Case Brief:

Company A recruits a new employee with two years’ working experience in other company. Six months later, this new employee asks for annual leave with pay. The company refuses to approve the application of annual leave and declares that with only less than 6 months of work history with the company, the employee has no right to enjoy the annual leave. Consequently, disputes arise and the employee inquires about the possibility of exceeding the legal number of days of annual leave at the company’s discretion.

This case mainly refers to two issues:

1. Whether this new employee could ask for paid annual leave.
2. Whether the days exceeding the legal number of days of annual leave could be arranged at the company’s discretion.

Whether this new employee could ask for the paid annual leave.

The Implementation Measures for the Paid Annual Leave for Employees of Enterprises were adopted at the sixth executive meeting of the Ministry of Human Resources and Social Security on July 17, 2008 and came into effect on September 18, 2008.

According to the new implementation measures, employees who have worked continuously for one year or more are entitled to paid annual leave; the employee’s work history will be defined as his cumulatively, including time with his current employer and his past employers.

In this specific case, although the new employee has only worked for company A for six months, his cumulative work time has been 2.5 years, which exceeds one year. Therefore, this employee is entitled to ask for the paid annual leave under the condition that the number of days that he could enjoy is needed to be determined further.

Article 5 of the Implementation Measures provides that the days of annual leave which may be taken by a new employee who satisfies the requirement in the current year shall be calculated according to the number of days from the time when he is employed by the current employer to the end of the calendar year, and if the result is less than one day, he shall not enjoy annual leave this year. The calculation formula is defined as the following: (the number of days from the time when he is employed by this employer to the end of the calendar year)/365 × (the days of annual leave he is entitled to if he works for this employer for 12 months in the current year.)

Thus, although this new employee meets the criteria for annual leave, whether he can actually claim it in practice, is in fact determined according by the above formula. For example, if the labor contract of this employee is from May 1, 2008 to April 30, 2009 and he submits the application of annual leave on Nov. 1, 2008, based on the above formula, the number of days he could collect in the year 2008 = (31+30+31+31+30+31+30+31)/365×5=3.4. Since 0.4 day is less than one day, the actual number of days of annual leave will be rounded down to three days.

Whether the days exceeding the legal days of annual leave could be arranged at the company’s discretion

Article 13 stipulates that if the number of days of annual leave provided by the company is more than the number of days provided by law, the company shall be bound by the agreement of the annual leave with employees, which means that for those excess days, the company can negotiate with employees to reach an agreement; otherwise, the company shall uphold the legal number of annual leave days, in accordance with legal provisions.

By: Ivy Hou

Attorney at Law

Allen & John Law Firm

Dec. 9, 2008

1．Current Conditions of Land Using

Land in China is classified according to its purpose: agricultural land, state-owned construction land and state unused land—all of which are owned by the state. Among them, the state owned construction land can be used directly but the other two types must initially undergo a recategorization into construction land before use. Today, although China is undergoing reform towards the market economy, the ownership of rural collective land and state land still remain the characteristics of the planned economy, which means that the rural collective land has no whole property right and thus, it can only be transferred by the way of expropriation by the state. However, this is characteristic of the traditional operation mode of the land during the planned economy period and is not compatible with the requirements of the contemporary market economy and is unable to optimize resource.

Article 43 of the LAND ADMINISTRATION LAW OF THE PEOPLES REPUBLIC OF CHINA provides that any unit or individual that needs to use land for construction must apply for the use of state-owned land in accordance with law; however, use of land collectively owned by peasants by the respective collective economic organization approved in accordance with law for the establishment of rural and township enterprises and construction of residences by villagers, or use of land collectively owned by peasants approved in accordance with law for the construction of village(township)public facilities and non-profit undertakings are excluded. Additionally, article 63 stipulates that the right to use land collectively owned by peasants shall not be transferred, retransferred or rented out for non-agricultural construction; however, enterprises that have obtained land for construction in accordance with law and conforming to the overall planning for land utilization where occurrences of transfer of land use right have been brought about by such circumstances as bankruptcy and merger are excluded. The above articles express the attitude of the government to restrict or prohibit the transfer of collectively owned land; furthermore, it also delineates the limited circumstances for such transfer.

2．Discussion on How Enterprises Get the Use Right of Rural Collectively Owned Land

In some Chinese cities, the transfer method of rural collectively owned land has deviated from the traditional system. For instance, the government of the Guangdong province published the “Regulation of collectively owned land use right transfer” in October 2005 (hereinafter referred to as regulation). This regulation provides that collectively owned rural land， designated for construction has the same status as state－owned land and shall be entered into the same exchange market， with respect to the principle of same land, same price and same right. Pursuant to this regulation, collectively owned land can be used for industry and city construction， as long as the application adheres to the land planning and avoids government expropriation. The form of transfer includes selling, leasing, releasing, mortgaging， among others. All the Sino-foreign companies including wholly owned foreign enterprise, Sino-Foreign Equity JV, Contractual JV Enterprises, and the enterprises that process with supplied material，assemble parts supplied by clients，process with customer’s samples and compensatory trade, can apply for the use right of collectively owned land. Guangdong Province has been the first city to implement the transfer of using right of rural collectively owned land.

