Good News for Employees in Shanghai: Adjustment to the Standards of Certain Livelihood-related Security and Treatment
Shanghai has raised a series of livelihood-related security and treatment standards since April 1st, 2014, including the standards of minimum salary, unemployment insurance benefits, employment subsidies and employment injury insurance as well as disbursement ceiling of the overall fund of basic medical insurance for urban employees
1. Standards of Minimum Salary
The minimum monthly salary has increase from 1,620 Yuan to 1,820 Yuan and minimum hourly salary has increased from 14 Yuan to 17 Yuan since April 1st, 2014
The minimum monthly salary standard is applicable to a full-time employee who provides regular labor services during statutory working hours. Please note that the minimum monthly salary standard does not include social insurance charges and housing fund paid by the employee himself. Besides, overtime pay, allowance for working on the swing shift or night shift, allowance for working under high temperature or low temperature environment and allowance for working in poisonous and harmful conditions are excluded from the minimum monthly salary standard.
The minimum hourly salary standard is applicable to a part-time employee. Part-time employment refers to the employment in which the wage is paid on an hourly basis, and the average working hours of an employee with the same employer are less than four hours each day, and the total working hours of such employee are less than twenty-four hours each week. The minimum hourly salary standard does not include social insurance charges and housing fund paid by the employee himself.
2. Standards of Unemployment Insurance Benefits
Standards of unemployment insurance benefits are determined by the continuous payment period and the age of the unemployed which are currently divided into three levels. After the adjustment, three levels of unemployment insurance benefits standards for the first 12 months are increased to 1,065 Yuan per month, 1,120 Yuan per month and 1,170 Yuan per month respectively; unemployment insurance benefits standards for the second 12 months are 80% of those for the first 12 months and the minimum standard shall be about 10 Yuan higher than the subsistence allowances for urban residents in Shanghai.
3. Standards of Employment Subsidies
According to the adjustment, living allowance for youth on employment training has been increased from 1,296 Yuan per month to 1,456 Yuan per month; employment allowance for laid-off workers with agreement on reservation of social insurance and self-employment allowance for the older unemployed have been increased from 810 Yuan per month to 910 Yuan per month.
Meanwhile, the subsidy standard for employers hiring identified local unemployed who have difficulties in finding jobs has been increased from 13,000 Yuan to 16,000 Yuan and the subsidy standard for employers hiring identified laid-off workers with agreement on reservation of social insurance who have difficulties in finding jobs has been increased from 6,500 Yuan to 8,000 Yuan
4. Standards of Employment Injury Insurance
Three standards regarding employment injury insurance has been raised.
a. improvement in the disability allowance enjoyed by employees who have first-degree to fourth-degree of disability caused by employment injury:
first-degree disability: an increase of 310 Yuan per month;
second-degree disability: an increase of 290 Yuan per month;
third-degree disability: an increase of 280 Yuan per month;
fourth-degree disability: an increase of 260 Yuan per month.
b. improvement in nursing fees for injured employees who are unable to look after themselves:
completely unable to look after themselves: an increase of 170 Yuan per month;
mostly unable to look after themselves: an increase of 130 Yuan per month;
partly unable to look after themselves: an increase of 100 Yuan per month.
c. improvement in pensions for dependents whom the employees died in course of duty have: an increase of 70 Yuan per person per month.
5. Disbursement Ceiling of the Overall Fund of Basic Medical Insurance for Urban Employees
Disbursement ceiling of the overall fund of basic medical insurance for urban employees for the medical care year of 2014 (from April 1, 2014 to March 31, 2015) has been increased from 340,000 Yuan to 360,000 Yuan. 80% of the medical costs surpassing the disbursement ceiling is still paid by local additional medical insurance fund. Corresponding adjustments have also been made to disbursement ceiling of the overall fund of medical insurance for urban floating employees and town employees.
The standards of livelihood-related securities and treatment are tied to the vital interests of the people. Therefore, the above-mentioned improvements are really good news for employees, especially for those with low incomes.
Ubilla & Cía. Advising Technology Innovation
New Amendment of Company Law of PRC Simplifies the Establishment of A Company in China
On December 28, 2013, the Standing Committee of National People's Congress made a decision to amend the Company Law of PRC and the new amendment (the “Amendment”) will take effect on March 1, 2014.
The Amendment abolishes several core requirements for the company establishment in China, including the paid-in capital, minimum of registered capital, installment of registered capital contribution, restriction on percentage of contribution by cash, capital verification, etc., which involves a paradigm change in Chinese corporate law and will significantly facilitate and simplify the procedure to incorporate companies in China.
The main changes are as follows:
1. Paid-in Capital
Paid-in capital shall not be included in the business license of a Chinese company. It means that the injection of capital contribution by shareholders is not required for the establishment of a Chinese company, except as prescribed in specific laws and regulations.
Notwithstanding this, each shareholder shall take limited liability to any third party based on its subscribed capital contribution to the company.
2. Minimum Registered Capital
The requirement of a minimum amount of registered capital is abolished. After the Amendment is effective, there will be no requirement on such a minimum registered capital.
