Wednesday, June 20, 2012

China - The New Rules on Protection for Female Employees

by Gordon Feng and Kay Cai of Paul Hastings LLP

I.                   Introduction
On 28 April 2012, the State Council of the People’s Republic of China (“China” or “PRC”) adopted the Special Provisions on Occupational Protection for Female Employees (the “New Provisions”) which took effect on that same date and superseded the previous Provisions on Occupational Protection for Female Employees effective September 1, 1988 (the “1988 Provisions”). 
There are about 137 million female employees in China, and the Chinese authorities are New Provisions gave more benefits, strengthened certain protection mechanism existing in current laws and regulations and made a breakthrough on preventing and addressing sexual harassment in workplace, which will be discussed in detail below.
II.                Maternity Leave
The New Provisions extended maternity leave from 90 days to 98 days, in order to meet the international labor standards.  It is unclear whether employees who are already on maternity leave can be entitled to the extended leave.  Some cities, e.g. Shanghai, have made it clear that only employees who take maternity leave on or after the effective date of the New Provisions will be entitled to the extended maternity leave of 14 weeks. 
Female workers have more flexibility under the New Provisions to start maternity leave at their own discretion.  Under the 1988 Provisions, maternity leave must start 15 days prior to the due date.  But, the New Provisions provide that maternity leave “may” start 15 days prior to the due date.  In other words, a female employee may choose not to take any maternity leave until her due date and thus have a longer post-delivery maternity leave.
Female workers also are entitled to extra maternity leave in certain circumstances.  For a complicated delivery, female employees will receive an additional 15-days' maternity leave.  Employees who give birth to multiple babies in one delivery (i.e., twins) will be entitled to an additional 15-days' maternity leave for each additional birth.  Women employees also are entitled to miscarriage leave.  A female employee who suffers a miscarriage within the first four months of pregnancy is entitled to 15 days' leave.  An employee who suffers a miscarriage upon or after the fourth month of pregnancy is entitled to 42 days’ leave.
Besides the above standard maternity leave, a female employee may be entitled to extra maternity leave for “late birth” as an incentive for family planning under local rules.  For example, a female employee in Shanghai or Beijing who gives birth to her first child at 24 years old or later is entitled to an additional 30 days of maternity leave.  In Guangzhou, a female employee who bears her first child at the age of 23 years old or later will receive an additional 15 days of maternity leave.  In addition, a female employee in Guangzhou is entitled to another 35 days’ leave if she complies with the Chinese “single child” policy and gives birth to only one child.
III.             Maternity Pay and Maternity Insurance
Female employees receive maternity pay during maternity leave.  Under the PRC Social Insurance Law, which took effect July 1, 2011, employers must enroll their male and female employees in mandatory maternity insurance.  Female employers will receive maternity leave pay and reimbursement of medical expenses related to childbirth and family planning.  The New Provisions provide that if an employer enrolls a female employee in the maternity insurance, the maternity insurance fund will pay the employer a maternity leave pay during her maternity leave, which equals the average wages of all of the employees of the employer in the last calendar year (“employer average wages”).  If the employer fails to enroll the employee, the employer must pay the employee itself during the maternity leave, which is equal to her regular salary prior to the maternity leave.
The New Provisions, however, fail to address one crucial issue: if a female employee’s regular salary is higher than the employer average wages, must the difference be made up by the employer?  The Law on the Protection of the Rights and Interests of Women (“Women’s Protection Law”) requires that a female employee’s salary may not be lowered during her maternity leave.  Article 5 of the New Provisions also provides that an employer may not lower a female worker’s salary due to pregnancy, childbirth or breastfeeding. Therefore, the difference should be made up under the law, but it is unclear whether the maternity insurance fund or the employer should be responsible.  We recommend that employers make up the difference to comply with the Women’s Protection Law, unless the local rules explicitly allows employer not to make the difference, e.g. Shanghai’s.
The existing practice regarding this issue varies from city to city in China.  For example, Shanghai’s local rules provide that the maternity insurance fund will pay a maternity leave pay at the employer average wages.  However, if the employer average wage exceeds 3 times local average wages (“cap”), the fund will only pay up to the cap.  The employer must make up the difference between the employer average wages and the cap if the former exceeds the latter.  However, the employer is not required to further make up the difference if the employee’s regular wages exceed the employer average wages.  As a result, high-income female employees will receive less pay during their maternity leave, which contradicts the Women’s Protection Law and the New Provisions.  In contrast, in Beijing and Guangzhou, although the maternity insurance fund also pays up to the cap, employers are required to make up the difference between the cap and an employee’s regular salary if the employee’s regular salary exceeds the cap.
IV.             Protected from Termination, Over-time and Night Shift
Under the Employment Contracts Law of 2007, a female employee is generally protected from termination if she is pregnant, on maternity leave or in the nursing period that is one year after childbirth.  If her employment contract expires during her pregnancy, maternity leave or nursing period, the employment contract will be extended automatically to the end of the nursing period by operation of law.  Nevertheless, a female employee still can be terminated under some circumstances, e.g. termination by mutual consent between the employee and the employer, for the employee’s serious misconduct, or due to the employer’s winding-up or bankruptcy. 
The New Provisions also prohibit employers from requiring a female employee who is 7 months pregnant or more or is in her nursing period to work overtime or on any night shift (from 10 P.M. to 6 A.M. next day).
V.                Sexual Harassment Against Females in Workplaces
