Due to the outbreak of the coronavirus (COVID-19), most companies in China have been completely shut down or operating at a fraction of their capacity for almost a month and a half, since the beginning of Chinese New Year in late January. Now, most employers in China are slowly getting back to somewhat normal operations, with most employees gradually returning to offices and factories. There are several things that employers should know to maximize the speed with which they can return to normal operations and continue to work in the time of the coronavirus.
Employers need to determine very little on their own as to how to comply with prevention and control measures. The Chinese government has had a heavy hand in instructing employers and individuals as to what they need to do, and there is no option but to comply. If an employer is found not to be in compliance with prevention and control measures, the company won’t be allowed to operate. However, employers should be aware of some preferential policies the government has introduced to help employers through this period, as well as certain sensitivities during this time, such as terminations.
The American Chamber of Commerce in Shanghai sends out a daily COVID-19 report which includes a graph showing the trend of new cases in China over time (in addition to other statistics and information). Since late February that trend line has essentially flatlined at near zero for cases outside of Hubei province. So, in addition to being required or suggested, the below measures appear to have been effective in at least significantly slowing down the spread of COVID-19.
Our discussion focuses on Shanghai, but similar rules and guidelines will apply in other locations. COVID-19-related policies, guidance and regulations are constantly being updated, and we will issue updates from time to time.
Having Employees Return to Work
Employers need local government approval to reopen and have employees who have been outside Shanghai return to work. Each employer must sign and return a commitment letter for the prevention and control of COVID-19 to their district government. The commitment letter sets out the steps each employer must take to obtain approval to reopen and continue to take going forward. This includes providing the health status and travel information of each employee, purchasing a temperature gun and masks for the office, and having a detailed schedule of daily office cleaning and sanitation measures. Some districts have an official WeChat account where all such information is submitted. The district government will then send inspectors to an employer’s office to confirm the employer has purchased the required items and implemented such plans before issuing approval for the office to reopen. Any employees who have been outside of Shanghai require individual approval from the local district government to be able to return to the office or factory. Such employees are required to complete a mandatory 14-day self-quarantine.
Additionally, each office will be issued posters in Chinese and English listing steps employees should take to stay safe during this period, which should be displayed prominently in the office. The steps emphasize washing your hands all the time, wearing masks all the time and avoiding people.
An employer’s office property management will likely have its own prevention procedures in place, such as limiting access to elevators through one entranceway, mandatory temperature checks and a requirement for registration of any guests. Your employees should follow any procedures they put in place.
In general, quite strict quarantine and movement restrictions remain in place. Many residential areas have rules prohibiting residents from leaving, except in limited circumstances. For those who have to go to work, they will likely have to provide a government-provided document chopped by the employer to prove they need to work.
Many office buildings, shopping malls and public transportation require Chinese citizens to download a QR health code from the popular mobile payment app, Alipay. Therefore, many employees will need to have this QR code on their mobile phones to get around or access an employer’s premises. Data from an individual’s phone is sent directly to Public Security to determine if he or she has been to a high-risk area or been near someone who is known to be infected. Based on this, the QR code gives an indication of green, yellow or red as to an individual’s health status. Green is fine, yellow or red means the individual is subject to quarantine of differing lengths.
Additionally, the law requires employers (among others) to accept any preventive and control measures put in place by the government and provide relevant information pursuant to such measures. So, data privacy in a health emergency? None on the government side. But a new government notice issued in the beginning of February prohibits employers from arbitrarily collecting an employee’s personal information on the grounds of epidemic control and prevention. Employers need to consider the relevancy and necessity of personal information they collect from employees in this regard.
Management of Employees After Returning to Work
Protecting and Monitoring Health
Employees should wear protective masks while at work and employers should measure each employee’s temperature every day.
Employers should encourage employees to come to the office during non-peak hours, and where possible, arrange for their own shuttle buses to pick up and drop off employees. Employers are encouraged to adopt flexible working arrangements (such as working from home) and are prohibited from sending employees to epidemic areas (undefined) for business trips. Strict controls must be put in place to restrict non-employees from entering the work premises. Employees should be encouraged to go directly to and from work.