Therefore, theoretically, a limited liability company can be established with its registered capital of RMB 1 and a joint stock limited company can be established with its registered capital of RMB 2 (at least 2 shareholders), as long as each shareholder subscribes its shares according to the articles of association of the company in general.
3. Installment of Registered Capital Contribution
The requirement relating to the payment of installments of registered capital contribution (at least 20% for the first installment and balance within 2 years or 5 years for the investment company) is abolished.
4. Exception Regarding Paid-in Capital, Minimum of Registered Capital and Installment of Registered Capital Contribution
The Amendment stipulates that if the paid-in capital, minimum amount of registered capital and installment of registered capital contribution are prescribed in other specific laws and regulations, such provisions shall be followed.
The exception mentioned above mainly refers to the corresponding requirements on security companies in Security Law, commercial banks in Commercial Bank Law, insurance companies in Insurance Law and international freight forwarding companies in Regulations on Management of International Freight Forwarding Business.
5. Percentage of Cash Contribution to A Limited Liability Company
The restriction on percentage of cash contribution to a limited liability company (at least 30%) is abolished.
Therefore, it will become feasible that one shareholder contributes up to 100% to a limited liability company in the form of intellectual property or real property.
6. Capital Verification for a Limited Liability Company
The capital verification for a limited liability company by a qualified institution is abolished.
Therefore, the capital verification report will not be required for the establishment of a limited liability company.
7. Restriction on the Offering Shares to Third Parties by A Joint Stock Limited Company
Each promoter of a joint stock limited company to be established by promotion means shall subscribe its shares and then pay its shares according to the articles of association. Even though the time limit of contribution/payment is not required, the Amendment stipulates that the promoters cannot offer shares to any third party before paying their subscribed shares.
8. Decrease of Registered Capital
The provision that the registered capital of a company shall not be less than the required minimum amount after the capital decrease is abolished.
Comments
The Amendment has made significant changes in the following three aspects:
a. Change the paid-in capital registration system to subscribed capital registration system;
b. Reduce the threshold of registered capital for the company establishment;
c. Simplify the registration procedure and application documents for the company establishment.
Therefore, these changes are expected to facilitate and promote investment and, therefore, encourage innovation and entrepreneurship.
Moreover, all aforementioned changes in the Amendment also apply to the foreign-invested companies (including equity joint venture, contractual joint venture and wholly foreign-invested companies), which will also encourage foreign investment in China.
Key Issues regarding the Third amendment to PRC Trademark Law
On August 30, 2013, the Standing Committee of the National People’s Congress issued the Third Amendment to PRC Trademark Law (the "Amendment"). The new Trademark Law based on this Amendment will enter into force on May 1, 2014.
In general, the Amendment improves the legal framework regarding critical issues such as trademark application, review and opposition, trademark use, assignment and extension, trademark infringement and punishment, etc. The main changes in detail are clarified as follows:
1. Increase of "Good Faith" Principle (Article 7 of new Trademark Law)
The Amendment introduces the "good faith" principle (or "honest and trust principle") to the Trademark Law on trademark registration and use. This principle is regarded as the safeguard to provide the final remedy for cases that cannot be tackled through the existing trademark regulations.
2. Expansion of Trademark Form for Registration (Article 8 of new Trademark Law)
The Amendment adds "sound" as one form of trademark for registration.
3. Well-Known Trademark (Article 14 of new Trademark Law)
First, the Amendment specifies the elements which shall be considered in order to define a well-known trademark, including i) trademark popularity to the public; ii) how long the trademark has been used; iii) duration, extent and scope of trademark advertisement; iv) records of trademark protection; v) others relevant elements.
Second, the Amendment explicitly prohibits the manufacturer or business operators to use the term "well-known trademark" on products, packages or containers of products, or to use for advertising, exhibition or any other business activities. Anyone who violates this rule shall be liable for monetary penalties which are equivalent to RMB 100,000.
4. Restraint of Trademark Squatting (Article 15 of new Trademark Law)
The Amendment explicitly prohibits representatives, trademark agents, and those who have business relationship with the trademark owners to register the identical or similar trademark on same or similar products.
5. Requirements to Trademark Agencies (Article 19 of new Trademark Law)
The Amendment creates rules for the first time to regulate the registration activities of trademark agencies. Trademark agencies shall be responsible to comply with the "good faith" principle, relevant laws and regulations of China, as well as confidentiality obligation. Besides, trademark agencies shall not apply for any other trademarks for their own purpose except trademarks applied for their clients.
6. Change of Trademark Application Methods (Article 22 of new Trademark Law)
First, the Amendment simplifies the trademark application procedure by allowing the applicant to submit one application for one trademark in several different classes.
Second, the Amendment allows the applicant to submit the registration documents in written form or electronic forms.
