Criminal Risks for not Paying Wages in P.R.C. Go back »
2011-07-26 | Nanjing
Criminal Risks for not Paying Wages in P.R.C.1. Warning of a new Crime for not Paying the Wages
After May 1st 2011 in light with the new passed Amendment Eight to P.R.C. Criminal Code (Amendment), it is a crime for not paying wages to employees. The Amendment was approved by the 11th National People’s Congress last February, which stipulates that a company withholding the wages of employees may face criminal fines and its key responsible personnel are subject to imprisonment for up to seven years. Considering the fact that many labor disputes rose in past few years were caused by payment issues from migrant workers, the new Amendment can be seen as part of solutions to protect the rights of employees. However, it also increases the danger and risk of managers in all companies, especially those companies suffering from financial difficulties.
2. What exactly the new Crime Is
The Article 41 of the Amendment says that the employer may be fined and its key responsible personnel may be sentenced to jail for 3 years in max if the employer intentionally escapes from wages by transferring the assets or running away, or if the employer refuses to pay with the payment capacity after being ordered to pay by relevant authorities. If the situation is serious or the result is severe, the fine to the employer will be increased and the key responsible personnel may face maximum 7 years imprisonment. The essential condition of the crime stipulated in article 41 of the Amendment is as follows:
(1) The employer refuses to pay the wages intentionally transferring assets or going into hiding;
(2) The employer has the capacity to pay the wages but refuses to pay;
(3) The employer refuses to pay even be ordered by relevant authority;
(4) The amount of wages unpaid is relatively large;
(5) The result is serious or the effect is severe.
3. Be Careful of the unclear Points
Although the elements of the crime stipulated in the Amendment are clearer described above, there are still some points need to be further discussed.
First, how could an employer prove that the company is not able to pay wages?
In case that an employer is not able to pay the wages, the employer will be safe for not paying. It is obvious that a simple statement from the employer saying that the company is not able to pay the wages will not be accept as evidence by the authority or court to support the claim of incapacity to pay the wages. Considering that paying wages is one of the most important legal obligations of employers, the only acceptable reason for not paying wages is bankruptcy, which will terminate all business activities of the company. To avoid the risk of criminal responsibilities, it can be expected that an application of bankruptcy is the only safe and effective excuse to protect the employer from being sued for not paying the wages in time.
Second, who are the key responsible personnel?
General speaking, key responsible personnel include HR managers and financial managers who are actually making the wage payment decisions. Moreover, the general managers or the chief representative if the employer is a representative office will be considered as key responsible personnel. Hence, all the managers who know the financial situation of the company shall pay special attention to the wage payment system and think about the solutions to fulfill the legal obligations of paying the wages.
Third, what do “relative large amount” and “serious result” mean?
As discussed above, only the amount of the unpaid wage is relative large or the result is serious then will it be a crime. However, the Amendment does not say anything about the standard to judge the “amount” and the “result”. Without the detailed judicial interpretations issued by Chinese Supreme Court, it can be expected that these two points will be interpreted by individual officers case by case, which will be dangerous for the management since the interpretation will be unpredictable. As what has been stressed in this article, the best strategy to avoid the risk is to apply for bankruptcy as soon as possible to get evidence showing that there is no intention of not paying wages if the company has financial problems to pay the wages in full amount in time.
4. Conclusion
It is noted that the criminal penalties will be used as a weapon by the employees when a dispute regarding payment of wage occurs. They might choose not to file a labor arbitration, to instead, to seek criminal procedure directly to get their wage for the criminal procedure will give more pressure and pressure over the employer so that they can be paid in the shortest time. Hence, it is strongly suggested that if the employer suffers from financial difficulties, the employer shall take instant actions to avoid the situation from getting worse. When the first signal of severe financial problems occurs, the employer shall seek financial support from the shareholders or potential investors, otherwise the delay payment may cause panic among employees, which will cause them to complain to labor authority or even to start the criminal procedure. Therefore, the wages payment shall always be in priority.In case that the financial problems cannot be solved and the employee cannot be paid in short time, the best solution is to file application of bankruptcy to protect the employer from being fined and the managements being sent to jail.
For more information please send an email to: c.dandrea@picozzimorigi.it, or visit our website www.picozzimorigi.cn and www.picozzimorigi.com
Disclaimer
This publication is distributed solely for information purposes and does not constitute legal advice. Although all the information in this document was obtained from reliable official sources, no guarantee is given with regard to their accuracy and completeness. This document may not be reproduced and copies of this document may not be distributed without our prior permission.
© 2011 Picozzi & Morigi Law Firm