In August 2008, the government of Hebei province published the “Administrative regulations of collectively owned construction land use right transfer of Hebei province”, which became effective on November 1 2008. Hebei province has been the first province to publish such a regulation relating to the collectively owned land for construction in the territory of central China. Thus, in Guangdong and Hebei province, the use right of collectively owned land for construction can be obtained by the way of direct transaction. The execution of this type of transaction is quite easy.

Within the territory of Jiangsu, the government obtained the use right of collectively owned land for construction by the means of replacement of house site. For example, in the town of Xinqiao， near Jiangyin city, the government has relocated all farmers within the locality to newly built residences in the town or suburb in order to use the space for industry and city construction. A large amount in costs was saved through bypassing approval by government institutions. At present, some enterprises use this method to negotiate with local government to obtain the opening space after house site replacement. This method solves the land problem of those enterprises.

In other provinces, the transfer of use right of collectively owned land is pretty much regulated by former legal provisions. However, in practice, enterprises always obtain the use right of land at lower costs through means of tender offer or mergers with town and township enterprises. Additionally, some town and township enterprises will lease the workshop to the public on the plea of industry reform or discontinuation of business. In China, the right to pricing the use right of collectively owned construction land is mostly in the hands of farmers or the farmers’ group. Therefore, the actual price of transfer or lease is typically lower than those prices of the primary market of land transaction, which can help enterprises in saving huge costs.

Nowadays, the government controls and monopolizes the primary land market strictly. Any entities beyond collective group and individuals must obtain the use right of land though the primary market or the derived secondary market. However, the methods of transferring collectively owned land for construction break the monopoly of primary market by the government. The enterprises and individuals will no longer be restricted by the primary market; they can obtain the use right of land through negotiation with collectivity or the lender directly. In fact, some entrepreneurs have paid close attention to such economical methods. With the development and improvement of the collective construction land transfer market, both domestic and foreign companies shall obtain use rights legally, in consideration of scarcity of land capital and the growing demand for available spaces for development.

Case Brief

Shenzhen Fuanna Decorations Co., Ltd registered “fuanna” as its trademark. However, following that, Shanghai Sankun Textile Co., Ltd registered ‘fuanna.com’ as domain name on the Internet and used ‘http:// www.sankun.com’ as the website of the company. Fuanna Company considered Sankun Company’s behavior to be an act of malicious rush registration. As a result, Fuanna Company could use www.fuanna.com.cn but is kept from using www.fuanna.com on the Web.

This case mainly involves two issues:

（1）How can the trademark right be protected effectively under the situation of network?

（2）How to determine trademark infringement under the situation of network and how is it applicable to law?

Applicable Law

（1）Guide: Principle of Good Faith of GENERAL PRINCIPLES OF THE CIVIL LAW OF THE PEOPLE’S REPUBLIC OF CHINA

（2）Applicable Laws: General Principles of the Civil Law of the People’s Republic of China, Law of the People’s Republic of China Against Unfair Competition, Civil Procedure Law of the People’s Republic of China and Legal Interpretations of Supreme Court

Determination of Domain Name Infringement

In any of the following circumstance, the infringer’s behaviors shall be determined as an infringement or making an unfair competition:

（1）The civil rights required by the right owner are legal and valid;

（2）The domain name or its main components of the infringer is a copy, simulation, translation or transliteration of the famous trademark of the rightful owner. Or, the domain name or its main components is the same as or similar enough to the registered trademark, domain name of the rightful owner to confuse the public.

（3）The infringer has no rights to the domain name or its main parts and has no reasonable excuses to register it or use it;

（4）The infringer is malicious in registering or using the domain name.

In any of the following circumstances, the intent and maliciousness of the infringer’s behaviors shall be judged by court:

（1）Register the domain name of other persons as registered trademark for commercial purpose;

（2）The infringer registers and uses a trademark or domain name that is the same as or similar to an already registered trademark, domain name of a rightful owner and will confuse and misguide the public to visit the wrong website for commercial purposes;

（3）The infringer offers to sell, lease or transfer the domain name with high price to seek unfair benefits;

（4）The infringer does not use or prepare to use the domain name after it being registered. The only purpose is to prevent the rightful owner from registering the domain name;

（5）Other circumstances.

