How Should Employers in China Pay Wages to Quarantined Employees During the COVID-19 Pandemic?

We provide practical guidance to employers in China who are impacted by COVID-19 containment measures by studying a typical case of labor dispute regarding payment of wages. For more questions about employment management in difficult times, please contact Kathy Wang, Assistant Manager of Business Advisory Service and Victoria Li of International Business Advisory, Shanghai Office.

Amid the recent COVID-19 surge in 28 provinces in China, several cities with the most cases have pressed the “stop button” again to contain the spread of the virus. Among others, the entire Jilin province, the technology hub Shenzhen and the manufacturing hub Dongguan in Guangdong, and the city of Shanghai have been subject to stringent COVID-19 containment measures.

In such cases, employers may find themselves exposed to new challenges in human resources management, especially in scenarios where employees are not able to go to work due to sudden shutdown of the community or building or being placed under quarantine for being (secondary) close contacts of confirmed cases.

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To protect the legal rights and interests of both employees and employers to the greatest extent, based on the instructions of the central government, the governments of various regions have issued a series of corresponding policies and regulations to clarify the human resources management issues under COVID-19, including leaves management, salaries payment, etc.

In this article, we focus on one of the most frequently asked questions: How should employers pay wages if employees are unable to go to work owing to the epidemic observation/quarantine period? We provide practical guidance to employers who are impacted by COVID-19 containment measures by studying a typical case of labor dispute.

Case study

The following case example is from The First Batch of Typical Labor and Personnel Disputes jointly released by the Ministry of Human Resources and Social Security and the Chinese Supreme People’s Court in July 2020.

Facts

On April 2, 2019, Zhang signed a two-year labor contract with a commercial company, and the two parties agreed on a monthly wage of RMB 10,000 (US$1,517). Zhang returned to his parents’ home in other province for vacation during the Spring Festival in 2020. On February 3 of the same year, Zhang claimed that there were close contacts of confirmed COVID-19 cases in the community where his parents lived. Therefore, according to the requirements of the community property management company, he was required to quarantine himself at home for 14 days so he could not return to work in time. 14 days later, Zhang said that he was still unable to return to work as scheduled because the residential area he rented in the city where the company was located prohibited tenants from staying. On March 16, 2020, Zhang returned to the company to work. After negotiating with Zhang, the commercial company paid Zhang the living expenses (rather than paying the full wage) for the period from March 3 to March 16, 2020 that went over one one wage payment cycle of the commercial company. Zhang believed that the company’s behavior was illegal and applied to the Labor and Personnel Dispute Arbitration Commission (hereinafter referred to as the “Arbitration Commission”) for arbitration.

In the arbitration, the applicant requested the commercial company to pay a wage difference of RMB 4,800 for the period from March 3 to March 16, 2020. However, Zhang’s arbitration request was rejected by the Arbitration Commission.

Issue

The focus of the dispute in this case example is how to determine that Zhang refused to provide normal labor work on the ground that he was in the home observation period during the COVID-19.

This mainly involves the following two sub-issues:

1. Whether Zhang belongs to statutory “quarantined object”;
2. How should wage be paid for employees who cannot provide work due to home observation?

Issue 1: Whether Zhang belongs to statutory “quarantined object”

The Arbitration Commission cited the following provisions:

• Article 39 of the Law of the People’s Republic of China on the Prevention and Treatment of Infectious Diseases (hereinafter referred to as the “Law on the Prevention and Treatment of Infectious Diseases”) stipulates that “when a medical institution discovers a Class A infectious disease, it shall take the following measures in a timely manner: Carriers shall be treated in isolation, and the isolation period shall be determined according to the results of medical examination; (2) For suspected patients, they should be isolated and treated in designated places before diagnosis; (3) For patients, pathogen carriers, and close contacts of suspected patients in medical institutions, medical observation and other necessary preventive measures are carried out in designated places.”
• Article 41 of the Law on the Prevention and Control of Infectious Diseases stipulates that “For persons in a place where a Class A infectious disease case has occurred or a person in a specific area within the place, the local government at or above the county level may implement isolation measures… If the quarantined personnel have a work unit, the unit they work for shall not stop paying their work wage during the quarantine period.”