Management of Dining Areas
Employers should strengthen the sanitation of cafeteria or canteen areas and ventilate and sterilize such areas frequently. Employers should also encourage individual servings of food or box lunches and discourage employees from eating together — or if they do eat together, employees should sit at least 1 meter from each other.
Management of Office Premises
Employers are required to stop using central air conditioning/heating. They should step up the sanitation and disinfection of all areas, such as office spaces, elevators, meetings rooms and equipment and vehicles. Employers should generally not hold face-to-face meetings, which will result in a number of employees grouping together.
The Employment Contract Law contains provisions where an employer can unilaterally terminate an employee if they become sick and cannot return to work after receiving medical treatment or conduct a mass layoff if experiencing difficulties in production or operations. Employers cannot do that now. If employees are under quarantine, diagnosed with COVID-19, or required to take other emergency measures by the government which cause the employee to be unable to perform work duties, the employer cannot unilaterally terminate the employee. An employer still can mutually agree to a termination, but during the epidemic period employees are going to be uncooperative with such suggestions and will ask for very high separation packages. Use of the statutory layoff provision is rare even during normal periods as local governments discourage that and there are some practical issues in implementing it — so that is of little concern. Most layoffs are done by mutual agreement.
If an employee’s employment contract term will end while the employee is being treated, under medical observation, quarantined or required to take other emergency measures by the government due to coronavirus, the employment contract will be deemed to be extended to the end of the medical treatment, observation, periods of quarantine or other emergency measures adopted by the government.
If an employer is experiencing difficulties in operations or production as a result of the COVID-19 outbreak, the employer should discuss with its employees to see if it is able to adjust compensation, adopt rotations or shifts, reduce working hours, or take other measures in order to secure jobs and eliminate or minimize any layoffs to the best of its ability.
If an employee refuses to return to work, someone from the employer (the government guidance specifically indicates an employer’s trade union, but presumably another employer representative should do this where a trade union doesn’t exist) should explain the requirements of the COVID-19 prevention and control measures and why it is important for the employee to return to work. If the employee still refuses to return to work without proper cause after this discussion, the employer is allowed to handle the employment relationship according to the law (which means, in practice, the employer will need to mutually agree to the termination).
Employees who are diagnosed or suspected of having COVID-19 or had close contacts with confirmed or suspected patients and thus are being treated, under medical observation, quarantined or required to take other emergency measures by the government, are still entitled to full pay during such period even if they cannot work. After the end of a quarantine period, if an employee still requires medical treatment, the employer should pay the employee based on the relevant compensation standards for medical leave.
If an employer is having difficulties in operations or production as a result of the COVID-19 outbreak, the employer should discuss with its trade union or employee representative(s) whether it is able to adjust compensation levels, adopt rotations or shifts, reduce working hours, or take other measures in order to secure jobs and eliminate or minimize any layoffs to the best of its ability. If an employer is temporarily not capable of paying compensation to its employees, the employer may postpone the payment of employees’ compensation after consulting with the trade union or employee representative(s).
Some employees may need to delay the resumption of work or may be unable to return to work as a result of the COVID-19 outbreak after using up all of their annual leave entitlement. In such cases, the employer should discuss with the employee about paying compensation during the first payroll period in accordance with the employment contract, and then relevant living expenses (per national regulations for payroll requirements for operational shutdown periods) during the second payroll period.
Mid- and small-sized businesses are exempt from contributing the employer’s portion of the pension, unemployment and work injury insurance for employees from February to June 2020. Large businesses are exempt from contributing half of the employer’s portion of the above three types of social insurance from February to April 2020.
During 2020, the social insurance authority will refund to employers 50% of the unemployment insurance fee contributed by both employees and employers during the last fiscal year if the employer does not lay off any employees (or at least keeps this to a minimum).
The year beginning and ending in the fiscal year for social insurance payments including the medical insurance payment shall be postponed for three months, which shall be between July 1, 2020 and June 30, 2021.
If employers or employees fail to complete social insurance registration requirements or make social insurance contributions, they will be allowed to make up such shortfalls after the COVID-19 epidemic ends. Employers will be allowed to make up any shortfalls within three months after the COVID-19 epidemic ends. No penalties will be imposed for any delays in making social insurance contributions. Any such delays will not affect an employee’s personal rights and interests.
