How much can the Chinese employees laid off by Bybit receive?

Author: Lawyer Liu Honglin, Mankun Blockchain

Last week, Bybit conducted a comprehensive strategic adjustment plan and made new progress regarding the registration of Chinese users. According to reports from Wu Shuo, Bybit plans to relocate its employees to Malaysia and Dubai and is considering closing its offices in Shanghai, Shenzhen, and other domestic locations. The main reason is that after opening registration for Chinese users, domestic employees will bear significant risks (for specific details, please refer to Lawyer Honglin's previous article "Bybit Opening Registration for Mainland China, Betraying Mainland Employees"). Currently, Bybit's domestic employees are mainly technical staff, and for those unwilling to leave, layoffs may occur gradually with compensation. Previously, other exchanges and cryptocurrency institutions have also required all employees to relocate overseas for collective work, or they would face layoffs.

The news is brief but contains substantial information. At least two points can be noted: 1. As a virtual currency exchange, it still has a considerable number of employees in mainland China; 2. It seems Bybit is determined to enter the mainland Chinese market, with no turning back, and the management is aware of the risks involved in this strategic shift.

Similar operations to Bybit's are quite common in the industry. For risk considerations, most domestic Web3 project parties usually register their projects abroad, and core executives often reside overseas, while the actual development and technical work are handled by domestic personnel, adopting a distributed office model in mainland China. This includes, but is not limited to, projects that have issued tokens and various tiers of virtual currency exchanges. In recruitment, many project parties hire relevant personnel in mainland China but require employees to work abroad for a period, such as in Dubai or Southeast Asia, to familiarize themselves with the project and colleagues before returning to continue working domestically. When it comes to salary payments, many blockchain companies choose to use virtual currencies for compensation. This industry-specific cross-border employment and payment method carries many legal risks.

Are Bybit's Chinese Employees Protected by Labor Law?

According to our country's legal provisions, combined with the common employment models in the Web3 industry, there may be three types of relationships between domestic employees and project parties: labor relations, service relations, and contracting relations.

According to Article 2 of the Labor Contract Law of our country, "Organizations such as enterprises, individual economic organizations, and privately-run non-enterprise units within the territory of the People's Republic of China (hereinafter referred to as the employer) establish labor relations with workers, and the signing, performance, modification, termination, or dissolution of labor contracts shall be governed by this law."

It can be seen that the premise for establishing a labor relationship is that both parties have the qualification of an employer; otherwise, the labor contract may be invalid. For employees, only enterprises that are legally registered and have obtained a business license within China qualify as employers in the sense of Chinese labor law, and can establish labor relations with them. Otherwise, even if a written "Labor Contract" is signed, it is very likely that Chinese labor laws and regulations will not apply.

To address the above issues, many project parties choose to cooperate with nominal employer companies, signing labor contracts between domestic companies and employees, primarily responsible for daily social insurance contributions and part of the salary payments. This is a basic necessity for employees who need to settle locally, as buying a car, a house, obtaining bank loans, enrolling children in school, and seeking medical treatment all require social security and housing fund proof or bank statements.

How Much Compensation Will Employees Receive if Laid Off?

According to Article 46 of the Labor Contract Law, a company must pay economic compensation to workers under the following circumstances:

• The employer proposes to terminate the labor contract and reaches an agreement with the worker to terminate the labor contract;
• The worker terminates the labor contract due to the employer's failure to provide labor protection or labor conditions as agreed in the labor contract;
• The employer fails to pay labor remuneration in a timely and sufficient manner, and the worker terminates the labor contract;
• The employer's rules and regulations violate laws and regulations, harming the rights and interests of the worker, leading the worker to terminate the labor contract;
• The employer needs to terminate the labor contract due to merger or division;
• The worker is incompetent for the job, and after training or adjustment of the job position, still cannot perform the job, leading the employer to terminate the labor contract;
• The labor contract expires, unless the employer maintains or improves the conditions agreed in the labor contract for renewal, and the worker does not agree to renew;
• Other circumstances as stipulated by laws and administrative regulations.