7. Clarification of Time Limit to the Official Review by Chinese Trademark Office ("CTMO")
The Amendment clarifies the official time limit to different aspects regarding trademark registration procedure which is collected in the table below:
| Procedure | Time Limit (Month) | Extension (if required) | No. of Article of New Trademark Law |
| Application | 9 | N/A | 28 |
| Review on rejection | 9 | 3 | 34 |
| Opposition | 12 | 6 | 35 |
| Review on opposition filed by the applicant | 12 | 6 | 35 |
| Invalidation on absolute reasons | 9 | 3 | 44 |
| Review on invalidation decision made by CTMO on absolute reasons | 9 | 3 | 44 |
| Invalidation on relative reasons | 12 | 6 | 45 |
| Cancellation by CTMO | 9 | 3 | 49 |
| Review on cancellation in Trademark Review and Adjudication Board (“TRAB”) of China | 9 | 3 | 54 |
8. Change of Opposition Procedure (Article 33 and 35 of the new Trademark Law)
First, the Amendment distinguishes the applicant who can file an opposition due to absolute and relative reasons and narrows the applicant due to relative reason. According to Article 33 of the new Trademark Law, only the owner of a prior right or an interested party of the trademark may file the opposition to the CTMO due to relative reasons, comparing to any party who can file the opposition before. On the other hand, the previous rule that anyone can file an opposition due to absolute reasons is not changed.
Second, if an opposition of trademark registration is refused by the CTMO after the review, the CTMO will approve the application and the opposing party shall only apply to the TRAB for the remedy through a new procedure – "invalidation". (Article 35 of the new Trademark Law)
9. Trademark Extension (Article 40 of the new Trademark Law)
The Amendment makes a change to the period applicable for the trademark extension. According to Article 40 of the new Trademark Law, the extension of registered trademark can be filed to the CTMO 12 months before the expiration date, comparing to 6 months under the previous law. The 6 months for the extension after the expiration date ("Grace Period") will still exist in the new Trademark Law.
10. Trademark Assignment (Article 42 of the new Trademark Law)
First, compulsory assignment: where the trademark is assigned, if the assignor has registered the similar trademarks on the same products or registered the identical or similar trademarks on the similar products, those trademarks shall be assigned concurrently.
Second, limit to the assignment: CTMO will not approve the assignment which may easily cause confusion or other negative influence.
11. Trademark License (Article 43 of the new Trademark Law)
The Amendment regulates that the license of trademark shall be filed to the CTMO and noticed to the public, otherwise, the license cannot be defended against the third parties in good faith.
12. New Definition "Invalidation" (Section 5 of the new Trademark Law)
The Amendment distinguishes the application of trademark invalidation due to different reasons. Anyone can file the trademark invalidation due to the absolute reasons as well as the registration through fraud or other wrongful activities (Article 44 of the new Trademark Law), meanwhile, only the owner of a prior right or an interested party of the trademark may file the trademark invalidation due to the relative reasons (Article 44 of the new Trademark Law).
13. Revocation of Trademark (Article 49 and 54 of the new Trademark Law)
The Amendment regulates that any legal entity or individual may apply to the CTMO for the revocation of the trademark that is considered as a generic name of products in the place where it is registered or that hasn’t been used for successive 3 years without reasonable reasons. The trademark right is terminated on the date of revocation notice.
14. Restriction of Trademark Registration (Article 50 of the new Trademark Law)
The Amendment regulates that CTMO shall not approve the registration of trademark which is identical or similar to the revoked or invalid or non-extended trademark within one year after it is revoked or invalid or not extended.
15. Adjustment of Trademark Infringement Behavior (Article 57 of the new Trademark Law)
First, the Amendment clarifies the following behaviors involving trademark infringement:
i) Using the trademark identical to registered trademark on the same product;
ii) Using the trademark similar to the registered trademark on the same product;
iii) Using the trademark identical or similar to the registered trademark on the similar product that may easily cause confusion.
Second, the Amendment increases one situation that may cause trademark infringement:
i) Deliberately facilitating the trademark infringement activities or helping others with trademark infringement activities.
16. Trademark and Trade Name (Article 58 of the new Trademark Law)
The Amendment regulates that if any company uses a registered trademark or a unregistered well-known trademark as its trade name which causes public confusion, Anti-Unfair Competition Law will be applied.
17. Fair Use or Prior Use of Trademark (Article 59 of the new Trademark Law)
a. Fair Use
The Amendment regulates that the trademark owner cannot prevent others from using the generic name, picture, model type of products, or descriptive features of products including quality, main materials, function, use, weight, quantity, etc, or geographic name which is included in the registered trademark. It is regarded as the fair use of the registered trademark and the user will not cause the trademark infringement.
Moreover, the Amendment regulates that the trademark owner cannot prevent others from using the trademark with 3D logo which includes i) shape created by nature of products; ii) product shapes required to obtain the technology effect; or iii) the shape creating substantial value of products.
b. Prior Use
If any legal entity or individual has used the trademark before the application date of the trademark and already obtained certain influence to the public, such legal entity or individual may continue to use its trademark after an identical or similar trademark is registered in identical or similar products. However, the continued use shall be limited to the original scope, and the trademark owner may ask the prior user to add marks to its trademark in order to distinguish two trademarks.
18. Damage Calculation Method (Article 63 of the new Trademark Law)
First, the Amendment regulates the method of damage calculation due to the infringement as follows:
i) The damage amount is calculated according to the actual loss suffered by the trademark owner;
ii) If the actual loss is hard to determine, the damage amount is calculated according to the profit gained by the trademark infringer;
iii) If both the actual loss and infringer’s profit are hard to determine, the damage amount shall be calculated according to the reasonable times of trademark license fee. Under the current law, the trademark registrant can elect its actual loss or infringer’s profit;
iv) If the trademark infringement is in bad faith and severe, the punitive damages shall apply and the damage amount can be 1 to 3 times of the normal amount mentioned above.
