Since the Civil Code of the People’s Republic of China came into effect on 1 January, it has attracted considerable attention from corporate Human Resources managers. 

Described as the “Encyclopaedia of Individuals’ Private Rights,” the Civil Code expands the scope of protection for the rights of individuals. As a result, it has had a significant impact on employers, affecting areas including reference checking, leave management, disciplinary procedures, handling of special events and discipline violations.  

Hong Kong companies and multinational corporations that have entities in Mainland China may not have complete legal documents and management systems. This may lead to certain legal risks in the process of employment management. 

Companies should take this opportunity to review their current legal documents, rules and regulations in connection with HR management, and consider ways to improve their core management processes to ensure compliance while maintaining the effectiveness and stability of internal management systems. 

In particular, companies should consider the following: 

Enhancing the Compliance of the Recruitment Process to Avoid Incurring Liabilities for Tort or Breach of Contract

• According to the Civil Code, the offer letter, which is usually issued by companies to candidates, is considered as an “Offer” with legal effect. To ensure flexibility, companies are advised to insert “Entry into Force” clauses, including “obtaining a satisfactory reference check” and “authentic information provided in resume.” 
• The Civil Code clearly stipulates that personal information is protected by law. During the on-boarding process, companies often need to collect personal information such as ID card number, residential address and bank account details. Companies must collect and use relevant personal information of employees under the principles of legitimacy, reasonableness, proportionality and necessity; in particular, the prior consent of the employee shall be obtained in advance. In order to minimize the legal risks, employees shall be required to sign a consent letter or other relevant legal documents, while companies should also formulate relevant policies on the protection of personal information. 

Focusing on Protection of Employees’ “Personality Rights” and Optimizing Relevant Rules, Regulations and Internal Management Processes

The Civil Code contains a section on “personality rights.” This not only focuses on the protection of personal information and right to privacy, but also emphasizes the protection of the interests of individuals such as the right of reputation, portrait and voice. 

• According to the Civil Code, medical records are considered to be private. Employees can therefore refuse to provide their medical records to their employer in support of sick leave application, and only need to provide a doctor’s note. This may lead to new challenges in sick leave management for companies, especially for those without comprehensive internal rules and regulations. Companies are advised to reach a written agreement with employees through the process of “notification, consent and promise,” which could effectively avoid any disputes on infringement of right to privacy in the future. 
• Companies should also protect employees’ personality rights, such as right of reputation and portrait. For example, they should not disclose the results of an employee’s performance review, or make the details of disciplinary procedures public. Before using an employee’s portrait or voice, companies should sign a relevant agreement with the employee to obtain the authorisation. Policies and guidelines for the storage, use and transfer of personal information should also be clearly stipulated within the departments of the company.

Measures Against Potential Legal Risks Caused by Sexual Harassment, and Establishing a Mechanism to Prevent, Monitor and Handle Sexual Harassment in the Workplace

The Civil Code clearly defines the concept of sexual harassment and stipulates companies’ obligations to prevent sexual harassment in the workplace by taking reasonable measures. 

• Companies should establish relevant rules and regulations in a timely manner. These should explicitly set out measures to prevent sexual harassment in the workplace, channels for complaints, and companies’ rights to investigate such cases and consequences. 
• Companies should engage lawyers and other professionals, on a regular basis, to deliver special training sessions regarding the prevention of sexual harassment at work, for management teams or all employees. Records of such training sessions should also be kept. Having such programmes in place may mitigate employers’ liabilities in the case of sexual harassment at their company.
• Companies should enhance the mechanism for handling sexual harassment at work by protecting employees’ rights of reputation and privacy during the investigation, and making specific plans to transfer such cases to law enforcement agencies. 

Setting Out Measures for Indemnity for Employees’ Conduct in Office, Clarifying Agreements and Regulations on Termination of Employment

• The Civil Code specifies that the company may ask for compensation from employees who cause the company to be liable for indemnity either “intentionally” or due to their “gross negligence.” The amount and proportion of which shall be determined in accordance with relevant laws, clauses under the employment contract, the internal rules and regulations, and based on the nature of the fault and the degree of damage. 
• The Civil Code further clarifies the principles of “good faith” and “public orders and good morals.” A company may terminate the employment of employees in the case of breaching foregoing principles and causing damage to the interests and reputation of the company. According to different opinions in previous judicial practice in Mainland China – in the absence of an express clause under “employment contract” or explicit regulation under the company’s policy – terminating employment on the ground of violating principles of “good faith” and “public order and good morals” may lead to certain legal risks, such as constituting “unlawful dismissal.”
• Considering the above, it is necessary for companies to further improve the relevant legal documents by including relevant clauses in terms of indemnification for damage caused by employees’ misconduct and unilateral right of summary dismissal. 

Conclusion

The Civil Code not only brings new challenges to employers’ HR management, but also provides strong support to the protection of their own rights and interests. Companies should take this opportunity to review their employment-related documentation, including:

1) employment contract, addendum to employment contract, employee handbook and company’s policies; 

2) enhance office systems and relevant procedures; 

3) optimize daily management; and 

4) carry out special training for employees at all levels in order to minimize legal risks and further protect the interests of the company.

Helen Liao, Partner, Deacons