China: OA-Related Pitfalls In MNC's HR Management Under China Law

Last Updated: 2 August 2019
Article by Aaron Yizhou Deng
Most Read Contributor in China, September 2019

The information technologies("IT") have been imposing increasingly greater challenges upon the law, lawyers and their clients worldwide. Among others, the digitalized human resource("HR") management is prone to many more legal pitfalls and uncertainties than ever before. In particular, many of my multi-national company("MNC") clients have come to me for advice on the legal issues and risks they encountered from the use of OA in the course of HR management. As a matter of fact, all MNCs here in China have applied the so-called OA systems in their daily HR management and business operations, with an effort to improve efficiency. In that scenario, I am going to draw on my professional experiences as a former trial judge and a current practitioner of law, to examine the legal features of the OA, analyze the legal challenges it poses on employment-related dispute resolution, and explore the precautions for employers to adopt against such challenges under China law.

1.Technical Features of OA from Legal Perspective

The term "OA" is generally used as the acronym of "Office Automation", which means a technological application making use of the computer and cyber technologies to automatize and optimize corporate management and operation. While the traditional OA systems are computer-based, functioning through customized intranets and email accounts, the OA has so far evolved into a mobile mode, such as the smart-phone-based Wechat OA system popular with companies in China nowadays (Wechat is an equivalent to Facebook or Twitter).

From a more generic but technical perspective, OA systems are electronics as opposed to paper based. As such, they have three overall characters from a legal perspective.

First, they are strongly technological, meaning they rely on certain technological device (such as servers, computers and smart cellphones) and technological methods (i.e., computer programming).Second, they are fragile and vulnerable, meaning that they are prone to alteration or sabotage; plus, such alteration or sabotage is hard to be retrieved or recovered. Finally, they are intangible, void of traces or marks. That being said, they are essentially a pile of numbers "1" and "0" as processed in accordance with computer programming protocols. Hence, they are invisible and untouchable, capable of being demonstrated only through special device and technologies.

In addition, there are two ways to get access to an OA software application. One is for the application to be designed and programmed by an IT service provider and then licensed to a company user. Indeed, this is the most common way. The other scarcer way is for some MNCs with powerful IT capacity to develop an OA software by their own technical team, thereby dispensing with a third-party IT service provider.  Either way, the company user, rather than individual employee is capable to control the OA software system.

2.OA-Related Burden of Proof In Disputes

1.Employers' burden of proof

In 2018, my team and I represented and defended an AI company against a departed employee, an IT technician regarding his claims of double penalty1 arising from alleged wrongful dismissal and overtime pay before Chinese courts. In the course of evidence disclosure and exchange(similar to the process of discovery under common law), it was revealed that my client used a mobile-based Wechat OA system to manage its employees. My client argued that the dismissal was not wrongful, but well justified in that the plaintiff employee had been repeatedly late for work for dozens of times during a 6-month probationary period, which fact the employee denied, and therefore the employee had severely violated my client's corporate policy, enabling my client to discipline him (i.e., to fire the employee immediately). Under the rules of evidence of Chinese courts, my client was required to show evidence that the employee had been late for work for dozens of time. With our assistance, my client has successfully discharged such burden of proof and eventually won the litigations.

One may wonder why my client, the employer using OA for HR management purposes was required to assume the burden of proof. As the judge pointed out, the reason is that my client got a license to use the OA Wechat software from a third-party OA developer, and thus my client was solely and exclusively able to control the software, whereas the employee plaintiff was unable to do so. Therefore, my client was in the best position to produce the required evidence, i.e., the employee's records of working time as shown in the OA software records.

Indeed, as noted above, generally an employer gets access to an OA application in two ways, and either way the employer, not an ordinary employee without the employer's authorization is exclusively able to take control of the records as produced and stored in an OA system. It is because of this very fact that employers in employment disputes are required to bear the burden of proof to produce genuine, pertinent and sufficient evidence produced by the OA systems concerned.

2.How to discharge the burden of proof

In an employment dispute arbitration / litigation here in China, an employer using an OA system for HR management purposes needs not just bear the burden of proof when it comes to issues related to OA, but also completely discharge such burden in strict accordance with the evidence rules and perhaps extra requirements of individual judges. Indeed, such burden poses abominable challenge to a defending employer, calling for assistance by professional lawyers.