A significant breakthrough under the New Provisions is that employers are required to prevent and stop sexual harassment against female employees in the workplace.  This is the first time that a national level law expressly imposes such obligations on employers. However, the law still fails to provide a definition of what constitutes “sexual harassment”.  Also, due to the nature of the New Provisions, the issue of woman-on-man or man-on-man sexual harassment still is not addressed.
A.                Background
The term “sexual harassment” was translated and introduced to China in the early 1990’s.   Research showed that sexual harassment was pervasive in China, and women suffered much more harassment than males did.  For example, conducted an online survey in 2003, among 8,282 participants of the survey, 59.36% confirmed that they had been sexually harassed.   In July 2003, and a magazine called “Bi-weekly Dialogue” held another sexual harassment survey, in which 5,469 males and 2,910 females took part.  17% of the female participants said that they were frequently harassed (while only 3% male participants said they were), and 60% of the female participants replied that they were occasionally harassed, while 18% males made the same reply.
In response to sexual harassment against women and other matters regarding protection of women’s rights and interests, the China’s national legislature amended the Women’s Protection Law in 2005, which explicitly prohibits sexual harassment of women.  However, the Women’s Protection Law does not impose any obligation on employers to stop and prevent sexual harassment.  Indeed, in the first draft of the Amendment, there was an additional clause providing that “employers must take measures to prevent sexual harassment in workplaces.”   Having reviewed the first draft, however, some legislators and scholars cast doubts on that clause and were concerned on what exactly were the preventive measures employers must take.   As a result, that clause was removed from the final text of the Amendment. 
Nevertheless, the provincial implementing rules of the Women’s Protection Law impose certain obligations on employers.  The Women’s Protection Law authorizes provincial legislatures to promulgate implementing rules.   So far, 27 of 31 provincial-level governments in the Mainland China have enacted their implementing rules of the Women’s Protection Law, which contain anti-sexual harassment provisions.   Although those implementing rules vary from one to another, the common provisions are: (1) it is prohibited to harass women, against their will, by means of verbal or written words, image, electronic information, physical acts, etc., which have sexual content or are related to sexual activity; and (2) employers must take measures to prevent and stop sexual harassment against women.  Today, the New Provisions finally impose these obligations on employers nationwide.
B.                 Employer’s Liability
Although there is no penalty on employers if they fail to stop or prevent sexual harassment, they may be subject to direct liability if their act or omission contributes to the harm to the victim of the sexual harassment conduct under the PRC Tort Law.  Employers are required to take measures to stop and prevent sexual harassment in the workplace.  If an employer negligently fails to establish preventive measures for sexual harassment conduct (e.g., adoption of an anti-sexual harassment policy and setup of a grievance procedure), or negligently or intentionally fails to stop the sexual harassment conduct when the employer knew or should have known it, the employer’s failure to take actions is tortious, and can be considered to contribute to the harm of the victim of sexual harassment.  As a result, the victim employee can sue the employer alone or jointly with the harasser for damages.
C.                 Damages for Sexual Harassment
Since the first sexual harassment case appeared in the PRC in 2001, there have been only a handful of workplace sexual harassment cases reported by media, which appears extremely disproportionate with the sexual harassment incidents actually happening in reality.  One reason for such a lower number of the lawsuits may be the culture, i.e. victims are concerned that public disclosure of their sexual harassment experience is detrimental to their reputation in their community.  Another principal reason is that the damages that a victim can receive through litigation are very low. In the two reported sexual harassment cases where the plaintiff prevailed, the court awarded RMB2,000 ($317) and RMB3,000 ($476) for emotional distress, respectively.  Damages for emotional distress usually are awarded in an extremely conservative manner in practice.  For example, some courts have the internal rule that damages generally should not exceed RMB50,000 ($7,937).  Thus far, the highest amount of emotional damages awarded was RMB300,000 ($47,619) and this was in a murder case.  Therefore, many victims do not think it is worth bringing the harassers to court, because the potential award is low, but the potential damage to reputation is huge.
This lack of appetite for litigation may change, however, since now employees may sue or implead employers for failure to stop and prevent sexual harassment, and thus may receive significantly higher damages.  Many employers may choose to settle with the employees for reasons of potential injury to image and reputation due to the sexual harassment in their workplace, and thus may decide to pay a much higher amount in order to settle an employee’s sexual harassment claim.
D.                Remedial Actions
The New Provisions and the provincial implementing rules of the Women’s Protection Law are silent regarding what appropriate measures an employer should take to prevent or stop sexual harassment in the workplace.  This may make it difficult for a victim to hold an employer liable for its failure to take the required measures.  The law on sexual harassment in the U.S. may be helpful on this issue.  For example, regarding preventive measures, companies are generally required to have an anti-harassment policy suitable to the employment circumstance.    Courts also have explained several factors determining what constitutes an “effective” harassment-prevention policy.  These factors include 1) sufficient training for supervisors regarding sexual harassment,  2) an express anti-retaliation provision,  and 3) multiple complaint channels for reporting the harassing conduct, enabling the victim to bypass his/her harassing supervisor.  
VI.             Conclusion
The New Provisions not only give more benefits to female employees, but they also impose more obligations on employers.  It is, therefore, necessary for employers to review their internal policies to ensure full compliance with the New Provisions, including with respect to the extended maternity leave and the overtime policy for female employees.
In order to fulfill the obligations imposed by the New Provisions regarding the prohibition on sexual harassment, employers should formulate an anti-harassment policy suitable to the employment circumstance, provide sufficient training for supervisors regarding sexual harassment, and set up multiple complaint channels for reporting the harassing conduct.