Authors: Liu Qi / Lian Yuxiong
(This article was first published on China Business Law Journal column "Labor Law", authorised reprint)
Numerous cases of disputes arising from conflicts of interest involving employees make it essential for companies to strengthen and improve their compliance management in this area.
Conflicting interests in employment mainly refer to conflict between an employee’s personal interests and his or her job duties or position, where such conflict directly or indirectly causes harm to the company’s interests, or puts them at risk. Such conflicts can manifest in various forms.
This article provides operational recommendations for companies in managing and resolving conflicts of interest, with particular focus on conflicts of interest arising when an employee or their relatives hold shares or positions in a competitor or business partner, such as a company supplier or customer.
ESTABLISHING A SYSTEM
Building a management system is the first line of defence in effectively controlling conflicts of interest.
Companies can establish agreements related to conflicts of interest in labour contracts and other relevant agreements. Alternatively, they can formulate a separate conflict of interest system or provide a specific chapter on conflicts of interest in their rules and regulations.
However, given that a company’s chance of success in such dispute cases will pivot around the degree of clarity and detail of conflicts of interest management requirements set in advance, the authors recommend that companies provide detailed provisions in their regulations, in addition to principle-based or general provisions in employment contracts.
It is suggested that more detailed provisions cover the following specific content.
Enumerate as comprehensively as possible ways in which conflicts of interest arise. These include any manner of association between employees or their relatives and the company’s competitors or business partners (such as holding shares, employment, providing services or assistance, and exercising control) within the scope of circumstances and activities that could give rise to a conflict of interest.
Clarify employee disclosure obligations. This includes disclosure obligations before induction, and ongoing disclosure obligations during their tenure, and setting up a channel and procedure for disclosing conflicts of interest.
Establish a process for reviewing conflicts of interest clearly defining the company’s decision-making authority regarding review findings and corrective measures. Not all conflicts of interest will result in harm or threaten the company, and the company can retain the ultimate right to make judgements and decisions. Where extreme measures such as dismissal are unnecessary, the company may consider certain corrective or adjustment measures such as requiring the employee to divest from relevant companies or resign from their positions, or change their job responsibilities or reporting lines, excluding them from corresponding decision-making processes, and requiring employees to co-operate.
Setting disciplinary measures for violations. When an employee refuses to disclose, fails to make a truthful disclosure or co-operate in the company’s corrective or adjustment measures, the company can impose sanctions such as a warning, a serious warning or, in most extreme cases, termination of the employment contract.
To implement a conflicts of interest system, the authors suggest companies take the following steps in practical operations:
  1. Ensure that the formulation and revision of the system comply with requirements of the statutory procedure so that it can be effectively applied to and constrain employees;
  2. Provide training and optimise management of conflicts of interest disclosure procedure. It is recommended that companies offer management training to employees during onboarding and throughout their employment. Additionally, a company can regularly arrange to be apprised of conflicts of interest situations among employees by questionnaire. Questionnaire templates can be prepared in advance and continually updated and improved, explaining disclosure requirements before employees fill in the questionnaire, and reminding them of the consequences of non-disclosure or non-truthful disclosure. The company can also establish a conflict of interest query window for employees to inquire and confirm when they have questions about the system, or are unsure whether they are in conflicts of interest. It is best to document the relevant training and communication processes in writing; and
  3. Open diverse channels for complaining and reporting conflicts of interest, such as a hotline, dedicated email address or website, and set up and improve an acceptance and investigation mechanism.
Where an employee is suspected of violating conflicts of interest regulations, it is incumbent on the company to promptly launch an investigation to verify whether the employee has committed a breach of discipline or, more seriously, a violation of the law relating to conflicts of interest, and to determine the pertinent disposal measures.
In practice, a company can investigate and fix relevant facts and evidence through external lawyer assistance by querying internal and external file data and government public information, and conducting interviews with relevant personnel.
INFORMATION COMPLIANCE
It is imperative for the company to pay attention to compliance when investigating. For example, a conflict of interest compliance investigation by a multinational corporation could involve cross-border transmission of the employee’s personal information.
Based on current personal information protection laws, if the company explicitly includes this situation in its effective rules and regulations as necessary for implementing human resources management, it is generally understood that separate consent from employees is not required.
However, given that application of relevant laws remains in flux, the company is recommended to inform the relevant employee and secure separate consent before cross-border transmission of data.
Based on the results of the investigation, the company may take corrective measures based on its rules and regulations, and impose appropriate disciplinary measures on the implicated employee.
If the employee is a senior executive who derived personal income or caused the company to incur an economic loss through conflicts of interest relationships, the company may additionally consider instituting legal action for harm to the company’s interests pursuant to the Company Law, demanding that the employee compensate for the loss or transfer his or her illegal income to the company.
The company needs to pay attention to establishing strict internal norms in advance for product and service procurement, and sale pricing authority and supplier selection, so the same can serve as a sound basis for substantiating violations of regulations by employees and holding them accountable.
