Tips for processing personal data in background checks in China

Understanding local labour regulations is key

Tips for processing personal data in background checks in China

Chinese employment and labor law is rather opaque regarding employer background checks on candidates/employees. The most recited legal ground for this is the last sentence of Article 8 of the Labor Contract Law of the People’s Republic of China (LCL), which sets out that the employer has the right to acquire the basic information of the employee that directly relates to the employment contract, and the employee is obliged to provide this truthfully.

However, Article 8 does not provide any detailed guidance on implementing a background check; in particular, what approaches might be viewed as intrusive and cross into the gray area of Chinese law. In this connection, in the past few years, most multinational corporations in China relied on a general authorization from the candidate to be safe, before carrying out a background check.

With the effectiveness of the Personal Information Protection Law of the PRC (PIPL) from November 2021, the practice of using a general authorization had changed, as the PIPL required a separate authorization (or separate consent) when processing sensitive personal data. As a result, both a general authorization and separate authorization (or separate consent) need to be produced before an employer may carry out a background check on candidates/employees in China.

Common scope of background checks

Generally, background checks for hiring purposes (excluding those for special purposes, such as compliance investigations) usually focus mainly on verifying the information provided by the job candidate on an application form or resume, rather than exploring unrevealed information about the candidate.

Usually, we recommend that our clients adopt a standard template job application form, rather than a freestyle resume provided by the candidate which may lack or even hide some key information related to the position.

In addition, for efficiency, when adopting such a template, the abovementioned general authorization and separate authorization (consent) with key information/reminders can be included. So in the job application form, the employer reminds the candidate that the information provided (including sensitive personal information - which is identified as such) can be the information that will be utilized in the follow-up background check. In this way, the employer can notify and collect the candidate’s general authorization and separate authorization (or separate consent) therein in one time.

Determining categories of information under local labor regulations

Since the LCL is silent on the categories of information that the employer has a right to know, the employer may first seek guidance from the local labor regulations. For instance, under Beijing local regulations, an employer is entitled to know (i) information stated in ID card; (ii) education and training history; (iii) employment status; (iv) career history; (v) skills and qualifications.

Determining categories of information by purposes

For information beyond the explicit scope set out in local regulations, the employer must carefully define whether such information is directly relevant to the position.

A very important rule has been introduced in this respect: It is the purpose that determines whether certain pertinent information may be restricted, i.e. it might be restricted for one purpose, but not another. For example, marital status and whether the candidate plans on starting a family may not be asked in connection with a normal white-collar position, as such information may easily be used as a means to discriminate. But if the position involved working with radioactive or dangerous chemical materials, the employer may need to inquire about family status and reveal potential hazards to the candidate.

Thus, for personal information (including sensitive personal data) matters, the law does not regulate the data that can be collected but the purpose behind the collection. In this connection, each piece of information/data collected or processed by the employer should have a specific and explicit purpose, and the employer may not collect any information/data without such justifiable purpose. With this in mind, the employer should carefully examine whether the information/data is truly necessary at the job application stage.

The information/data rules in place since the effectiveness of the PIPL enable employers to have more flexibility in determining employment matters, but it also imposed a new, heavier burden at the same time, requiring employers to abandon their outmoded data preferences in order to address today’s new challenges.

Several types of sensitive data to note

Information about family members. Many employers ask job candidates to provide information on the job application form regarding family members (e.g. name, status within the family, domicile, employer of the particular family member, etc.). However, they have no justifiable ground for such information when requiring so. Some employers have explained that they follow this practice because they learned the same from other employers but they don’t have an objective reason for the time being, or they simply feel this information would be useful after the candidate has been hired for “just in case.”

Such explanations are not in accordance with PRC law (either the LCL or the PIPL), as the employer has failed to justify the purpose of obtaining pertinent information that is directly related to the position. The fact that other employers are doing the same cannot be a legal excuse for also doing so. If the purpose is “for future needs,” the employer can request this information during the onboarding process but not during the job application process.

If a key position is involved that has additional compliance requirements for a potential conflict or anti-bribery check, the employer will have a justifiable ground. Therefore, instead of inquiring about such information directly, we usually advise our clients to specify their compliance concerns in connection with family members in the job application form and they to ask candidate whether he/she would fall under such concerns (e.g. the self-declaration mechanism). If yes, the employer will need additional information; otherwise, the candidate simply promises that there is no potential conflict in this respect for applying and taking the position.

Criminal records. Some employers might require the candidate to produce a certificate of no criminal record from a local authority before being onboarded.

Though the law is not clear on this, the labor authority has a negative opinion on this practice, as they believe this is also a kind of discrimination (but not a statutory category under the law), and this may cause unforeseeable effects on rehabilitating specific groups of people. Some high-level police managerial institutions have also instructed police authorities in district/block level not to produce certificates of no criminal record for employment purpose, except for statutory scenarios.

According to Article 100 of the Criminal Law of the PRC, when applying for a job, the candidate has an obligation to reveal any criminal convictions. As such, instead of directly requiring a certificate, we usually advise our clients to simply ask the candidate directly if he/she has committed any criminal act.

However, if the candidate lies, at this stage, the employer may lack the legal channel to check unless there was a public criminal judgment involving the candidate that can be searched from the court website.

Reference firms and their products

Many multinational corporations in China would prefer to entrust reference firms to conduct background checks on their behalf. In such case, the candidate will also need to sign an authorization paper covering the general authorization and a separate authorization (or separate consent).

According to articles 44, 45 and 46 of the PIPL, candidates should have the right to know the details regarding the outcome of such entrusted background checks, and they may even have the right to require the reference firm to supplement or correct information that was not correct or was insufficiently precise in the report. However, in practice, it is very rare that employers and reference firms share their reports with candidates.

Before the effectiveness of the PIPL, we handled some litigations against previous employers that arose from background checks, where the job candidate was claiming defamation—that their previous employers had provided retaliatory or untrue comments about the candidate’s credibility or job performance. In the past, such cases would typically be settled under judge’s mediation, mainly because the employees lacked evidence (in particular, the employees did not have access to the background check reports). However, the results may be different in the PIPL era, where an employee can first request a copy of the background check report, using the PIPL as legal justification, and then proceed with the defamation suit.

Shane Luo is Vice Director of Dentons China Employment and Labor Practice Commission in Shanghai. Pascal Jiang is a partner at Dentons in Shanghai.

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