China employment law auditChinese employees constantly litigate overtime claims against their China employers. Many foreign employers in China assume their employees have the burden of proving overtime was actually incurred. But they are only sort of correct. The governing judicial interpretations (i.e., Interpretation (III) of the PRC Supreme People’s Court of Several Issues on the Application of Law in the Trial of Labor Dispute Cases) shift the burden to the employer if the employee produces evidence showing the employer holds the relevant evidence. What does this mean in practice? In employee-favorable jurisdictions like Beijing, it means that if an employee has just minimal evidence of having put in overtime without getting paid for having done so, the courts will require the employer prove the employee’s overtime claims are untrue. The Beijing courts take this position because they know employers often verbally transmit their overtime requirements/requests and thereby leave their employee with no good evidence of having worked overtime. On the other hand, the employer’s mandatory attendance records usually show who worked when.

The Beijing courts have recognized that copies of work shift schedules signed by a supervisor were enough to shift the burden of proof to the employer and eve declarations and witness testimony. But even where the employee comes forward with sufficient evidence to shift the burden to the employer, the employer can still prevail if it can produce sufficient evidence to rebut the employee’s overtime evidence. For example, the courts have accepted wage payment acknowledgment forms signed by an employee who specifically acknowledges having been paid in full and had no issues concerning such payments and fully accepted the amount.

Many China employers also assume that if their employees follows an order to work overtime and then does not object to the wages received, they have accepted that no overtime pay is owed to them. This is WRONG. Employees do not need to file a complaint or voice any rejection right away. Generally speaking, they have one year until after their employment is terminated to sue for overtime wages. And sue they do, which is all the more reason why it is so important to get your departing Chinese employees to sign settlement agreements with you making clear they have no wage claims. See China Employee Termination: Avoid These Mistakes.

What all of this means in real life is that employees can and often do keep minimal evidence of unpaid overtime and patiently wait for years before taking any legal action. They can (and do) also unilaterally terminate the employment relationship and sue their employer for severance and damages or they can wait until they are terminated or the employment term has expired. In other words, if you have not been properly handling your employee overtime and compensation correctly, you could be sued for years of unpaid overtime pay. Our China employer audits often find lingering potential overtimes claims and we typically advise our clients to clean those up right away while they still have leverage over their employees, rather than waiting for the nearly inevitable claims once the employees have left.

“Clever” employers may argue that their local labor authorities have told them that they are obligated to keep employee wages records on file for  only two years in case of audits, so everything will be fine if they do just that. Wrong. Yes, this does mean you have fulfilled that specific employer obligation/law, but that law is not intended to prevent employees from pursuing you for overtime wages going back more than two years. Also note that like pretty much everything else involving China employment law, even the amount of time you must keep your employee wage records can vary.

The bottom line on employee overtime claims in China is that China employers should just assume they will end up having the burden of proof on overtime claims and should therefore start both cleaning up past problems and preparing for future problems.