Analysis

According to Trademark Law of the People’s Republic of China, to use a trademark that is identical or similar to a registered trademark with respect to the same or similar goods, without the authorization of the proprietor of the registered trademark is an infringement of the exclusive right to use a registered trademark. Therefore, if the trademark in question is preemptively registered as domain name but does not fall into the above condition, this behavior cannot be determined as an infringement of trademark right. However, such behavior is in violation of the principle of good faith, which will harm the equal competition order and thus, shall be regulated by Law of the People’s Republic of China against Unfair Competition.

In the above case, Sankun Company infringed upon the trademark right of Fuanna Company by the means of registering domain name, which violated Law of the People’s Republic of China against Unfair Competition. The court can issue an injunction to stop the infringement, write off the domain name or decide to let the real owner, Fuanna Company register and use the domain name. If there are any actual losses caused by the infringer to the actual owner, the court also can order for monetary compensation by the infringer.

James Bai,

Attorney at Law

Allen & John Law Firm

Nov. 18, 2008

In recent years, China has adhered to implementing a tight monetary policy. It has issued some new foreign exchange policies to limit the “hot money” into China, which result in the shortage of funds for some FIEs. In confronting this dilemma, it is imperative for FIEs to find a solution that is both economical and time efficient. The following case may shed some light on the recent developments in Chinese monetary policy and the adequate response strategies.

2. Facts

We have two customers as FIEs: one is a Japanese company, established for many years in China, and other is a U.S. company that has been operational for less than a year. The Japanese company seeks capital to fuel the expansion of its business, while the American company seeks a new lifeline after depleting its registered capital. Despite differing circumstances, the dilemmas of the two firms are indistinguishable: a shortage of funds. In addressing this issue, both firms came to us and asked for a complete solution.

3. The Legal Solution for This Dilemma

There are two solutions applicable to these two companies:

Solution 1: making a loan from domestic institutions or from abroad

A company can make loans from banks, individuals and other financial institutions; however, a loan between two companies is prohibited according to Chinese law. Furthermore, caution must be taken with foreign loans, due to strict restrictions for amount of the loan. According to the law concerning foreign investment, the external debt amount of a FIE is the balance between FIE’s total investment and registered capital. Additionally, external debt is divided into two types: Short-term and Long-term.

The loans with a term of 1 year (ST external debt) are calculated on basis of its balance, but the loans more than 1 year (LT external debt) shall be calculated by its accumulated amount. For example, if you are only allowed $10 million in loans and you have borrowed $5 million (LT external debt), the remaining amount you can borrow again at a later time is only $5 million, regardless of whether you have repaid the former $5 million; however, in the case of ST external debt, if you have borrowed $5 million (ST external debt) and then repaid in full, the remaining amount you can borrow again is still $10 million.

The external debt must also be registered with the local Administration of Foreign Exchange.

Solution 2: increasing registered capital

If both of companies stated above increase the registered capital, the proportion of the additional registered capital and the increased amount of investment shall be subject to the following provisions:

1. Where the total amount of investment is less than 3,000,000 U.S. dollars (including 3,000,000 U.S. dollars), the registered capital shall account for seven tenth of the total amount of investment at least.

2. Where the total amount of investment is between over 3,000,000 U.S. dollars to 10,000,000 U.S. dollars (including 10,000,000 U.S. dollars), the registered capital shall account for half of the total amount of investment at least. Where the total amount of investment is less than 4,200,000 U.S. dollars, the registered capital shall be not less than 2,100,000 U.S. dollars.

3. Where the total amount of investment is between over 10,000,000 U.S. dollars to 30,000,000 U.S. dollars (including 30,000,000 U.S. dollars), the registered capital shall account for two fifths of the total amount of investment at least. If the total amount of investment is less than 12,500,000 U.S. dollars, the registered capital shall be not less than 5,000,000 U.S. dollars.

4. Where the total amount of investment is over 30,000,000 U.S. dollars, the registered capital shall account for one third of the total amount of investment at least. If the total amount of investment is less than 36,000,000 U.S. dollars, the registered capital shall be not less than 12,000,000 U.S. dollars

Company shall submit the following documents to local Foreign Economic Relation &Trade Committee for approval, including but not limited to:

1. The application

2. Board Resolution

3. Capital Verification Report

4. Auditing Report of current year

5. Certificate of Approval & Business License

6. other required documents

When completing the above steps, the company shall apply for registration to the Administration for Commerce and Industry.

By Allen & John Law Firm

Vincent Sun

Attorney at Law

1.1 An employee shall be paid severance pay based on the number of years worked with the employer at the rate of one month’s wage for each full year worked. Any period of not less than six months but less than one year shall be counted as one year. The severance pay payable to an employee for any period of less than six months shall be one-half of his monthly wages.

