holiday leave allocation.
5/ Do the current (international) travel restrictions and negative travel advisories justify leaves of absence?
The negative travel advisories for China issued by the US State Department and other national governments do not, in and of themselves, constitute a valid excuse for an employee’s leave of absence from work. However, if other circumstances apply, it may help for the employee to explain that they are facing major travel restrictions, for instance because all US and most major European airlines have cancelled flights to China, and the remaining flights are either fully booked or outrageously expensive.
However, again, these circumstances do not automatically constitute a valid justification for absence.
Indeed, an employer may expect that employees would have taken all “reasonable measures” to ensure that they are available for work on the authorized day of work resumption. How these “reasonable measures” will apply will vary significantly on a case-by-case basis. Let’s just say that it appears reasonable that the employee would immediately inform their employer about, for example the cancellation of their return flight and explain the difficulty faced in booking a new flight. This would allow the employer to work with the employee to seek alternative solutions (or for instance, proposing to pay for the extra cost involved with the travel).
As with any contract, the parties may not simply assume that “force majeure” completely exonerates them from all further obligations under the contract. The duty of care and the duty of loyalty which apply to all contracts dictate that a party affected by circumstances amounting to force majeure would take all reasonable steps to mitigate losses incurred by the other party as a consequence of the breach of contract resulting from the force majeure situation.
6/ What can a company do if it encounters serious financial difficulties?
The government allows companies experiencing difficulties in production and operation due to the coronavirus to enact temporary or permanent economic preservation measures to ensure the financial continuity of the company. Although such measures do not need prior approval from the authorities, companies should be able to justify initiating such measures, in case it might be accused of abusing its rights or discretion. Some common measures are summarized below for your reference. What measures to take should of course be considered on a case-by-case basis.
- Salary/work reduction
- if the work resumption is delayed by more than 1 salary cycle, i.e usually 1 month, the company shall be allowed to limit the salary minimum to the local minimum salary
- job sharing under which employees work shifts for the same job function, effectively reducing the number of working hours per worker
- reduction of overall working hours
- Delay salary payment at most for one month
Following consultation with the labor union or the representatives of the employees, the company may delay salary payment at most for one month by notifying all the employees of the delayed payment date.
- Suspension of the labor contract
This suspension could be formalized by a suspension agreement between the employee and the employer. This suspension agreement should stipulate the suspension period, the conditions during the suspension period, and the rights and obligations of both parties.
Usually, during such a suspension period, the employer would be allowed to pay “living allowances”, which generally amount to between 70% and 100% of the local minimum salary, subject to local regulations. Contribution to social security should remain normal.
- Apply for a comprehensive working hours’ system
A comprehensive working hours’ system helps reduce the costs of overtime work during the extension holiday. This is particularly beneficial for companies in excepted industries working normally during the extension holiday.
Note that this special working hours’ system should be applied for by the company and approved by the local labor bureau before implementation.
We suggest avoiding layoffs lay-off by undertaking some of the above measures first. That said, in our opinion, the current situation for certain companies may be such that requirements could be met to justify unilateral termination, such as “major change of the objective circumstances” or “economic dismissal”.
Additionally, some local governments (e.g. Hebei, Zhejiang) will pay subsidies for keeping jobs of the employees of certain companies meeting certain requirements.
7/ Preferential policies introduced by the government.
For now, the primary task of the government is to control the spread of the virus, and most government efforts are focused on that. Still, maintaining stability and the normal functioning of enterprises is always fundamental to the economy, and remains another major task for the government. Hence, the government has introduced and will introduce more policies to alleviate the burden on companies facing serious difficulties because of the epidemic. We have summarized the major policies below for your reference:
- The national tax bureau has clarified that tax declaration in February 2020 may be delayed to 24th February nationwide. For significantly affected areas, such as Hubei province, the delay could be longer depending on the actual situation.
- For some companies in the sensitive industries, such as epidemic control, medical supply, etc., special loans with a preferential interest rate and interest subsidy may be provided.
- For other industries, such as the catering, tourism, logistics, and companies (in particular small and micro sized) influenced by the epidemic seriously, loan policies (application, repayment, term, interest rate and etc.) may be loosened in favor borrowers.
It is important to remember that government efforts and management of resources are arranged and implemented by functional departments at the local level (to the extent of industrial park level) in accordance to the specific local situation. We would suggest that companies facing serious difficulties keep lines of communication open with local governments, both to ask for advice and to apply for any possible help in getting through these difficult times.
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