Bifurcating Corporate NNN Agreements and Individual PRC Labor Contracts
Corporate NNN agreements cannot bind individual PRC workers directly without compliant labor contract non-competes backed by monthly statutory stipends.
WFOE Employment Contracts
Meaning
Binding labor agreements represent the legal foundation of employment relationships between wholly foreign-owned enterprises and their staff in China. The use of WFOE employment contracts ensures that hiring practices comply with the rigid provisions of the Labor Contract Law. These documents must be signed in writing to avoid double-wage penalties.
Statutory Mandate
Employers must execute WFOE employment contracts within thirty days of the employee’s start date to comply with local laws. The agreement must state the term of the contract, the salary details, and the social security contributions. Standard contracts can be for a fixed term or an open-ended term depending on the hiring strategy.
Failing to offer a written contract gives the worker the right to demand double pay for every month of work.
Risk Management
Incorporating specific clauses on confidentiality, intellectual property rights, and non-competition helps protect the enterprise from internal disputes. These protective terms must be customized for different roles, particularly for senior executives and technical staff. The local labor bureau often provides basic templates, but these need to be modified to cover corporate IP assets.
Having clear definitions of working hours and overtime prevents future disputes over unpaid wages.
Termination Protocol
Ending an employment relationship requires following strict legal grounds to avoid wrongful dismissal claims. WFOE employment contracts should clearly list the company rules that, if broken, allow for immediate dismissal without severance pay. The company must consult with the local labor union before executing a unilateral termination of any worker.
When severance is required, it must be calculated using the statutory formula based on the worker’s length of service.