1.2 If the monthly wage of an Employee is greater than three times the average monthly wage of employees in the Employer’s area as published by the People’s Government at the level of municipality directly under the central government or municipality divided into districts of the area where the Employer is located, the rate for the severance pay paid to this highly paid person shall be applied to three times the average monthly wage of the location of Employer instead of this person’s monthly wage. For instance, Shanghai area’s average monthly wage now is around RMB:2892, and plus 3 times it shall be around RMB:8676.

1.3 The term “monthly wage” means the employee’s average monthly wage for the 12 months prior to the termination or ending of his employment contract.

Monthly wage includes:

1. hourly wage (计时工资)
2. piece rate wage（计件工资）
3. bonus（奖金）
4. allowance（补助和津贴）
5. payment for overtime work（加班加点工资）
6. others （特殊情况下支付的工资）

2. Answer of Questions

Q1: How to calculate labor contract compensation relating to old & new labor contract laws ?

1.1 If the employment contract spans years 2007 and 2008, the contract shall be treated as two parts. The turning-point is Jan. 1, 2008. Therefore, the contract period before Jan 1 2008 shall be treated according to the old labor law; the contract period after that date shall be treated in accordance with the new labor contract law.

1.2 Pursuant to the old labor law, if the employer dissolves the labor contract in advance, the employer still shall pay labor contract compensation, and the standard is the same as the new labor contract law. However, if the labor contract has matured automatically, the employer shall not pay any labor contract compensation under the old labor law.

1.3 Pursuant to the new labor law, if the labor contract has matured automatically, the employer still shall pay the employee each year one month wage as the compensation of termination; if the employer dissolves the labor contract in advance with right legal reasons, the employer shall pay the employee the same each year one month wage including the years before Jan. 1, 2008 as the compensation of termination in advance; If the employer dissolves the labor contract in advance with no reasons or not legal reasons, the employee can ask the employer to keep the labor contract till it has matured or the employer pay the damages to the employee at twice the rate of the severance pay.

1.4 To explain this issue clearly, we’ll use an example as follows:

The labor contract period between the employee and the company is from April 1, 2006 to March 31, 2008.

a. If no special circumstance happens and the labor contract matures naturally, the labor contract compensation shall be calculated from Jan 1, 2008 to March 31, 2008. Therefore, the severance pay payable to the employee shall be one-half of his monthly wages as the period is less than six months.

b. If the Company dissolves the labor contract on Feb. 1, 2008 in advance with right legal reasons, the labor contract compensation shall be calculated from April 1, 2006 to Feb. 1 2008. In this case the total labor contract compensation shall be 2006 one month wage, 2007 one month wage, plus 2008 one-half month wage.

c. If the Company dissolves the labor contract on Feb. 1, 2008 in advance with no reasons or not legal reasons, the employee can ask the employer to keep the labor contract till March 31, 2008, or the employer pay the damages to the employee at twice the rate of the severance pay.

Q2: How to calculate labor contract compensation of a sales person ?

2.1 The standard calculation is the labor contract compensation for a sales person= (Employee’s wage for the 12 months prior to the termination or ending of his employment contract + total allowance + total commission) divide 12, and multiply the number of years worked.

2.2 If the employer has a special agreement with the employee, the calculation shall go with the agreement.

Q3: Regulations of annual bonus

There is no government regulations of annual bonus. Whether to pay annual bonus is at company’s discretion. However, if the methods of calculating annual bonus have been provided in the labor contract, handbook or other company documents, and the employee shall be paid according to such company regulations.

Q4: Regulations of pregnant women during lactation period

If a female employee in her pregnancy, confinement or nursing period, the company must not terminate the employment contract or fire her by the excuse of workforce reduction plan even if the company is willing to pay enough compensation.

Q5: The position only has one employee and he/ she does a good job. But this employee is a new person in the company; shall he/she be fired firstly under workforce reduction ?

5.1 No relating regulations to govern this issue. In our opinions, to compare the old or new between two employees shall be on the condition that they are in the same position at the time of workforce reduction.

5.2 Even if there are two persons in the same position at the time of workforce reduction, one is new and the other is old person, but the new is better than the old, the company still can keep the new person who does good job. (Although there are no relating regulations of this question, we made a phone call to ask relating labor bureau and the officer said yes.)

Q6: Whether the company facing workforce reduction can keep the new division and relating exclusive employee ?

According to the explanation of Q5, the answer of this question is yes.

3. Lawyer’s Suggestions

Because the labor matters are the areas which have regulated by government heavily, we suggest before the company takes any workforce reduction, the company shall follow up the following steps:

1. The properly notification in advance to all employees.
2. Reporting the company’s action of workforce reduction in advance to relating local labor bureau.
3. After the company has developed a detailed plan, the company shall go to relating local labor bureau again and get its approval or understanding.

This brief report is written by:

Ivy Hou, legal assistant,

Sunny Chen, legal assistant,

Allen Jiang, attoney at law,

Allen & John Law Firm