China: New Foreign Labor Regulations Sharpen Penalties for Illegal Employment of Expatriates - With Severe Personal Consequences for Offenders

In order to regulate and penalize illegal working relationships concerning foreigners more strictly, the National People's Congress approved the Exit and Entry Administration Law, which will come into effect on July 1, 2013.

The new regulations blend in an increasingly harsh approach towards illegal immigration, which recently culminated in Beijing's announcement of a three-month police campaign to uncover foreigners that do not possess a valid permit for residence or work in China. The campaign had been preceded by a somewhat public debate on foreign public misconduct and illegal foreign residents that do not contribute to the society in a positive way. Shanghai, considered to be as the most internationalized and foreign-friendly living environment by the majority of expatriates in China reportedly participated in the campaign with police spot-checks of passports and employment permits in popular nightlife districts patronized by foreigners. For companies employing expatriates as well as foreigners working in China it is therefore important to know what impact the new law will have on employment and residence. In the past, more than just a few foreigners and companies considered existing rules on residency and employment to be rather "suggestions" that sometimes may to be adjusted and stretched according to personal needs than binding laws. However, the new law contains punitive provisions of much more serious nature than mere monetary penalties. In the worst case scenario, a foreign employee could even be expelled and banned from entering China again for 10 years.

Key Points of the Law - What Expatriates and Employers Need to Know

Tightened Supervision of Foreign immigrants

With the new law, the government seeks to tackle non-compliance and tightens its grasp of control with several new measures in terms of residence registration and reporting duties:

  • For permanent residence applicants, it will become necessary to record biometric data such as fingerprints with the Public Security Bureau. But also persons entering or departing China may be required to provide biometric data, for example at the airport pass control, if additional regulations are promulgated in due time.
  • In terms of residence and work locations, the Public Security Bureau may restrict foreigners from residing or working in certain locations where conflicting national security interests. Foreigners who have already established residency or workplaces in such areas may be given notice to relocate.
  • Entities that employ foreigners must report relevant information on the employment to local Public Security Bureaus. Registered foreign students in China are not exempted from special rules governing employment, which will be issued by the Ministry of Education. It may be common for foreign students to work in part time jobs such as brand promotion or English teaching, but a breach of the rules could violate the rules for illegal employment, and thus entail legal consequences.
  • Citizens and legal persons that become aware of illegal employment relations and illegal residence are encouraged to report relevant clues to the authorities.
  • Work-related residence certificates will be valid for a minimum period of only 90 days (instead of 180 days) and a maximum of five years. Non-work-related residence certificates will remain to be valid for a minimum of 180 days and a maximum of five years, respectively. Where foreigners wish to extend a visa with a maximum stay of 180 days, the application should be filed seven days prior to the date of expiration, and the length of extension should not exceed the originally permitted duration.

Increasingly Severe Punishments for Non-Compliance

The legal stipulations send out a signal that the government is determined to bear down on individuals and companies who do not play by the rules with more severe and deterrent legal consequences and greatly increased penalties. In the end it remains to be seen whether the upper limits of the fines and sharper measures will be made use of on a frequent basis.

  • For each illegally employed foreigner, the employer will be fined CNY 10,000, and monetary gains from the employment will be confiscated. The maximum fine for companies who illegally employ foreigners is doubled from CNY 50,000 to CNY 100,000.
  • The new law explicitly states that expatriates are obliged to obtain the necessary employment documents. Illegally working foreigners could now be fined between CNY 5,000 and CNY 20,000, as opposed to a low former penalty of only CNY 1,000. In serious cases, foreigners may face detention.
  • Under the new law, stay without a valid visa is now subject to fines up to CNY 10,000, and detention for 5 to 15 days. However, illegally staying foreigners will be given a warning before being fined.
  • The most severe consequence foreigners should be aware of is the possibility of deportation. Where foreigners are found guilty of illegal immigration, residence or employment, they may not only be deported from the country, but additionally be banned from entering China for five years. Foreigners who violate Chinese laws can be requested to depart within a specified deadline, but severe (non-criminal) violations may even result in forced deportation, and such individuals may not be allowed to enter China again for a 10-year period. According to the law, assistance in illegal acts is also punishable.

New Visas, New Entry Facilitations

Despite the harsher punitive provisions in the law, another part also aims to make entry procedures for certain groups more convenient.

  • Together with the new law, a new visa category is introduced which caters especially to foreign high potentials. The new "talent visa" is designated for foreigners with certain skills in demand to support the development of the country. However, further details regarding the "talents" will have to be set by the government.
  • In addition, foreigners who make "outstanding contributions" to the nation or meet other requirements as determined by regulations may be rewarded with a "green card" for permanent residence, according to the new law.
  • For the first time, China incorporates provisions in domestic law reflecting its obligations under the 1951 Refugee Convention and 1967 Protocol relating to the Status of Refugees. Under the new law. Refugees are allowed to stay in China after obtaining a temporary ID card and while their refugee status is under examination.

Conclusion

The new law proves the Chinese government's intention to screen foreign workers in the country more carefully, and to punish those who fail to comply with legal stipulations. Expatriates and their employers are advised to pay attention to the rules, as a break of the law may result in consequences even more severe than the increased monetary penalties, such as detention, deportation, or ultimately even a ban on entering China again for many years. On the other hand, foreign high potentials that are eligible to apply for the "talent visa" may benefit from facilitated rules to obtain visa and residence permits when the conditions are further described in additional provisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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