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China Reductions In Force (RIFs). A Warped View.

By Dan Harris and Steve Dickinson

One of the problems with being a lawyer is that we oftentimes only see or hear about things when they are a problem. This can give us a somewhat warped view on things, but so be it. So when I say that terminating your Chinese employee will lead to problems 100% of the time, you need to take it with a grain of salt. But from my perspective, every single time a company has up and terminated a Chinese employee, it has led to big problems. Of course, those clients who up and fired a Chinese employee without a problem never needed to call us, but I am not aware of any of those. What I am aware of is that foreign companies are terminating Chinese employees these days and it seems like these ex-employees are, nearly without exception, pursuing legal claims for these terminations, and, in many instances, retaining lawyers to assist. Based on what we are hearing out there, the chances of a foreign company doing well against a terminated Chinese employee in these cases are not good at all. The solution here is the same solution for nearly every legal problem. A bit of preventative maintenance. If you are going to terminate an employee in China, recognize that employee has a lot of rights AND a lot of political/social/economic/sympathetic power. Do not just up and fire them and expect to walk away unscathed. Plan. Get your lawyer involved. And then negotiate a deal where you pay some money and in return you get a signed agreement, IN CHINESE, making very clear that they are satisfied with the results and are relinquishing their rights to pursue any further legal action against you. Even this may end up not being foolproof, but it is going to be the way to go almost all of the time. The money you pay out to your employee and your lawyer to settle early will almost invariably be a lot less than you will need to pay out to your employee and your lawyer if you find yourself in a knock-down drag-out legal fight. Trust me on that.

Full post as published by China Law Blog on October 20, 2008 (boomark / email).