Coronavirus Emergency Measures Legal Brief | What you Should Know
It is important to understand the legal nature of the Emergency Measures and to keep in mind the overarching goals which the authorities are striving to achieve by imposing the Measures.
A few core principles applicable to the Emergency Measures:
- The principles and general framework for the Emergency Measures are set out in the Emergency Response Law of the PRC (2007) and the Law on prevention and Treatment of Infectious Diseases (updated 2013), according to which the various governments at different levels are authorized to impose measures with the purpose to “control, mitigate and eliminate the serious social damage caused by major emergency incidents” (Article 1 of the Emergency Response Law);
- All Emergency Measures undertaken by the governments at different relevant levels (national, provincial & municipal, all the way to county level) are undertaken as part of the of the Level 1 emergency action plan which was declared by the different provinces and municipalities on 23-24 of January. In addition, some industry-related authorities or special administrations may issue specific measures applicable to the enterprises falling under their authority. Such measures will usually be created by central administrations and may thus differ from the measures applied by the regional or local governments.
- Emergency Measures are applicable to all individuals and legal entities falling under the authority of the government, administration or public office by which it was promulgated in application of the Level 1 Emergency Plan. They are in principle generally applicable (for companies that means across all industries and regardless of size or type of entity), but some may allow for exceptions which should be provided for in the measure itself.
- Emergency Measures are not to be taken lightly. If they are not applied correctly, sanctions may be imposed by the competent authorities, ranging from administrative fines to mandatory closures or even criminal prosecution in the most serious cases. In addition, individuals or legal entities who do not abide by the Emergency Measures, or cause the security threat to expand, causing damage to another person/entity or prevents the proper implementation of the Emergency Measure, shall assume civil liability according to the law.
- Emergency Measures are by definition limited in time and space and obviously subject to frequent variations. Therefore it is advisable to keep a regular watch on the official sources of information about the Emergency Measures for instance by consulting the government websites such as http://www.shanghai.gov.cn ; http://www.jiangsu.gov.cn ; http://www.gd.gov.cn/; http://www.zj.gov.cn/ and official Wechat accounts such as “Shanghaifabu”, ”weixunjiangsu”, ”gdszfw” or ”zjfabu”.
- Also note that private entities, such as property management firms or private security firms, may be mandated by authorities to ensure the strict application of the Measures, restricting access to certain buildings or compounds or imposing preventive sanitary measures before granting access (typically temperature measurements and face masks), but also reporting entities or individuals who do not voluntarily comply. Thus, their instructions are to be complied with.
What’s the purpose of the Emergency Measures?
The overarching priority of the Emergency Measures is to “control, mitigate and eliminate” the risk of an uncontrolled spread of the virus to the broader populations outside the area of origin of the virus (Wuhan and Hebei Province) or overseas, in particular as hundreds of millions of people across China will soon return to their homes when the lunar new year holiday ends. As a consequence all Emergency Measures should be understood and applied in consideration of this objective, i.e. to avoid as much as possible gatherings of people who have recently travelled and/or of people who are potentially and unknowingly carrier of the virus, until it can be established that they do not constitute a hazard for the others.
Some companies are putting in place a 15-day observation period before allowing employees who have recently returned to the city to access the workplace. However, at this point this is not a mandatory rule. Additionally, people are encouraged to avoid face-to-face meeting and prefer on-line solutions instead.
As a consequence most companies have now banned all national or international business travel. On the other hand, one can probably assume that any form of business activity which does not require gathering people in certain places, such as factories or offices, or cause people to use mass transportation systems (subways, busses, airports, railway stations) is authorized, or even encouraged.
Measures affecting holiday schedules or work conditions
The State Council decided on January 27 to extend the official holiday until February 3rd 2020. This means that Friday 31st of January and Saturday 1st of February are no longer working days as was planned, but added to the tally of public holidays counting as official leave for all of China. It remains to be determined if these 2 extra days of national public holidays will be compensated at some other time during the year by adding work days on Saturdays or Sundays.
In addition various local governments (Shanghai Municipality, the Provinces of Zhejiang, Jiangsu, , Guangdong to name just a few of the most important ones) and even specific economic zones or industrial parks, have proclaimed that all enterprises falling under their authority shall not resume work before February 9th at 24 hours, i.e. the first authorized working day shall be February 10th. This measure provides for multiple exceptions, the scope or conditions of applications of which are not always easy to determine. In general, it is understood that if the work is indispensable to ensure, for instance, the provision of emergency medical goods or services but also more broadly the livelihood of people (e.g. any essential operator of the logistic chain for food distribution, but also banks, gas stations, etc.), resumption of work is authorized beginning February 3rd, provided that the employers and employees have taken strict sanitary measures ensuring the safety of workers, and are organizing work in such fashion as to limit large gatherings of workers.