To correctly discharge such burden of proof in relation to OA records, it is necessary to first understand certain basic rules of evidence in Chinese courts.

First, The PRC Civil Procedures Law as amended in 2012 groups civil evidence into several categories, each of which is subject to different rules of evidence. According to the statutory definitions2, OA-produced evidence / records should fall with in the evidence category called "electronic data" in the light of their origins and storage formats. Second, as a general rule, a piece of evidence presented by a party to a litigation should be examined and cross-examined at court hearings or sessions; otherwise it is inadmissible. There are four general objectives / issues of evidence to be cross-examined by a counterparty. Evidence is not admissible until and unless all of the four issues are resolved positively (i.e., only legal, genuine, relevant and adequate evidence should be admitted as basis to establish contended facts). The four issues are the legality, genuineness, pertinence / relevance and adequacy of evidence.

By my experience as a former judge and current practitioner, generally the legality of OA-related evidence is not contended in litigations, provided that the records have been stored and obtained within China. However, there would be big issues if such records were indeed generated, stored, maintained or obtained outside China. This is because under the rules of evidence, any evidence obtained outside China would generally be required to be locally notarized and then legalized by a Chinese consular before it can be presented as evidence to a Chinese court. However, the processes of such notarization and legalization as well as subsequent translation tend to be rather time-consuming and costly.

In reality, the OA or other types of electronic systems used by some MNCs in China were developed in their overseas headquarters and accordingly the data are stored on servers located outside China. As noted above, once employment disputes arise in China, and evidence of such data is called for, complex and costly processes of evidence notarization and legalization would likely be required, posing great burden and even harshness to the MNCs.

Second, the genuineness of OA-related evidence, like any other categories of evidence in litigation tends to be the most contentious issue of evidence cross-examination. In particular, a counterparty tends to deny the truthfulness of OA-related evidence presented by an employer party in an employment dispute. As noted above, the evidence rule requires the employer to establish the genuineness of the evidence in order for it to be admissible by the courts.

To show the genuineness of the evidence, a party must establish that the evidence is original void of any alteration. That is a rather harsh proof criterion given the complex technical features of OA systems and other electronic records as mentioned above. In what way can that burden of proof be successfully discharged?

As per our experience, there are generally four ways to discharge the burden.

The first way is to use cutting-edge information technologies, such as accredited hash value, electronic signature, time stamp or third-party evidence-storage platform in the course of applying OA systems. Judicial precedents show that courts tend to admit the genuineness of OA records that have been based on the aforesaid IT methods. The more reputable the developers of the aforesaid IT methods are, the more likely the genuineness of the records produced by such developers is acceptable.

The second way is for the OA-related records to be notarized by a local notary public. That process is called evidence-conserving notarization. Under China law, a piece of notarized evidence carries much more evidential value, and hence is usually more admissible than one not notarized. Indeed, courts may not reject notarized evidence absent proof to the contrary. Therefore, a notarized OA record would be more likely deemed as genuine and relevant.

The third way is for the developer / provider of the OA software to testify that the records are incapable of being altered, or have not been subject to alteration if that is true. This is particularly applicable if the OA provider is a well-established reputable IT company, adding to the trust worthiness of the OA evidence. However, it is worth noting that under China law such testimony is usually in writing, rather than oral ones, although the witnesses are occasionally summoned to be cross examined at hearings.

The last way is application for a judicial appraisal to technically test the genuineness of the evidence. This is similar to the expert witness rules under the Common Law. This method is not applicable until all the other three methods do not work. The general process is that, the party providing the OA evidence should move to judicially appraise the evidence. Then judges will review the move and if it is approved, an independent third-party judicial appraisal institution is to be jointly selected by all the parties, or in the event of a failure of joint selection, to be randomly determined by the courts. Plus, the moving party is supposed to prepay the fees of the judicial appraisal. The written conclusion generated by the selected appraisal institution needs to be cross-examined by all parties before it becomes admissible. Generally, such conclusion would be admissible absent evidence to the contrary.  