This is the first time to introduce "punitive damages" concept in the Trademark Law.
Moreover, the trademark infringer shall provide its financial books as evidence to show its profit if the trademark owner is difficult to obtain such information and the court requests the infringer to do so. If the infringer doesn’t provide such information, the court may calculate the damage amount only based on the evidence provided by the trademark owner.
Second, the Amendment increases the maximum of statutory damage amount to RMB 3 million, comparing to RMB 500,000 in the previous law, which may significantly restrain trademark infringement.
19. Non-used Trademark for Three Years (Article 64 of the new Trademark Law)
The Amendment regulates that the trademark owner will not be compensated from the infringer if the trademark owner cannot prove its use of the trademark in the past three years and cannot prove any other loss.
20. Punishment to Trademark Agencies (Article 68 of the new Trademark Law)
Besides the requirements to the trademark agencies, the Amendment also regulates certain types of punishment to the trademark agencies according to different levels of wrongful activities they conduct, including official warning, rectification, monetary penalties, bad credit recording, rejection of trademark application by agencies, and criminal liabilities.
Summary
The Amendment has made a significant improvement in the trademark framework of China in order to adapt the development of intellectual property and new requirements on trademark management.
Based on the trademark practices of the past 10 years, the Amendment stipulates new rules to regulate the existing trademark issues and problems.
Among others, the Amendment brings at least the following improvement/achievement in details:
a. Stipulate explicitly the "good faith" principle in order to safeguard the trademark protection;
b. Clarify the time limit of official reviews in order to increase the efficiency of trademark registration;
c. Simplify the trademark application procedure;
d. Prohibit the wrongful use of the term "well-known trademark" to prevent unfair competition;
e. Reinforce the management of trademark agencies and stipulate the corresponding responsibilities and liabilities;
f. Increase the cap of penalties due to trademark infringement and stipulate explicitly the punitive damages in order to restrain the infringement.
However, there are comments on certain new changes which are unclear or to be further specified as follows:
a. Electronic Application
Even though the application method expands the electronic form, the detailed procedure and requirements on such matter are to be specified.
b. Lack of Review Procedure Due to the Rejection of Opposition
According to the Amendment, if the opposition is rejected by the CTMO, the opposition applicant cannot request the review by TRAB. Instead, the applicant may only apply for the "invalidation" procedure. As a result, even if the trademark is determined to be invalid by the TRAB afterwards, the trademark has been registered when the opposition is rejected and may be used for a period, which will probably affect the benefit of opposition applicant in a negative way. Since such case may probably involve the trademark registration in bad faith, it will be even worse if the trademark owner in bad faith alleges the trademark infringement of the opposition applicant – "actual trademark owner".
"Absolute reasons" refer to the elements which cannot be registered as the trademark regulated in Article 10, 11 and 12 of the new Trademark Law.
"Relative reasons" refer to the situation under which the trademark is applied for in Article 13, 15, 16, 30, 31 and 32 of the new Trademark Law.
Adjustment of Administrative Approval in China (Shanghai) Free Trade Trial Zone
On August 30, 2013, the Standing Committee of the National People's Congress (“Standing Committee”) issued a decision in which the State Council is authorized to temporarily adjust certain rules on administrative approval in relevant laws within China (Shanghai) Free Trade Trial Zone (hereinafter the “Decision”), which will enter into effect on October 1, 2013.
In order to accelerate the transformation of governmental functions, innovating the mode of opening the economy to the world, exploring the experience of deepening of reform and opening up, the State Council is authorized to execute such adjustment in Shanghai Waigaoqiao Free Trade Zone, Shanghai Waigaoqiao Bonded Logistics Park, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Zone established on the basis of China (Shanghai) Free Trade Trial Zone. The adjustment of administrative examination and approval shall be implemented within three years on a trial basis as of its effective date. If the Trial practice is proved feasible, relevant laws and regulations will be modified and improved. Otherwise, relevant laws and regulations will be recovered.
According to the Decision, the approval of establishment, registration changes, dissolution and other relevant activities with respect to foreign-invested enterprises, sino-foreign joint venture enterprises and sino-foreign cooperative joint venture enterprise stipulated in Foreign Invested Enterprises Law, Sino-foreign Joint Venture Enterprises Law and Sino-foreign Cooperative Joint Venture Enterprise Law shall be temporarily ceased and replaced by the filing management of the Chinese authorities within 3 years' period.
