Many countries have governmental occupational health and safety standards to protect workers on the job. In the United States, the federal Occupational Safety and Health Administration (OSHA) of the United States Department of Labor is responsible for regulating the workplace conditions and safety. OSHA was created in the early 1970’s, the agency is responsible for conducting safety inspections of workplaces and businesses across the United States to ensure American workplace safety. The agency is also tasked with enforcing a variety of federal whistleblower statutes and regulations.
China joined a growing list of countries who put employee safety ahead of profits and economic growth.
China is no exception to the increasing trend of promoting workplace safety and regulating employers and the working conditions of the employees. In China, employee and workplace safety is regulated by the PRC’s State Administration of Workplace Safety under the Workplace Safety Law of the People’s Republic of China. This is particularly important as China has rapidly developed into what many call the “world’s factory.” Thousands of Western companies produce their goods for sale in China and the standards and regulations under which they operate are not necessarily the same as the protections or regulatory regime relating to workplace safety in other countries.
However, despite what some Western companies and government officials may have seen as a history of placing economic growth over workplace and employee safety, the PRC took significant steps forward in protecting worker safety and in putting the safety of Chinese workers first by passing a much expanded and broader Workplace Safety Law in 2014. With the introduction of this law, along with its expanded scope of protections for workers and both responsibilities and penalties for employers who did not do their part to protect their employees, China joined a growing list of countries who put employee safety ahead of profits and economic growth. The country’s leadership has signaled the importance it is placing on this topic by recently announcing a nationwide inspection regime in January 2017 designed to ensure that businesses are following the strictures of the 2014 amended Workplace Safety Law.
Workplace safety is now a serious priority in China, as reflected in both the laws and regulations as well as their enforcement. This has resulted in a changed landscape for both small and large businesses in PRC, but it substantially affected the country’s workers most of all. Therefore, any business which is entering China needs to prepare itself for a country that takes workplace safety seriously, if a business tries to cut corners, it will swiftly find itself facing large fines and other punitive measures.
What Does the Law say?
The 2002 Version of the Law
The original Workplace Safety Law, enacted in 2002, was focused on particular industries in which employees were thought to be most at risk. For example, the 2002 version of the Law required companies engaged in mining, construction, or the production, selling or storage of hazardous substances, no matter how many employees the business had, to establish an office within the company or hire a full-time employee to manage and monitor workplace safety.
The 2002 Law also required production companies not engaged in the above-mentioned industries to establish an administrative body within the company or hire a full-time employee to manage and monitor workplace safety if a company had 300 or more employees. However, companies with fewer than 300 employees were permitted to hire a part-time workplace safety monitor or entrust this responsibility to engineering technicians. Nevertheless, a number of high-profile workplace incidents made the shortcomings of the 2002 law clear.
Any business which is entering China needs to prepare itself for a country that takes workplace safety seriously
The 2014 Amended Law
Therefore, in 2014, China passed a new Workplace Safety Law (the Law) to make changes to the country’s legal framework governing employers and businesses as it related to the basic requirements for employee safety on the job in the PRC. The amended version of the Law, which officially took effect on December 1, 2014, significantly tightened the PRC government’s regulation and control over workplace safety and the prevention of workplace accidents in China.
The amended Law: (1) promulgated comprehensive rules that employers in China must follow to protect workers from accidents in the workplace; (2) required employers to develop an internal responsibility system for workplace safety; (3) significantly increased fines for work-related accidents and for any non-compliance with the Law; and (4) provided liability under the Law for any violations to “responsible persons” within businesses covered by the Law.
The 2014 amended version of the Law also significantly expanded the scope of the businesses and industries to whom the Law applies and also broadened the scope of workplace protection under the Law. The amended Law is applicable to all businesses engaged in the production and operational activities within Chinese territory and carries significant implications for employers with operations in that jurisdiction.
