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Do You Know How Many China Employees You Have? I'll Raise You One.

By Dan Harris and Steve Dickinson

The other day I was searching for an email from a client named "Joe" and I came across another Joe from whom I had not heard in quite a while. So I shot the other Joe an email to ask him how his China business was going and he replied to me today by saying he was operating it in "stealth" mode but that it was going well. I immediately went into lawyer mode and told him that if he was using independent contractors in China, he was looking for trouble. I then told him how my firm has been working on a whole slew of cases for foreign companies in China who are being sued for various benefits (like an employee termination package) from people that were never employees. I went on to say that in most instances, China's labor officials are siding with the putative employees against the foreign companies and our role has mostly been to negotiate a settlement with the "employees," oftentimes by hinting that our client is so tired of this sort of thing they are thinking of leaving China, in which case the settlement offer will be a lot more than they can get by litigating. In my email, I said that if you are using Chinese nationals for your business in China and doing so by any method other than by using a third party company, you run a substantial risk of having these people be deemed to be your employees, with all of the attendant costs and risks. Turns out this guy's company is using another foreign company to get into China by "stealth mode" and so my fears with respect to the "other Joe" were entirely unjustified. But hey, seems like there is a blog post here somewhere.

Full post as published by China Law Blog on September 10, 2008 (boomark / email).