The specific items applicable to the adjustment are as follows:
1. Approval of the establishment of foreign-invested enterprises (Article 6 of Foreign Invested Enterprises Law);
2. Approval of division, merger and other critical registration changes of foreign-invested enterprises (Article 10 of Foreign Invested Enterprises Law);
3. Approval of operation period of foreign-invested enterprises (Article 20 of Foreign Invested Enterprises Law);
4. Approval of the establishment of sino-foreign joint venture enterprises (Article 3 of Sino-foreign Joint Venture Enterprises Law);
5. Approval of the extension of operation period of sino-foreign joint venture enterprises (Article 13 of Sino-foreign Joint Venture Enterprises Law);
6. Approval of the dissolution of sino-foreign joint venture enterprises (Article 14 of Sino-foreign Joint Venture Enterprises Law);
7. Approval of the establishment of sino-foreign cooperative venture enterprises (Article 5 of Sino-foreign Cooperative Joint Venture Enterprise Law);
8. Approval of the critical registration changes of cooperative agreement, contract, articles of association of sino-foreign cooperative venture enterprises (Article 7 of Sino-foreign Cooperative Joint Venture Enterprise Law);
9. Approval of the transfer of the contractual rights and obligations of sino-foreign cooperative venture enterprises (Article 10 of Sino-foreign Cooperative Joint Venture Enterprise Law);
10. Approval of the transfer of the contractual rights and obligations of sino-foreign cooperative venture enterprises (Article 10 of Sino-foreign Cooperative Joint Venture Enterprise Law);
11. Approval of the extension of cooperation period of sino-foreign cooperative venture enterprises to the third party (Article 24 of Sino-foreign Cooperative Joint Venture Enterprise Law).
General Remarks
The State Council of China approved the establishment of China (Shanghai) Free Trade Trial Zone on July 3, 2013. Although the formal general plan/framework of this free trade zone has not been published, according to the information from the Chinese government, within this trial zone, at least financial market, international trade, ocean transportation will be further opened. For instance, goods may be imported, processed and re-exported without the intervention of customs authorities. Moreover, there will be the financial innovation in respect of RMB free exchange, exchange rate marketization, opening of finance market, etc.
China (Shanghai) Free Trade Trial Zone will be the first free trade zone on the Chinese mainland. It will take about three years to build to meet international standards. It is expected to help Shanghai to cut costs of trade, improve efficiency and promote financial services.
New Regulations on Exit and Entry of Foreigners
On July 12, the State Council issued the PRC Administrative Regulation of Entry and Exit of Aliens (the “Administrative Regulation”) which took effect on September 1, 2013. The promulgation of the Administrative Regulation aims to specify the exit and entry rules in the PRC Exit-Entry Administrative Law (the “Exit-Entry Administrative Law”) which came into force on July 1, 2013, and facilitate the management of the exit and entry of foreigners in the practical areas.
Key Points of Administrative Regulation are as follows:
1. Category of Ordinary Visas of China
Exit-Entry Administrative Law regulates the ordinary visa as one kind of visas to China but no specific category is mentioned. Administrative Regulation specifies the category of the ordinary visas applicable to foreigners coming to China, which include 12 types as follows:
a. C visa – for international transportation workers;
b. D visa – for permanent residents (settlement);
c. F visa – for person conducting exchange activities, visits and investigation;
d. G visa – for transiting persons;
e. J1 and J2 visas – for journalists;
f. L visa – for tourists (travelling);
g. M visa – for businessmen (commerce);
h. Q1 and Q2 visas – for family members or relatives of Chinese citizens or foreigners with permanent residence permit in China;
i. R visa – for high level foreign talents required by China;
j. S1 and S2 visas – for family members and relatives of persons dealing with personal affairs in China;
k. X1 and X2 visas – for persons studying in China (study);
l. Z visa – for persons working in China (employment).
The Administrative Regulation expands the category of ordinary visas from 8 types to 12 types which include 4 new types – M, Q, R and S visas besides old 8 types regulated in the Exit-Entry Administrative Law.
The Administrative Regulation clarifies application documents required for different types of visas. For instance, i) for F and M visas, the applicant shall provide the invitation letters issued by the Chinese entities or partners, among others; ii) for Q and S visa, the applicant shall provide relationship proofs, among others; iii) for Z visa, the applicant shall provide the work permit, among others.
2. Management of Stay of Foreigners in China
2.1 Renewal, Replacement or Reissuance of Visa
The Exit-Entry Administrative Law regulates that foreigners shall apply for the renewal, replacement or reissuance of his/her visa or for the issuance of a stay permit with the exit-entry department of the police station, and the Administrative Regulation reaffirm this rule. Moreover, the Administrative Regulation specifies the following two issues:
a. Specify documents for renewal, replacement or reissuance of visa including application form, valid passport, photo, statement and other relevant documents.
b. Specify the time limit for the review of the application – 7 days.
2.2 Residence Permit
Besides different types of visas, foreigners can also apply for the residence permits which are valid for at least 90 days (maximum of 5 years). Comparing to visas, residence permits have a long period of effective periods.
The Administrative Regulation specifies the following issues regarding residence permits:
a. Types of Residence Permits
i. Residence permit for employment;
ii. Residence permit for study;
iii. Residence permit for journalists;
iv. Residence permit for family members and relatives;
v. Residence permit for personal affairs.
b. Documents for Application of Residence Permit
The Administrative Regulation also clarifies application documents required for different types of residence permits. For instance, i) for employment residence permit, the applicant shall provide work permit, among others; ii) for residence permit for family members and relatives, the applicant shall provide relationship proofs, among others; iii) for study residence permit, the applicant shall provide the letter with study period issued by institution recruiting him/her, among others. If the applicant applies for a residence permit valid for one year or more, he/she shall submit a health certificate as required. Such a health certificate is valid for six months as of the date of issuance.
c. Feedback of Application of Residence Permit
The Administrative Regulation specifies the time limit for the review of the application by the exit and entry department of police – 15 days.
