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Preface

As the economic environment gradually deteriorates, the employment situation has become even more severe over the past two years. Countless workers have been laid off, relatives and friends around me are constantly facing the risk of layoffs, and the number of layoff-related labor dispute cases I handle has also been increasing continuously. In the process of handling cases, I have found that many workers lack a basic understanding of layoffs and do not know how to respond to layoffs calmly. Some workers even sign agreements on negotiated termination of labor contracts or voluntary resignation applications without a clear understanding of relevant implications, which puts them in a passive position in subsequent labor arbitration and litigation, and eventually they fail to obtain the economic compensation they are entitled to.

In light of the above circumstances, I have decided to formulate a simple, easy-to-understand and highly operable *Layoff Response Manual* from the perspective of laborers, so that you can calmly cope with the situation and obtain the due or even more economic compensation if you are unfortunately laid off.

Target Audience: Ordinary workers at risk of layoff

Purpose of the Manual: To disseminate legal knowledge, clarify individuals' own rights, master response strategies, protect their legitimate rights and interests in the process of layoffs and strive for the optimal outcome.

Core Principles: Legality, Rationality, Evidence, Strategy

Contents

Preface

Target Readers: Ordinary workers at risk of layoff

Core Principles: Legality, Rationality, Evidence, Strategy

Part I: Basic Cognition – What Does "Adjudication" Deal With and What Does "Compensation" Refer to?

I. Interpretation of Key Terms (To define clearly and avoid confusion)

II. Unveiling Industry Jargon: What Exactly Are N, N+1 and 2N, and How to Calculate Them?

Part II: Take the Initiative -- How to Gain Leverage over the Company and Secure the Optimal Outcome

I. Identification of Layoff Signals and Preliminary Responses (Stay Vigilant and Collect Information)

II. Core Strategy: Seize the Initiative in Negotiations (Negotiation is the key battlefield for securing interests)

III. Negotiation Skills

Part III: Legal Arsenal – Formal Channels for Safeguarding Legitimate Rights and Interests

I. Labor Supervision Reporting

II. Labor Arbitration (Core Channel for Rights Protection)

III. Court Litigation

Appendix I: Abstract of Relevant Core Provisions of the Labor Contract Law of the People's Republic of China

Appendix II: Evidence List Template

Appendix III: Arbitration Application Template

Part I: Basic Cognition – What Does "Adjudication" Deal With and What Does "Compensation" Refer to?

I. Interpretation of Key Terms (To define clearly and avoid confusion)

(I) Layoff: In a broad sense, it refers to the act of an employer rescinding or terminating a labor contract. In a narrow sense, it refers to the "economic layoff" stipulated in Article 41 of the Labor Contract Law of the People's Republic of China, which requires compliance with statutory conditions and procedures.

Statutory Conditions for Economic Employee Cutback: It shall be deemed as meeting the statutory conditions where an enterprise needs to reduce its workforce by 20 or more employees, or by fewer than 20 employees accounting for 10 percent or more of the total number of employees of the enterprise, due to any of the following circumstances: undergoing bankruptcy reorganization; suffering from serious operational difficulties; staff reduction is required as a result of production transition, major technological innovation or adjustment of operation mode; or any other circumstance where the objective economic conditions relied upon at the time of conclusion of the labor contract have changed materially, rendering the labor contract impossible to perform.

Procedures for Economic Layoff: The employer shall explain the relevant circumstances to the trade union or all employees 30 days in advance, listen to their opinions, and report the layoff plan to the labor administrative department.

Note: Many companies ostensibly carry out layoffs under the pretext of "economic layoff", but in fact fail to meet the statutory conditions for economic layoff or fulfill the statutory procedures therefor. Under such circumstances, employees shall carefully verify whether the company meets the conditions for economic layoff. If the layoff does not constitute a statutory economic layoff, such fact constitutes a legal defect on the part of the company, which employees may use as bargaining leverage to strengthen their position in negotiations with the company.