Employers’ medical insurance contribution requirement will be temporarily reduced by 0.5%. This is conditional upon employers ensuring medical insurance treatment for employees does not decrease and that the medical insurance system operates smoothly.
Employees are allowed to delay retirement. Additionally, after an assessment by the Human Resources and Social Security authority, supplementary payments for pension will be made to employees beginning this month.
Upon receiving approval from the authorities, employers will be allowed to delay contributions to the housing fund until June 2020. Employees will not be penalized for failing to repay any housing fund loan on time during the epidemic period.
Overtime Exemption Approvals
Employers whose approval for the flexible work hour system will expire during the epidemic prevention and control period will be automatically extended to the end of such period.
Visas or Resident Permits for Foreigners That Are About to Expire
All visas and resident permits for foreigners nearing expiration will automatically be extended by two months during the current period of prevention and control of the COVID-19 epidemic.
Employees With Children
All schools in Shanghai are closed indefinitely with children required to continue their studies online from home. This may present issues for employees who are requested to return to the office who have spouses that also work, even those families with nannies. Most nannies are from outside Shanghai, and even if they complete the self-quarantine requirement, most residential complexes won’t allow them in, which means one parent will need to stay at home to care for the child.
COVID-19 is generally not considered an occupational illness if contracted by an employee at work. Exceptions to this rule are health care and related staff who are at high risk of exposure to COVID-19 while working.
Individual Income Tax Exemption
Employees are exempt from individual income tax for medicine, medical and prevention supplies received from their employers for virus prevention purposes.
Use of Interns Suspended
The use of interns must be suspended by employers.
Lessons for Employers in Other Jurisdictions Where COVID-19 Is Appearing
For many employers, the biggest impact on their businesses will be from fear, not COVID-19 illnesses. Some employers may be able to have employees work from home, but that is unlikely to be the case for manufacturers. If employers are not providing what is perceived to be a safe work environment, many employees are unlikely to show up for work or will be less productive. Providing masks to employees and implementing some of the above measures required of employers in China, subject to any state and federal laws restricting such actions (and we know employers elsewhere cannot implement them all), is likely to increase the productivity of employees, and limit, to the greatest extent, the impact of COVID-19 on an employer’s operations in terms of its workforce.
The prevention and control measures taken by the Chinese government have been extremely comprehensive and strict. As mentioned above, they track the movement of individuals by their phones to determine if they pose a risk. In the past, if someone went to a pharmacy to buy flu medicine, they would have been reported to Public Security and quarantined. Now pharmacies are prohibited from selling flu medicine, so if an individual gets sick, he or she must visit a hospital to get treatment. To leave residential compounds individuals had to prove they had to work; otherwise, each household could only send someone out twice a week for necessities. If you came from outside of Shanghai and were subject to the 14-day self-quarantine requirement, someone from the local government would make sure you self-quarantined and were healthy. Every residential compound, office building, mall — basically every building — has been sealed except for one entrance where everyone must have their temperature taken before they can enter. Non-residents are not allowed into residential buildings and individuals who do not work in commercial buildings are not allowed to enter those buildings. Private guards at every building in Shanghai enforce these prevention and control measures. Hotels are not allowed to take guests from out of town. Hair salons, gyms, Shanghai Disneyland and other such places where people would have close contact or gather in large groups were not allowed to open. When an infected person dies there are no last goodbyes, the body is immediately cremated. The list goes on and most of these measures remain in place.
Such comprehensive measures are not being implemented by governments in the U.S., U.K. or elsewhere, either because that is not possible in those jurisdictions or the magnitude of the problem has not been appreciated. Therefore, it is incumbent upon employers in those jurisdictions to take it upon themselves to design and implement their own specific prevention and control measures to avoid, to the maximum extent, any disruptions to operations due to fearful or infected employees.
As the number of cases around the world grows, Faegre Drinker’s COVID-19 Task Force of attorneys, consultants and professionals is helping clients fully understand and assess the legal, regulatory and commercial implications of COVID-19. This team can serve as an excellent resource to help keep your workforce safe and productive.