3. Management of International Students
According to the Administrative Regulation, international students are permitted for off-campus work or internships in China. When a foreign student holding a residence permit for study works or interns off-campus, besides the approval of his/her school in advance, he/she must apply for the filing of working/internship place and specific period in his/her residence permit with the entry-exit department of the police in China. Otherwise, the foreign student may not take a part-time job or internship off- campus.
Summary
The Administrative Regulation specifies many rules of the Exit-Entry Administrative Law with respect to main issues mentioned above. Compared with the old regulations, the Administrative Regulation together with the Exit-Entry Administrative Law stipulates more complete and practical regulations in details in order to provide a clear guideline for the visa/residence permit application of foreigners.
China Simplifies Rules on Foreign Exchange Administration of Foreign Direct Investment
On May 10, 2013, State Administration of Foreign Exchange (“SAFE”) released the “Regulations on the Foreign Exchange Administration of Domestic Foreign Direct Investment” (hereinafter the “Regulations”), which came into effect on May 13, 2013.
The promulgation of the Regulations aim to further simplify and clarify the foreign exchange administration of foreign direct investment (“FDI”) into China, following the Notice on Further Improvement and Revision of Foreign Exchange Regulatory Policies concerning Foreign Direct Investment (the “Notice”) issued by SAFE on November 19, 2012, which simplified dramatically procedures and examination concerning the foreign exchange administration for FDI (see previous post http://www.ub-co.com/media-room/news/76/2012-11-19/notice-on-further-improvement-and-revision-of-foreign-exchange-regulatory-policies-concerning-foreign-direct-investment/).
According to the Regulations, SAFE has simplified the foreign exchange administration procedures with respect to the registration, account openings and conversions, settlements of FDI-related foreign exchange, as well as fund remittances.
The main issues of the Regulations are as follows:
1. Definition of “Domestic FDI”
According to Article 2 of the Regulations, “domestic FDI” refers to the establishment of foreign-invested enterprises (FIEs) or projects in China by means of new setup, mergers and acquisitions, or other methods, through which foreign investors acquire the ownership, control rights, or operation and management rights, or other rights and interests.
2. Authorities in Charge
SAFE and its branches are in charge of foreign exchange administration registration and supervision.
3. Foreign Exchange Registration
The following FDI-related activities require the registration with SAFE and its branches.
- Remittance of pre-operation expenses for establishing FIEs;
- Establishment of FIEs;
- Foreign investors’ capital contribution to FIEs in the form of foreign exchange, equity, tangible and intangible assets (including domestic lawful profits), as well as payment of consideration to the Chinese shareholder when acquiring its equities in a domestic enterprise;
- Changes of FIEs such as capital increase, capital decrease, equity transfer;
- Deregistration of FIEs or transformation of FIEs to non-FIEs;
- FDI-related activities conducted by domestic and foreign institutions and individuals, such as equity transfer, domestic re-investment;
- Remittance of funds abroad due to capital decrease, liquidation, recovery of investment in advance, or transfer of equities held by foreign investors in FIEs.
4. Form of Bank Accounts for FDI
After the registration, FIEs may open one or more bank accounts as follows according to the actual requirements:
- Pre-operation expenses account;
- Capital account;
- Asset conversion account
5. Annual Inspection
SAFE and its branches conduct the annual inspection of FIEs based on relevant regulations, and are entitled to conduct on-site or off-site inspections where they discover abnormal or suspicious activities of FIEs.
6. Supervision and Management
The supervision and management of SAFE and its branches applies to both FDI-related activities conducted by foreign investors/FIEs and banking services provided by corresponding banks.
On one hand, activities such as investment fund remittance, settlements, use of FIEs’ capital after settlements, changes of foreign investors’ rights and interests, opening and changes of FIEs’ bank accounts, shall be supervised by SAFE and its branches.
On the other hand, corresponding banks are required to register or report service information regarding the opening of and changes of accounts, fund remittances, and foreign exchange settlements relating to FDI with SAFE and its branches.
7. Others
The Regulations also apply to the establishment of financial institutions in China, and cover investors from Hong Kong, Macau, and Taiwan.
In addition, the Regulations abolish 24 foreign exchange administrative regulations that are out of date or no longer applicable.
Comments
The trend of improvement and reform of foreign exchange administration of FDI indicates that the new leadership of the Chinese government follows policies of the previous government in order to further simplify the foreign exchange administrative procedure and loosen the strict control in this regard.
The Regulations together with the Notices will surely facilitate the operation of FIEs regarding the foreign exchange matters and attract more foreign investment entering into China market, which will probably help to reverse the persistent weakening of the Chinese economic since early 2012.
Adjustment of the Standard of Social Security Payment
Shanghai Human Resources and Social Security Bureau issued the New Standard of Social Security Payment in Shanghai (the “New Standard”) on April 3rd, 2013. The New Standard has come into effect on April 1st, 2013 and will expire on March 31st, 2014.