By extension, and by applying the rules provided for in the Labor Contract Law for work during mandatory resting days, it can be argued that any activity which is required to be carried out to ensure the continuity or essential interests of the company shall be authorized. For example, the financial staff of companies may be requested to work after February 3rd to ensure timely payment of bills, or for instance salaries, or the filing of taxes. In such cases, it is often mandatory, or in any case certainly advisable to inform the local labor bureau of the intended work schedule for the specific personnel. As these are mandatory resting days, employees are in principle entitled to receive 200% salary for the days they are requested to work during this period or alternatively they may receive compensatory holidays (see the Q&A section of this brief for more details on this and other HR questions).
Most of the communications issued by the various governments clearly encourage the organization of remote work solutions. However, it is not always clear whether employees who are indeed working from home are entitled to compensatory leave or double salary compensation for the days worked during the mandatory leave period.
For such questions and other specific situations, we definitely recommend taking a case-by-case approach, and to always prefer a negotiated solution with the employees, eventually brokered through the workers’ representation. Always keep in mind that employers and employees may come to an agreement on these issues and others and that such agreement may differ from the non-essential provisions of the Emergency Measures. Indeed, the authorities have repeated in their various communications over recent days that enterprises should have a benevolent approach to the issues which may arise in working relationships as a consequence of the Emergency Measures, and that all parties should show goodwill in putting forward solutions to unforeseen problems.
DaWo Law Firm therefore recommends applying a consensual approach while keeping in mind the general principle that the Measures are only supposed to stop or disrupt the business activities insofar as such activities would or could affect the overall purpose of the emergency plan, i.e. containing the spread of the virus.
Emergency Measures will affect your contracts
Beyond the consequences with regard to labor relationships, it is to be expected that the implementation of Emergency Measures will have consequences on a much broader scale, both in terms of economic interests at stake, but also in terms of geographical spread. For instance, where businesses rely on just-in-time supply chains, it is obvious that the default of just one supplier upstream may have consequences down the entire chain.
Such situations will probably trigger a chain reaction of contractual breaches and ensuing liability claims both in China and internationally. In these cases it is usually the least prepared party which ends up on the losing end of the rope. Based on past experiences during similar situations (e.g. the tsunami and ensuing Fukushima accident in Japan) we have put together a list of recommended measures to be undertaken so as to ensure your company’s interests are safeguarded as much as possible.
- Make a detailed assessment of the operational consequences of the work restrictions and other measures imposed on your business in the weeks to come. It is probably safe to anticipate at this point that any measure currently in place could be extended for another couple of weeks. Consider also the consequences that the Emergency Measures may have on your main suppliers and inquire with them about the same.
- Review the force majeure or equivalent clauses in your contract and evaluate if the situation falls under the application thereof. If you do not have a contract or if the contract does not provide any specific clause dealing with unforeseeable or unforeseen situations, you should consider the provisions of the applicable contract law. In case of transnational contracts, the applicable law shall be determined according to the international private law rules of your jurisdiction. In any case DO NOT simply anticipate that the current circumstances will necessarily fall under the scope of the applicable force majeure rules. Such rules vary in scope and modalities from one clause to another, from one contract to another, and from one jurisdiction to another.
- If it appears that you will (or may) fail to meet your contractual obligations due to the Emergency Measures, you should take a number of urgent steps: 1/ inform your client or contractual partner about the situation, and explain in detail how the Emergency Measures affect your capacity to deliver, as well as why you request the application of the applicable force majeure provisions; 2/ put in place urgent measures which will allow you to mitigate your risk (if your problem is that your supplier is defaulting) or the risk of your client (where you are defaulting), perhaps also conducting a search for alternative solutions in close collaboration with your client; 3/ make all relevant correspondence official i.e. in China, send out original copies duly chopped to the correspondence address provided in the contract and keep valid evidence of all Emergency Measures applicable to you as well as of all measures you have put in place to mitigate the risk; when there is any doubt about whether or not an Emergency Measure is applicable to your situation or effectively prevents you from meeting your obligations, ask the competent authorities to officially confirm the situation.
- When the emergency situation ends, immediately inform your contractual partner and advise them of the schedule you expect to be able to meet to deliver on your obligations. All arrangements or agreements made with your contractual partner should be confirmed in writing and formally documented (original copies, duly chopped).
If you have questions about this topic, or other legal consequences of the Emergency Measures, contact Maggie or Philippe on WeChat, or at maggie.jia@dawo-lf.com or philippe.snel@dawo-lf.com.
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