(II) Termination of Labor Contract: It refers to the early termination of labor relationship upon the proposal of either the employer or the worker prior to the expiration of the labor contract.

In addition to the aforementioned economic redundancy, the circumstances under which an employer may propose to terminate the labor contract and pay economic compensation as stipulated by laws generally refer to non-fault termination. Article 40 of the Labor Contract Law of the People's Republic of China stipulates that: Under any of the following circumstances, an employer may terminate the labor contract after giving a 30-day prior written notice to the employee in person or paying the employee an additional one month's wage:

(I) Where a worker, after the expiration of the prescribed medical treatment period for an illness or non-work-related injury, is unable to engage in his original work or any other work arranged by the employing unit;

(II) Where an employee is incompetent for the job and remains incompetent after training or adjustment of his post;

(3) A major change in the objective circumstances taken as the basis at the time of the conclusion of the labor contract renders the performance of the labor contract impossible, and no agreement on revising the content of the labor contract is reached after consultation between the employer and the employee.

Summary: Both economic layoffs and no-fault dismissals are bound by specific statutory conditions, and employers have no right to terminate labor contracts arbitrarily. In most cases, when an employer discusses layoff matters with employees, the circumstances may satisfy neither the requirements for economic layoffs nor the conditions for no-fault termination, and the employer "simply intends to downsize its workforce and cut costs". Under such circumstances, if the employee does not give consent, the employer shall not forcibly terminate the labor contract with the employee merely by offering to pay economic compensation. Otherwise, the aforesaid act may constitute unlawful termination, and the employer shall be obligated to pay economic damages.

II. Unveiling Industry Jargon: What Exactly Are N, N+1 and 2N, and How to Calculate Them?

N: Generally refers to the aforesaid economic compensation, which is calculated as follows: One month's wages shall be paid for each full year of employment with the employing unit; where the term of employment is not less than 6 months but less than 1 year, it shall be counted as 1 year; where the term of employment is less than 6 months, 0.5 month's wages shall be paid. For example: For an employee who has worked for the company for 2 years and 3 months, the calculation period of economic compensation shall be 2.5 years.

The calculation formula is as follows: Average monthly wage for the 12 months prior to the dissolution or termination of the employment contract (including due income such as bonuses, allowances, individual income tax, social insurance contributions, etc.) × Length of service.

"N+1": Refers to economic compensation (N) plus one-month payment in lieu of notice (1), i.e., an additional one-month salary paid on the basis of the economic compensation.

Payment in lieu of notice: Where an employer terminates a labor contract pursuant to Article 40 (Dismissal Without Fault) of the Labor Contract Law of China, and fails to serve a 30-day prior written notice, it shall pay an additional one month's wages. The implication is that if the company serves a 30-day written notice in advance, it may not be required to pay the aforesaid additional one month's wages.

2N: refers to economic damages, which is twice the amount of economic compensation, and is generally applicable in cases where an employer illegally rescinds or terminates a labor contract.

Display of Excerpts from *Layoff Response Manual: Practical Version for Employees*

How to Obtain the Full Version of *Layoff Response Handbook (Practical Edition for Employees)* For individuals who are currently facing layoffs or may be subject to layoffs in the future, you may add Lawyer Yin as a WeChat contact to claim the full text of the handbook, which includes templates of *Arbitration Application* and *Evidence List*.

We sincerely hope that this manual will be of assistance to you all, and that we will jointly tide over the difficulties during the economic downturn.

Author of this Article:

Yin Sisi, Lawyer

Attorney Yin Sisi graduated from East China University of Political Science and Law. Her practice areas cover civil and commercial dispute resolution, intellectual property rights and corporate compliance. She has simultaneously provided professional legal consultation on compliance and full-process compliance services for a number of enterprises.

Mobile Phone Number (same for WeChat): 18717724521