The New Standard increases the payment base (the “Base”), which refers to the number used to calculate the amount of the social security payments.
The new standard regarding the upper limit and the lower limit of the Base are summarized as follows:
1. The Base
The Base of the social security payments should be the actual salary of the employee, however, the upper limit is RMB 14,076 and the lower limit is RMB 2,815. In other words, if an employee’s actual salary is over RMB 14,076, his/her Base of the social security payments should still be RMB 14,076, and if an employee’s actual salary is below RMB 2,815, his/her Base should still be RMB 2,815.
2. The Cost
The cost of the social security payments should be born divided as follows:
Born by the employee: 11% of the Base;
Born by the employer: 37% of the Base.
The amount of the social security payment is a percentage of the Base. Since the Base is increased every year, the social security payment will be increased accordingly.
The People's Supreme Court Issued Interpretation IV on Certain Issues Regarding Applicable Laws in Labor Dispute Cases
The People’s Supreme Court (“Supreme Court”) released the Interpretation IV on Certain Issues regarding Applicable Laws in Labor Dispute Cases (hereinafter the “Interpretation”) on December 31, 2012, which came into effect on February 1, 2013.
The Interpretation includes the following major issues:
1. Jurisdiction of Labor Dispute Litigation
The court has the power to censor whether the labor dispute arbitration authority has the jurisdiction over the labor dispute.
If the labor dispute arbitration committee refuses to accept to deal with the labor dispute case with the reason of no jurisdiction and the applicant brings it to the lawsuit, the court shall deal with such case under the following rules:
a. If the arbitration committee has no jurisdiction over the case, the court shall inform the applicant to apply for the arbitration to the competent arbitration committee;
b. If the arbitration committee has the jurisdiction over the case, the court shall inform the applicant to apply for the arbitration to this arbitration committee. If this arbitration committee still refuses to deal with the case, the applicant has the right to bring the case to the lawsuit and the court shall accept to hear it.
2. Arbitration Decision
The arbitration decision shall be issued in writing. If the arbitration decision doesn’t clarify whether the decision is final and the employer brings the case into lawsuit, the court shall hear the case under the following rules:
a. If the arbitration decision is not final, the count shall accept to hear the case;
b. If the arbitration decision is final and the court refuses to hear the case, the court shall inform that the employer has the right to apply for the revocation of the arbitration decision to the intermediate court;
c. If the court has already heard the case, it shall reject the lawsuit.
3. Working Period of the Employee
For reasons not attributed to the employee, arrangement is made for the employee to work for a new employer, if the original company hasn’t paid the compensation to the employee, when the employee terminates the labor agreement with the new employer or the new employer terminates the labor agreement with the employee, the working period of the employee with the original employer shall be taken into account and included in the whole working period.
“For reasons not attributed to the employee” mentioned above refer to the following circumstances:
a. The employee works in the same position and working places but the employer is changed;
b. The work of the employee is changed by the employer in the form of appointment or dispatch;
c. The work of the employee is changed due to the merger, division of the employer;
d. The employer and its subsidiaries sign the labor agreement with the employee in turn;
e. Other reasonable circumstances.
4. Non-Competition
If the labor agreement or non-disclosure agreement includes the non-competition clause but excludes the compensation to the performance of non-competition by the employee after the termination of the agreement, when the non-competition is executed, the employee may request the compensation equivalent to 30% of average monthly salary of previous 12 months before the termination of the agreement. If this compensation amount is less than the minimum monthly salary amount in the place where the labor agreement is executed, the minimum monthly salary shall be paid by the employer for the compensation.
If the labor agreement or non-disclosure agreement includes the non-competition as well as the compensation clause, when the agreement is terminated, the employer has the right to request the non-competition to be performed by the employee. However, the employer shall pay the compensation after the employee finishes the performance of the non-competition. If the employer fails to pay the compensation for three months, the employee has the right to release the responsibility of non-competition.
During the term of non-competition, the employer may terminate the non-competition agreement and the employee has the right to request three months’ compensation.
Even If the employee has paid the penalty to the employer due to the violation of non-competition clause, the employee shall continue to perform the responsibility of non-competition.
5. Change of Labor Agreement
If the labor agreement is changed verbally and has been actually performed for more than one month, and the revised agreement complies with the Chinese law, regulations, national policy, public order and good custom, this new labor agreement shall be regarded as effective by the court.
6. Expiration of Business Duration of the Employing Legal Entity
If the labor agreement is terminated because the duration of the employing legal entity is expired and the employing legal entity will not continue to do business, the employee has the right to request the relevant compensation.
7. Foreign Employees without Work Permit in China
If a foreign employee or stateless person or a resident from HK, Macao or Taiwan signs the labor agreement with the employer within the territory of China but hasn’t obtained the work permit in China, the labor relationship is not established,
Conclusion
The Interpretation regulates how the court shall handle labor dispute cases regarding specific issues which have not been regulated in the applicable labor laws and regulations. It facilitates the judgment of the court for the labor cases and improves the labor laws and regulations of China. On the other hand, the Interpretation also clarifies the rights and responsibilities of parties involved in the labor disputes.