The most important feature of the 2014 amendments to the Law was to clarify the obligations and responsibilities of employers in China to provide a safe and healthy working environment for employees by establishing a comprehensive workplace health and safety program and developing a clear “responsibility system”. The purpose of the “responsibility system” is to organize and delegate responsibilities as they relate to workplace health and safety.
These responsibilities are delegated to the organization’s “safety unit”. The safety unit, which is comprised of “leading members of production and business units” at a business covered by the law, is required to: (i) formulate rules and implement a work safety plan; (ii) establish and test an accident response protocol; (iiii) ensure that existing facilities and any new facilities comply with the Amended Workplace Safety Law; and (iv) supervise and inspect work safety at the respective business and production units.
Chinese officials have also become increasingly aggressive in implementing the Law.
While developing a “responsibility system” and implementing a work safety plan, employers must provide all necessary safety equipment, including goggles, hard hats, and protective or other clothing, for employees to do their respective jobs and ensure that all employees receive proper education and training on health and safety standards in the workplace. Employers also are required to allocate funds specifically for work safety issues.
The amended version of the Law also provided significantly higher fines for employers (and adds that employers may also be exposed to criminal liability) in relation to noncompliance and workplace accidents. “Responsible persons” may also have personal liability in the form of fines for workplace accidents that occur under their supervision.
In addition to the enumerated fines for employers, the person or persons who are primarily responsible for “control over work safety” of a company or business unit (the “responsible persons”) can be personally liable for fines and penalties for workplace accidents. The “responsible person” can be liable to fines of between 30% and 80% of her previous year’s income. If a “responsible person” is found to have failed to take prompt and appropriate action or to make immediate emergency arrangements in the event of an accident that causes injury or death, that person may also be liable to a fine of 60% to 100% of her previous year’s income. Responsible persons can also be dismissed or demoted from their position if an accident occurs.
How Is It Enforced?
China, during its stratospheric rise to become the second largest economy in the world and as its economy expanded at a rate of over 7 percent per year, developed a reputation among Western consumers and countries as being less concerned with the safety of its workforce than in continuing to grow its economy. That growth at all costs mentality no longer exists in most portions on the Chinese economy. Instead, China’s leadership is taking steps forward to put a higher priority on employee safety. This is both an opportunity and a minefield for companies operating in China, many of whom may be used to operating in which workplace safety may not be as emphasized as heavily as it is now. In today’s Chinese workplace, employee safety is now a priority that takes precedence in a way that it never used to prior to passage of the amended Workplace Safety Law in 2014.
Chinese officials have also become increasingly aggressive in implementing the Law. For example, in January 2017, the official Xinhua news agency announced that it would be launching a nationwide safety inspection in workplaces in China. The announcement also noted that “China’s workplace safety record improved in the first five months of 2017, with the number of accidents dropping 25 percent year on year to around 19,000, according to the State Administration of Work Safety. These accidents left some 13,000 people dead, down 16.9 percent year on year.”
Conclusion: This is Not the Old China When It Comes to Workplace Safety
As can be seen from both the passage of a significantly expanded Workplace Safety Law in 2014 as well as the recent nationwide inspections instituted by the Chinese government, it is clear that workplace safety is now an increasing concern for the Chinese leadership. Businesses operating in China would be well-served to develop and implement detailed, comprehensive workplace training and accident protection protocols for their employees. While it is true that the Law applies equally to both foreign and domestic Chinese companies, the reality is that foreign companies are typically held to a higher standard under the Law. In the end, the expense and administrative costs associated with complying with the Law is preferable to the terrible publicity and potentially large reputational hit that a company, whether foreign or domestic, seeking to cut corners on employee safety measures in China will face.
About IPO Pang Xingpu: IPO Pang Xinpu is a premier international law firm that has been representing clients in China since the early 1990’s. We’ve been here longer than the vast majority of corporate law firms, and have helped hundreds of companies across a wide spectrum of industries securely and quickly establish operations in China, and then provide follow-on services for their ongoing legal needs.