Based on the above clauses, it can be seen that there are clear regulations on the legal isolation of employees during the COVID-19 era:

• First, medical institutions can isolate diagnosed patients, suspected patients and close contacts of confirmed cases for treatment or medical observation.
• Second, it is the local government at or above the county level can take isolation measures according to the law.

In this case, Zhang does not fall into the three categories of people who need to be isolated for treatment or medical observation, and the local people’s government at or above the county level in the area where Zhang lives did not taken quarantine measures for people in the community where close contacts of COVID-19 confirmed cases live. The requirement for Zhang to stay at home was a precautionary measure taken by the property management company from the perspective of community management. Therefore, Zhang does not belong to the situation where people cannot provide normal work because he/she is in isolation treatment period or medical observation period or because the government implements isolation measures.

Issue 2: How should wage be paid for employees who cannot provide work due to home observation?

According to the Opinions on Properly Handling Issues Related to Epidemic-related Labor Relations (Ren She Bu Fa [2020] No. 17) issued by seven departments, including the Ministry of Human Resources and Social Security and the Chinese Supreme People’s Court:

For cases who are not quarantined in accordance with the law but due to emergency measures taken by the government in accordance with the law such as shutdown and closure of epidemic areas, leading to the result that they cannot return to their work or the resumption of work of the enterprises is delayed, they shall be handled according to different circumstances…

(III) if the enterprise has not resumed work or if the enterprise has resumed work but the employee has not returned to work and cannot provide normal labor through other means, the enterprise shall consult with the employee in accordance with the relevant provisions of the state on wage payment during the period of suspension of production:

• (If the suspension period is) within one wage payment cycle, salaries shall be paid according to the standards stipulated in the labor contract; and
• (If the suspension period goes beyond) more than one wage payment cycle, the living allowance shall be paid by the enterprise, and the living allowance shall be implemented in accordance with the relevant local regulations.

Referring to the regulations of Zhejiang Province, Hubei Province, and Shaanxi Province, the employer is required pay living allowance at 70~80 percent of the local minimum wage.

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The calculation of the start and end dates of the employer’s suspension of production and production shall be calculated continuously from the day of the suspension of production and production to the day before the resumption of production.

• Among them, a wage payment period shall not exceed 30 days at most (excluding rest days, statutory holidays, and other types of leave).
• If the payroll date of the employer falls within this period, it will not affect the calculation of salaries by stages according to the relevant payment standards for suspension of work and production.

If the employee resumes work after suspension of work and production, and the suspension of work and production happens again after resuming work, it must be recalculated. The two time periods of the suspension of work and production resumption shall not be accumulated for calculation.

To be noted, although enterprises are required to negotiate with employees before paying living allowances (rather than full wages) to employees who cannot perform normal duties for more than one wage payment cycle, there is no mandatory requirement that an agreement must be reached.

In this case, the commercial company negotiated with Zhang before paying the living allowance and paid the living allowances for the period that goes beyond more than one wage payment cycle. The commercial company’s behavior did not violate relevant regulations.

Therefore, Zhang’s arbitration request was rejected by the Arbitration Commission according to law.

Key takeaway

According to the Law on the Prevention and Control of Infectious Diseases, the National Health Commission has clearly included the COVID-19 as a Class B infectious disease and has taken prevention and control measures for Class A infectious diseases to contain the spread of the pandemic.

During the epidemic period, measures such as lockdown of epidemic areas, traffic quarantine, suspension of work and school, and centralized quarantine of close contacts by local governments at or above the county level based on the situation of epidemic prevention and control, are all within the scope authorized by law.

If a community or building is closed due to the epidemic and employees cannot go to work as normal – employers should consult with employees by referring to the relevant regulations on wage payment during the suspension of work and production; no consensus is required.

When asserting their rights and interests, employees should strictly follow relevant regulations and strictly distinguish the different connotations of isolation treatment period, medical observation period, and home observation period – to avoid the occurrence of “rights abuse”.

After all, the COVID-19 epidemic is a challenge faced by the whole human society. The government wants to guide employers and employees to take responsibility and overcome difficulties in a collaborative manner.

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