In June 2015, mainland China published the Draft Amendments to the LCL. These amendments could end the general use of staffing firms by foreign-invested companies: for most companies, the time has come to revisit the need for using staffing firms.
Current uses of staffing firms
Representative offices
Under certain circumstances, there is no way around using a staffing firm. The resident representative office of a foreign company, for example, cannot directly hire Chinese employees in mainland China: their employment relationships must be retained through a staffing firm. Thus, the staffing firm officially employs those employees whom the representative office selected. These employees are then seconded (despatched) to the representative office under a staffing or secondment agreement between the staffing firm and the representative office. The representative office can (and should) sign a supplementary agreement directly with the employees to detail certain conditions to their work, such as non-competition and confidentiality. This way, the obligation on the employee towards the representative office become legally binding, and their breach can be penalized as per the terms of this supplementary agreement.
Talent Spot analyse these relationships in more detail
1. Rights and obligations between the staffing firm and the employee
The relationship between the staffing firm and the employee is one of employment. Yet, it is different from traditional employment relations because the employment and the actual labour are separated. As per Article 59 of the LCL, this employment falls into the category of labour contract relationship. Under this article, the staffing agent shall assume the obligations as employer according to law.
2. Rights and obligations between the staffing firm and the representative office
The staffing firm and the representative office have a civil contractual relationship, with rights and obligations agreed in the staffing agreement. In terms of actual legal activities, the rights and obligations of the staffing firm and the representative office are effective and binding on the respective parties. This means that the staffing agreement between the staffing firm and the representative office does not curtail an employee's right of claim against these two parties.
3. Rights and obligations between the representative office and the employee
There is no employment relationship between the employee and the representative office, even though the employee provides labour services to the representative office. According to Articles 62 and 63 of the LCL, the representative office shall provide, among others, safe and healthy working conditions and work protection, benefits appropriate for the job position, a wage not lower than the legal minimum wage standard and 'equal pay for equal work' (ie the despatched employee should get the same pay as a regular employee in a same or similar position). In breach, the staffing firm and the representative office shall assume joint and several liabilities by law. This responsibility cannot be mitigated.
Any commitment that the representative office makes, on the other hand, should be fixed in writing. To this end, the representative office will often sign a supplementary agreement with the employee. It deals with work discipline (working hours, reporting as well as the employee's obligations on confidentiality, non-compete and non-solicitation). These terms are usually included in the employment contract in a direct employment relationship. As contractual terms agreed by the parties, these will be binding upon the parties as per the said contract. These could thus give the representative office a legal basis to terminate a secondment in case of breach or to claim against an employee for damages.
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