What Businesses & Employees Need to Know in the Virus Outbreak

In order to help enterprises in Guangdong province manage business risks, maintain good relationships with employees, clients and other business partners, and resume production and operation as soon as possible, GH Global Law Team has briefly summarized the relevant regulations and general solutions based on the common questions raised by many enterprises regarding HR management and enterprise operations in light of the current virus outbreak.

The summary, pertinent to all enterprises operating in Guangdong province no matter of size, is presented with three inter-related sections, including Resumption of Work, Salary & Leave and Contracts & Rent.

Resumption of Work

Q1. Can the enterprises in Guangdong Province resume work before February 10th, 2020?

Except for Special Enterprises, enterprises may not resume work before February 10th, 2020 for any reason. Employees may refuse the request to resume work from enterprises that are not Special Enterprises. Special Enterprises refer to enterprises in industries that are necessary to ensure the operation of urban and rural areas (water supply, power supply, oil and gas, communications, public transportation, environmental protection, municipal environmental sanitation and other industries) and epidemic prevention and control (production, transportation, and sales of medical devices, drugs, and protective supplies), community daily necessities (supermarket stores, food production, logistics and distribution industries) or other related enterprises that are involved in important national economy projects and people's livelihood, for Hong Kong and Macao, or in special situations.

Legal basis:

Guangdong Provincial People's Government, Notice on Resumption of Work for Enterprises and Beginning of School Term. 广东省人民政府《关于企业复工和学校开学时间的通知》

Q2. What if the enterprise still cannot resume work after February 10th?

Enterprises are encouraged to discuss with the employees on work arrangements before resumption of work. If viable, enterprises may arrange employees to work flexibly at home through telephone or internet. If remote working is not an option for the enterprise, the enterprise may discuss with the employees and ask them to take annual leave or other benefits leave for the period prior to resumption of work.

Legal basis:

General Office of the Ministry of Human Resources and Social Security, Advice on Stabilizing Employment Relationship and Supporting Resumption of Work and Production During the Prevention and Control of the Pneumonia Epidemic Caused by The New Coronavirus. 人社部《关于做好新型冠状病毒感染肺炎疫情防控期间稳定劳动关系支持企业复工复产的意见》

Q3: Are enterprises allowed to lay off employees during the epidemic?

Enterprises are not allowed to terminate employment contracts of the employees who could not provide employment due to measures taken for the prevention and control of the epidemic outbreak.

If an enterprise is allowed to resume work but employees are unwilling to return to work, the trade union shall persuade the relevant employee to return to work by emphasizing the policy of prevention and control of the virus outbreak and importance of the resumption of work. If the persuasion is unsuccessful or the employee refuses to return to work on other unjustified grounds, enterprises may terminate the employee’s employment contract in accordance with applicable laws.

If an enterprise considers it necessary to lay off employees to maintain normal production and operation after taking all measures recommended in the Advice on Stabilizing Employment Relationship and Supporting Resumption of Work and Production During the Prevention and Control of the Pneumonia Epidemic Caused by The New Coronavirus, it may formulate a lay off plan and terminate employment contracts in accordance with the procedures prescribed by the applicable laws.

Legal basis:

General Office of the Ministry of Human Resources and Social Security, Advice on Stabilizing Employment Relationship and Supporting Resumption of Work and Production During the Prevention and Control of the Pneumonia Epidemic Caused by The New Coronavirus. 人社部《关于做好新型冠状病毒感染肺炎疫情防控期间稳定劳动关系支持企业复工复产的意见》

Salary & Leave

Q1. Are enterprises required to pay wages to employees during the period prior to normal operations?

Yes, but different principles may apply at different stages.

The Spring Festival Holiday was officially extended to February 2nd, 2020 and the period from February 3rd to February 9th is considered rest period in Guangdong Province. Enterprises are required to pay full wages to employees for the extended holiday and the rest period. If an enterprise (other than Special Enterprises) arranges its employees to work during the extended holiday or the rest period but cannot arrange compensatory leave in the future, it shall pay no less than 200% of the employees' daily or hourly wages for the work done during such periods.

If employees cannot return to work after the extended holiday and the rest period, due to measures taken for prevention and control of the virus outbreak, enterprises are encouraged to negotiate salary payment arrangements with the employees in accordance with relevant regulations related to shut down and pause of production. In principle, the employee shall be paid the full salary stipulated his/her employment contract for the first payment cycle and living expenses for subsequent payment cycles.

In addition, enterprises that are experiencing difficulties in production and operation due to the virus outbreak are encouraged to discuss with the employees, through democratic process, on flexible work arrangements, such as salary adjustment, alternate work and rest, reduction of working hours, etc. Enterprises may also discuss with the trade union or employee representative on postponement of payment so as to alleviate the cash flow pressure on the enterprises.

Legal basis:

General Office of the Ministry of Human Resources and Social Security, Advice on Stabilizing Employment Relationship and Supporting Resumption of Work and Production During The Prevention and Control of The Pneumonia Epidemic Caused By The New Coronavirus. 人社部《关于做好新型冠状病毒感染肺炎疫情防控期间稳定劳动关系支持企业复工复产的意见》

Regulations of Guangdong Province on Payment of Wages. 《广东省工资支付条例》

General Office of the Ministry of Human Resources and Social Security, Notice on Properly Handling Labor Relations During the Prevention and Control of Pneumonia Epidemic Situation of New Coronavirus Infection. 人社部办公厅《关于妥善处理新型冠状病毒感染的肺炎疫情防控期间劳动关系问题的通知》.

