A closer look at mass layoffs under PRC Law

An employer seeking to implement a mass layoff is required to satisfy various substantive and procedural requirements, and after these are completed, still faces the risk of labour disputes. In the current Covid-19 pandemic, any labour disputes are likely to be adjudicated with presumptions in favour of employees, and the policy of the government and local labour bureaux is for employers to carry out mass layoffs prudently, avoiding them to the extent possible.

Accordingly, an employer seeking to conduct a mass layoff is advised to:

  • seek professional advice from legal counsel as soon as possible and formulate an appropriate plan based on its and its employees’
  • proactively communicate with the local labour bureau to understand the specific local requirements for mass layoffs and documents required for submission;
  • take mitigating measures such as hiring freeze, suspension of overtime work and business as far as possible before implementing a mass layoff;
  • take alternative redundancy measures as far as possible to gradually segment and retrench employees in batches, in order to reduce the number of employees subject to a mass layoff; and
  • undertake full consultation with labour unions and employees, and make the redundancies by mutual agreement through such consultation as far as possible in order to reduce the risk of labour disputes and mass employee action occurring. 

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