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作者介绍
刘琦律师毕业于华东政法大学和德国法兰克福大学，分别获得法学学士和法学硕士学位，之后曾在耶鲁大学短期进修美国法。刘律师2006年获得中华人民共和国律师资格。
刘律师具有超过15年的法律从业经验，主要业务领域为劳动法和公司法。刘律师拥有丰富的涉外法律服务经验。她服务的客户覆盖石油化工、机械制造、医疗器械、食品、酒店、时装等各行各业，就规模而言，其中既有中小型外商投资企业，也包括多家世界500强跨国巨头。刘律师曾参与多家跨国公司在华企业员工遣散、安置及转移项目。刘律师同时擅长为跨国企业提供高质量的人力资源法律服务，包括起草和修订雇佣相关的法律文件，协助高管解雇谈判，以及提供人力资源合规、员工安置及遣散、员工股权激励、外国人在华就业和居留和劳动争议解决、企业全球用工合规等方面的法律服务。她严谨、负责、务实而高效的工作风格受到其欧美客户的高度评价及认可。
刘律师2019年1月加入竞天公诚之前，曾在北京斐石（上海）律师事务所担任合伙人，并曾在美国贝克·麦坚时国际律师事务所、德国百达国际律师事务所等大型国际、国内律师事务所工作十余年。刘律师多次举办劳动法研讨会，且在《German Chamber Ticker》、威科、律商等多家法律媒体发表劳动法主题的中文和英文文章。刘律师被世界知名法律媒体Who’s Who Legal评选为2020年度中国劳动法领域领先律师，并被Asian Legal Business评选为“2021 ALB China十五佳女律师”，同时入选《商法》（China Business Law Journal）公布的“The A-List法律精英2022”名册（The A-List 2022）。
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连煜雄律师毕业于中南财经政法大学和厦门大学，分别获得法学学士和法学硕士学位。连律师的主要业务领域为劳动法和公司法。
连律师为包括汽车、机械制造、食品饮料和特许经营在内的各行业的客户提供法律服务。连律师曾在德国百达国际律师事务所、瑞典维格律师事务所和北京斐石（上海）律师事务所等大型国际、国内律师事务所工作超过十年以上，还曾担任麦当劳中国总部的法律顾问。
连律师擅长为各类内外资企业提供高质量的人力资源法律服务，包括日常法律咨询，法律风险评估，提供合规整体方案，审查、起草和修改劳动合同、规章制度及其他劳动法律文件，处理外国人在华就业和居留的相关事宜，企业全球用工合规，为客户及其员工提供培训服务，设计员工安置方案，提供员工股权激励、高管解雇/离职和劳动争议等方面的法律服务。
连煜雄律师历史文章  
  1. 刑事与合规系列（四）| 侵犯商业秘密行政举报路径刍议——从代理客户成功追责的一起典型案例谈起
  2. 中国企业建立ESG劳动用工合规体系的实操建议
  3. How companies should establish an ESG labour compliance system
  4. 企业如何开展人力资源合规体检？
  5. How enterprises should conduct HR compliance self-inspection
  6. 用人单位应对新《妇女权益保障法》之合规建议
  7. 解雇违纪高管行动方案的设计与执行
  8. Effecting strategic dismissals of senior management
  9. 因客观情况发生重大变化而解雇员工的传统困局和破解方向——聚焦上海地区近年司法实践
  10. 中国企业ESG劳动用工合规问题探讨
  11. Labour-related ESG compliance in China
  12. 用人单位在虚假报销劳动争议中的举证和应对
  13. Employer’s burden of proof in false reimbursement disputes
  14. 用人单位在反职场性骚扰中的合规治理
  15. Employer compliance governance in workplace
  16. 《个人信息保护法》对企业用工管理的影响与合规建议
  17. Impact of personal information protection law on enterprise
  18. 居家办公涉及的常见用工法律问题与解答
  19. 用人单位如何应对职场中的性骚扰
  20. 如何认定劳动争议案件中的高级管理人员？
  21. Identifying senior management in labour disputes
  22. Employee placement in early dissolution of enterprises
  23. 公司提前解散关键法律问题解答
  24. 疫情影响下企业的灵活用工和员工安置
  25. Key Employment Issues amid COVID-19
  26. Review of Key Updates to Employment Laws and Policies in 2019
  27. 2019年劳动法领域重点立法与政策变化回顾
  28. 关于“三期员工”的问与答 Q&A About “Employee Undergoing Three Periods”
  29. 关于“三期”员工的问与答——从上海地区的规定和实践出发
  30. Employment Issues in China M&A Deals 中国并购交易中的劳动法问题
  31. Compliance Issues on Employees' Personal Information
  32. 收集和使用员工个人信息合规问题分析（下篇）
  33. 收集和使用员工个人信息合规问题分析（上篇）
  34. 从劳动法视角看“996工作制”
  35. Directors and Senior Management's Non-Compete Obligations
  36. 董事与高级管理人员的法定竞业限制义务——用人单位救济障碍与应对策略分析
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