However, there are some issues that cannot be resolved under the Interpretation as follows:
a. The compensation amount borne by the employee who breaches his obligations of non-competition clause is unclear if this amount is not regulated in the non-competition clause of the labor agreement or non-disclosure agreement;
b. The terms of the compensation to the employee are unclear if the labor agreement is terminated due to the expiry of the duration of the employing legal entity.
Labor Contract Law Revision: Stricter Regulation over Labor Dispatch
On December 28th,2012, Standing Committee of the National People's Congress (NPC) approved a Decision on the Revision to the Labor Contract Law of the People's Republic of China (hereinafter referred to as the “Decision”) which shall come into force on July 1st, 2013.
The Decision focused on the provisions related to labor dispatch and was designed to strengthen the administration of labor dispatch agencies and protect the rights and interests of the dispatched employees.
Main Content
1. Four Amendments
According to the Decision, Article 57, 63, 66 and 92 of the current Labor Contract Law will be amended. Details of the four amendments are as follows:
1.1. Higher Threshold for Labor Dispatch Agencies (Article 57)
A labor dispatch agency shall:
(1) have a registered capital of not less than RMB 2,000,000;
(2) own fixed premise(s) and facilities for business opreation;
(3) establish a system of labor dispatch management in accordance with laws and administrative regulations;
(4) meet other requirements provided by laws and administrative regulations.
As provided by law, a labor dispatch agency shall apply for an administrative license for operating labor dispatch business to the competent labor administrative department and shall go through the relevant registration formalities after obtaning the license. No entity or individual can provide labor dispatch services without the license.
1.2. Emphasis on the Principle of Equal Pay for Equal Work (Article 63)
The dispatched employees shall have the equal pay for equal work as that received by the employees who directly enter into labor contracts with the labor users (hereinafter referred to as the “directly-hired employees”). According to the principle of equal pay for equal work, the same method of remuneration distribution shall be applied to both dispatched employees and directly-hired employees who hold the like positions. If a labor user has no direct-hired employee in the like position, the remunerations shall be determined with reference to that paid to the employees who work in the place where the labor user is located and hold the same or similar positions.
The labor contract concluded between the dispatched employees and the labor dispatch agencies, the dispatch agreement concluded between the labor users and the labor dispatch agencies and the expressed or agreed remunerations shall be in accordance with the preceding clause.
1.3. Definitions for “Temporary”, “Auxiliary” and “Substitutive” (Article 66)
Labor contract is the fundamental employment model while labor dispatch is the supplemental employment model which shall only be used for temporary, auxiliary or substitutive positions.
A temporary position refers to the position of which the duration is no more than six months; an auxiliary position refers to the position regarding non-operating business which provides services to the positions regarding operating business; a substitutive position refers to the position in which the employee takes in place of the labor-user’s directly-hired employee who is not able to work for a certain period due to full-time study, vacation, etc.
1.4. Severer Punishment on Violation (Article 92)
Where a labor dispatch agency provides labor dispatch services without complying with the Labor Contact Law, the competent labor administrative department shall order it to cease its illegal activities, confiscate its illegal income and charge a penalty. The penalty shall be no more than 50,000 yuan or shall be not less than one time but not more than five times the illegal income, if any.
Where a labor dispatch agency or a labor user violates the provisions regarding labor dispatch, it shall be ordered to make ratification in a given period by the competent labor administrative department. If the ratification is overdue, it shall be fined at the rate of not less than 5,000 yuan but not more than 10,000 yuan per person and the labor dispatch agency shall have its administrative license for operating labor dispatch business revoked. If any damage is caused to the dispatched employee by the labor user, the labor dispatch agency and the labor user shall bear joint and several liability of compensation.
2. Retroactive Effect
2.1. The labor contracts and labor dipatch agreements which were concluded before the issuance of the Decision can continue to be executed till their dates of expiration. However, the content of those labor contracts and labor dispatch agreements shall be adjusted if it's not in accordance with the method of remuneration distribution under the principle of equal pay for equal work, as set forth in the Decision.
2.2. In order to carry on new business, the labor dispatch agencies which provided labor dispatch services before the date of implementation of the Decision shall obtain the above-mentioned license and go through the relevant registration formalities within one year from the date of implementation of the Decision. The detailed rules for implementation will be developed by state labor administrative department and other competent state department.
General Comment
After the Labor Contract Law came into force in 2008, many enterprises favored using dispatched employees because they brought advantages such as flexible employment relationships and cost savings. However, due to the ambiguity of wording and the lack of definitions in the Labor Contract Law (2008), the use of the labor dispatch model in China has increased —— to the point of “abuse” according to some voices.
The Decision limited the application of the labor dispatch model through stricter rules of labor dispatch business operation and clear definitions for “temporary”, “auxiliary” and “substitutive”. In addition, the Decision detailed the principle of equal pay for equal work in order to the protect the rights and interests of the dispatched employees.
According to the Decision, labor dispatch agencies shall make necessary adjustment and obtain the license for operating labor dispatch business before they can carry on new business; enterprises that currently use the labor dispatch model to staff their workforces should take a proactive and thorough review of the functions of their dispatched employees so that they can successfully adapt to the changes.