Q2. If an employee is diagnosed with novel coronavirus and cannot resume work duties, how should the salary be calculated during the illness?

The Department of Human Resources and Social Security of Guangdong Province has explicitly specified that full salary shall be paid to those who cannot work during a medical quarantine period due to the virus. If after this time the employee is still unable to resume his/her work due to medical treatment, the employee shall be paid the standard sick leave rate as per local provincial law, which shall not be lower than 80% of the minimum wage.

As this policy is  consistent with the Advice issued by the General Office of the Ministry of Human Resources and Social Security, we expect the principle to apply in other areas as well, subject to new guidelines issued by the local governments.

Legal basis:

Official Reply Published by the Department of Human Resources and Social Security of Guangdong Province on its website. 广东人力资源和社会保障厅在其官方网站的答复

Q3. Can the enterprise refuse an employee’s right to return to work if they returned from or passed through a key virus outbreak area?

The employer may temporarily refuse employee’s right to return to work and require them to take medical isolation at the designated hospital and take other necessary precautions. The employee must cooperate in accordance with the law. However, if the employee is confirmed to be risk-free after the expiration of the medical isolation period, the employer must accept his/her return to work.

Legal basis:

the Law on the Prevention and Control of Infectious Diseases.《传染病防治法》

Contract & Rent

Q1. Are enterprises exempted from liability when it fails to perform a contract due to theimpact of the novel coronavirus?

In accordance with standard contract writing practice, enterprises usually declare a force majeure when they are unable to meet contractual obligations for reasons that are beyond their control.

China has urged its commerce chambers to provide force majeure certificates for exporters to help cut losses caused by the novel coronavirus epidemic in the country. Such documents, recognized by governments, customs, chambers of commerce and global enterprises, can help partly or completely waive, or delay fulfilling the obligations of litigants.

To apply, applicants must submit proof of delay in the resumption of production, delays or cancellations in sea, air or land transportation, as well as export cargo sales contracts or agreements.

Q2. How should the enterprise deal with contracts that cannot be performed due to the impact of the novel coronavirus?

The unfulfillment of a contract can be divided into three categories: complete unfulfillment of contract, partial performance and temporary unfulfillment of contract.

A party demanding termination of a contract shall notify the other party in accordance to the contract by laws. If the other party objects to such termination, it may petition the People’s Court or an arbitration institution to adjudicate the validity of the termination of the contract.

Where the laws and administrative regulations so provide, the approval and registration procedures for the termination of the contract shall be gone through in accordance with such laws and regulations.

We recommend that enterprises consult our team before making decisions, as the situation involving the termination of a contract is quite complex.

Q3. Can the enterprise ask for rent reduction in accordance with the landlords rent reduction proposals initiated by the various regional industry associations?

According to the Several Policies and Measures to Support the Resumption of Work and Production of Enterprises to Promote Economic Stability in Response to The Pneumonia Epidemic of New Coronavirus issued by the Guangdong Provincial Government on February 6th , (1) State owned commercial property owners shall offer free rent for the first moth and charge half of the rent for the second and third month for enterprises that are heavily influenced by the epidemic and cannot resume normal operation; (2) Other property owners are encouraged to appropriately reduce or exempt rents based on actual circumstances;(3) Property owners that offer free rent for more than two months are entitled to reduced or exempted real estate taxes based the length of the rent-free period.

In addition, a number of industry associations have issued proposals encouraging landlords to reduce or exempt rent in light of the ongoing epidemic. However, the proposals issued by the industry associations are not mandatory. If the leasing property is not a state-owned commercial property, the tenant is advised to approach the landlord for friendly discussion to see if any rent reduction or exemption is possible.

Given the developing nature of the epidemic, we expect more regulations and guidelines to be issued by various government bodies and we will update our answers accordingly. We encourage the readers to subscribe to our public account or contact us for further updates.

GH Global Law Team

About Guanghe Law Firm

Guanghe Law Firm is a leading law firm in China with its headquarters in Shenzhen, GuangDong. GH Law is awarded the Asia's Leading Law Firm by the Chambers and Partners. GH Law currently has 17 branches in Shenzhen, Beijing, Guangzhou, Taipei, New York, Toronto, Uruguay, Kuwait and other regions respectively.

About GH Global Law Team

Global Law Team is formed by Lynn Feng (Partner), Nelson Lau and Kevin Wang with a total of 6 other members. We are fluent in English, Mandarin, Cantonese and Spanish. Members of our team are qualified for both Chinese and American jurisdictions and have practiced law in America and Briton. We worked in multinational groups and have extensive experience in complex cross-border transactions. We serve both PRC and international clients successfully in various industries and are continuously involved in, advising on, and creating innovative legal structures for transactions in a whole spectrum of commercial areas such as general corporate, foreign investment, litigation and arbitration.

In the wide range of fields in which we are involved, we place great emphasis on excellence of services, a commercial attitude to transactions, efficiency of costs and, of course, speed of response.

 Contact GH Global Law Team 

Lynn Feng  Partner

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