In addition to the originality of an OA evidence, the provider of the evidence must also show the employee plaintiff was required to use and indeed used the OA system concerned, if the employees deny. This is an issue of eviden cerelevance. To that end, employers need to show that the employees used their account usernames, passwords, cell phone numbers, ID / social security numbers to sign up or log on to the employers' OA system during their employment. For instance, the Wechat OA system requires an employee to be registered with her cell phone number and real name. Also, certain circumstantial evidence may be used to show this, such as clauses of an employee handbook or a separate OA policy that were acknowledged by the employees and that expressly state all employees are required to use the OA system.

3.Precaution

Since there are so many legal pitfalls and challenges in the course of employment dispute arbitration / litigation relating to OA, the conquest of which are thorny, time-consuming and costly, it would be most advisable to take precautious measures well ahead of the occurrence of any disputes.

In our experience, the most fool-proof precaution is quite straight forward, i.e., to avoid the adoption of electronic technologies including OA for purposes of employment management.

If employment is managed on a paper basis, under the rules of evidence an original hardcopy of documents generated in the employment management process would be categorized as "documentation evidence", one of the traditional categories of evidence under China law. The genuineness of documentation evidence is much easier to show than that of electronic data such as OA records. A physical corporate seal or signature affixed to the documents is generally sufficient to establish such genuineness.

However, nowadays it would be too idealistic to be practicable for MNCs to manage employment on paper basis only. In fact, no employer can dispense with the application of IT methods in their daily management and operations. In that scenario, the following tips may be useful:

First, as noted above, reliable cutting-edge information technologies, such as accredited hash value, electronic signature, time stamp or third-party evidence-storage platforms can be applied to the OA systems in an employer's daily management. The odds of admissibility of OA evidence could be substantially increased if such technologies have been applied.

Second, paper documents should be adopted while an OA system is applied for certain important HR management matters. As noted above, paper-based documents would be much easier to be admissible as evidence in litigations. Such important HR management matters include an employee's voluntary resignation through submission of a resignation letter to an employer, reassignment or adjustment of an employee's job duties or salary rates, medical leave and worker's compensation, dismissal or termination of an employee, duty of confidentiality, non-compete and non-solicitation, and the like.

Third, an internal written policy may be adopted to enhance the management of OA systems. Tactically, one of the functions of such policy is to show that the employees are indeed subject to the employer's management through an OA system, and therefore a connection or relevance is established between the employees and the OA evidence.

Fourth, a written statement showing anthorization to use an OA system is advised for all employees to sign and acknowledge at the very beginning of their employment. Such statement should specify the employees' OA username, her phone numbers and other necessary personal details. It should further state that only the employees themselves are able to set and change the passwords of their OA accounts, and that they are obligated to keep confidential such passwords. As such, the employees are hard to be able to deny the genuineness of OA records as evidence in the event that a subsequent dispute arises.

Finally, relevant managers' awareness of evidence conservation should be improved on a daily basis. Under China law, evidence in litigation or arbitration mainly refers to documentation, as opposed to witnesses. As a preventive measure, important documents in the course of HR management should be retained for records for certain numbers of years.

In summary, categorized as electronic data evidence, an OA system possesses prominent technological features, leading to different evidential properties from traditional categories of evidence, and further giving rise to the difference in methods to show its genuineness and other evidential properties. Accordingly, by drawing on the judicial views on OA evidence, employers, particularly MNCs in China can, in their daily HR management apply multiple precautious measures with an effort to minimize the legal risks arising from likelihood of evidential defects and hence considerably improve odds of winning.

Note:

1.The term "double penalty" is used in the PRC Employment Law of 2007. Usually, if a dismissal or expiration of an employment contract is legal and well based, a severance package calculated by the average monthly salary rate of the employee multiplied by the number of her service years should be payable by the employer. However, if dismissal or expiration is illegal or wrongful, the amount of severance package should be doubled as a penalty to the employer.

2.Article 116 of the 2015 Interpretations by the People's Supreme Court for Applying the PRC Civil Procedures Law provides that, electronic data refer to information formed and/or stored in electronic media through such methods as emails, electronic data exchange, online messengers, blogs, mini-blogs, mobile text messages, electronic signatures, domain names and the like.

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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