According to Article 47 of the Labor Contract Law, economic compensation is paid to the worker based on the length of service in the unit, at the rate of one month's salary for each full year of service. For service periods exceeding six months but less than one year, it is calculated as one year; for less than six months, economic compensation of half a month's salary is paid.

For example, suppose Mr. Li has worked at Bybit for 3 years and 8 months, with a monthly salary of 10,000 RMB. According to Article 47 of the Labor Contract Law, Mr. Li's length of service in the company is calculated as 4 years, since 3 years and 8 months exceeds six months. The economic compensation Mr. Li should receive is: 10,000 RMB × 4 = 40,000 RMB. Additionally, if Bybit fails to notify Mr. Li of this matter 30 days in advance, according to Article 40 of the Labor Contract Law, they must also pay an additional month's salary.

It should be noted that the monthly salary here refers to the average salary of the worker in the twelve months prior to the termination or dissolution of the labor contract. If the worker's monthly salary exceeds three times the average monthly salary of employees in the previous year published by the local government at the municipal level where the employer is located, the standard for economic compensation will be based on three times the average monthly salary of employees, and the maximum duration for which economic compensation is paid shall not exceed twelve years.

If economic compensation can be seen as a peaceful separation solution, there is also a method for settling accounts in a breakdown of negotiations, which is economic damages.

According to Article 87 of the Labor Contract Law, if the employer violates the provisions of this law to terminate or dissolve the labor contract, they shall pay the worker compensation at twice the standard of economic compensation. Applicable situations include:

• The employer did not reach an agreement with the worker to terminate the labor contract in accordance with the Labor Contract Law;
• The employer illegally terminates the labor contract in violation of the labor contract or legal provisions;
• The employer forcibly terminates the labor contract without paying economic compensation as required by law.

Let’s look at another example. Suppose Mr. Wang has worked at the company for five years, with a monthly salary of 10,000 RMB. If the employer illegally terminates the labor contract, the economic compensation Mr. Wang should receive is: 10,000 RMB × 2 × 5 = 100,000 RMB.

However, the issue here is that whether it is economic compensation or economic damages, according to legal provisions, the calculation standard is based on the amount in RMB agreed upon in the labor contract between both parties, as RMB is the only legal currency recognized by China. Since the Chinese government clearly stated in the 2013 "Notice on Preventing Bitcoin Risks" that virtual currencies are not issued by monetary authorities, do not possess monetary attributes such as legal tender and compulsion, and are not true currencies in the real sense.

Unfortunately, in the Web3 industry, salaries are most often paid in virtual currencies such as USDT. Even if there are domestic labor contract signing entities, they only represent nominal minimum wage standards or partial RMB salaries. In some cases, it is even worse; some Web3 project parties do not sign contracts with domestic employees at all, and the monthly operation is simply "give the address, transfer the money." For employees unwilling to leave, proving their employment relationship raises a significant question mark.

In this awkward situation, workers clearly cannot enjoy the "getting rich upon resignation" treatment that employees at other major internet companies in China experience. If employees fail to negotiate satisfactorily with HR during resignation discussions and have to take the signed documents with domestic companies to labor arbitration or court, the amount they can claim is unlikely to reflect their actual monthly income.

This "enjoying U while employed, but not so pleasant when claiming compensation upon resignation" labor-capital situation is a common pain point for Web3 practitioners. While receiving salaries in virtual currencies seems enjoyable, discovering significant losses upon resignation can be disheartening. Therefore, as Web3 practitioners, when joining a company and signing contracts, they should pay special attention to the salary payment methods and resignation compensation clauses to ensure their rights are maximally protected.

Mankun Lawyer's Advice

For Web3 companies like Bybit, if they choose to actively lay off employees domestically due to policy reasons or company strategic adjustments, it may not be a happy event for employees unwilling to leave their motherland. After all, how much they can offer employees cannot be entirely based on the provisions of Chinese labor law, but rather depends more on the content of their contractual terms with employees and the company's willingness to fulfill those terms. For others looking to join Web3 companies, it is advisable to consult a professional lawyer before joining to review relevant contract content and protect their legal rights as workers.