Author: Lawyer Liu Honglin, Man Kun Blockchain

Last week, Bybit carried out a comprehensive strategic adjustment plan and made new progress in opening registration for Chinese users. According to Wu Shuo's report, 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 greater risks (for specific details, please refer to Lawyer Honglin's previous article "Bybit, which opened registration for mainland China, betrayed its mainland employees"). Currently, Bybit's domestic employees are mainly technical staff, and for employees who are unwilling to resign, layoffs may be carried out gradually with compensation. Previously, other exchanges and cryptocurrency institutions have also required all employees to relocate for collective office overseas, otherwise they will be laid off.

The news is not lengthy, but it contains a lot of information. At least two key points: 1. As a virtual currency exchange, it still has many employees in mainland China; 2. It seems that Bybit is determined to enter the mainland Chinese market this time, and once the bow is drawn, there is no turning back. The management is also aware of the risk management involved in this strategic shift.

Similar operations to Bybit are actually quite common in the industry. Due to risk considerations, most Web3 projects in China usually register their projects overseas, and core executives often reside overseas year-round, while the actual development and technology work is carried out by domestic personnel, adopting a distributed office model in mainland China. This includes, but is not limited to, projects that have issued coins and various tiers of cryptocurrency exchanges. In terms of recruitment, many projects in China will recruit relevant personnel and have the employees work overseas for a period of time, such as in Dubai, Southeast Asia, etc., to familiarize themselves with the project and colleagues before returning to work in China. In terms of salary payment, many blockchain companies choose to use virtual currency for payment. This industry-specific cross-border employment and payment method has created many legal risks.

Are Bybit's Chinese employees protected by labor law?

According to China's laws, 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, labor service relations, and contracting relations.

According to Article 2 of China's "Labor Contract Law," "Enterprises, individual economic organizations, private non-enterprise units, and other organizations (hereinafter referred to as employers) within the territory of the People's Republic of China that establish labor relations with workers, conclude, perform, modify, terminate, or rescind labor contracts shall be governed by this Law."

It can be seen that the prerequisite for establishing labor relations is that both parties have the qualifications as employers. Otherwise, the labor contract may be invalid. For employees, only enterprises registered in China and holding a business license in accordance with the law belong to the category of employers in the sense of China's labor law, and only they can establish labor relations. Otherwise, even if a written "labor contract" is signed, it is highly likely that it cannot be subject to China's labor laws and regulations.

To address the above issues, many project parties choose to cooperate with nominal employer companies, and sign labor contracts between domestic companies and employees, mainly for the purpose of being responsible for daily social security payments and partial salary payments. This is a practical need for some employees who need to settle down locally, as proof of social security, provident fund, or bank statements are required for buying cars, houses, bank loans, children's education, medical treatment, etc.

How much money will employees receive if they are laid off?

According to Article 46 of the "Labor Contract Law," companies should pay economic compensation to workers in the following situations:

• 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 because the employer fails to provide labor protection or working conditions as agreed in the labor contract;
• The employer fails to pay labor remuneration in full and on time, and the worker terminates the labor contract;
• The employer's rules and regulations violate laws and regulations, infringing on the rights and interests of the worker, and the worker terminates the labor contract;
• The employer needs to terminate the labor contract due to merger or division;
• The worker is incompetent, and after training or adjusting the job position, still cannot perform the work, and the employer terminates the labor contract;
• Upon expiration of the labor contract, unless the employer maintains or improves the conditions agreed in the labor contract for renewing the labor contract, the worker does not agree to renew the contract;
• Other circumstances as stipulated by laws and administrative regulations.

According to Article 47 of the "Labor Contract Law," economic compensation should be paid to workers based on the number of years worked at the company, with one month's salary paid for each full year worked. For periods of over six months but less than a year, it is calculated as one year; for periods of less than six months, half a month's salary is paid as economic compensation.

Let's take an example. Assuming 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 years of service at the company is 4 years, as 3 years and 8 months exceeds half a year, so it is calculated as 4 years. Mr. Li should receive economic compensation of: 10,000 RMB × 4 = 40,000 RMB. In addition, if Bybit fails to notify Mr. Li of this matter 30 days in advance, according to Article 40 of the "Labor Contract Law," an additional month's salary needs to be paid.

It should be noted that the monthly salary here refers to the average salary received by the worker in the twelve months before the termination or rescission of the labor contract. If the worker's monthly salary is higher than three times the average monthly salary of workers announced by the municipal people's government of the municipality directly under the Central Government or the city where the district is located, the standard for paying economic compensation is three times the average monthly salary of workers, and the maximum period for paying economic compensation does not exceed twelve years.

If economic compensation is considered a peaceful way to part ways, there is also a method for settling accounts in a breakdown situation, which is economic compensation.

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

• The employer fails to negotiate the termination of the labor contract with the worker in accordance with the provisions of 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 consider another example. Assuming 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, Mr. Wang should receive economic compensation of: 10,000 RMB × 2 × 5 = 100,000 RMB.

However, the problem here is that regardless of whether it is economic compensation or economic compensation, according to the legal provisions, the calculation standard is the RMB amount agreed upon in the labor contract, as RMB is the recognized legal currency in China. Unfortunately, in the Web3 industry, salaries are mostly paid in USDT or other virtual currencies. Even if there are signing parties for labor contracts in China, it is only the nominal minimum wage standard or partial RMB salary. The situation is even worse in some Web3 projects, where contracts are not even signed with domestic employees, and the monthly operation is simply "send the address, send the money." For employees who are unwilling to resign, proving their employment relationship is a big question mark.

In this awkward situation, workers obviously cannot enjoy the "resign and get rich" treatment as seen in other major internet companies in China. For employees who have not been able to negotiate with HR during the resignation negotiation, going to labor arbitration or court with the signed contract with the domestic company, it is very difficult to claim compensation based on their actual monthly take-home salary.

This "enjoying U while employed, not so enjoyable when resigning" labor-capital situation is a common pain point for Web3 practitioners. It seems great to receive salaries in virtual currency most of the time, but when resigning, it seems like they have suffered a loss. Therefore, as a Web3 practitioner, when joining a company and signing a contract, special attention should be paid to the salary payment method and resignation compensation clauses, to ensure that their legal rights as employees are maximally protected.

Lawyer Man Kun's Advice

For Web3 companies like Bybit, if they choose to lay off employees in China due to policy reasons or company strategic adjustments, it may not necessarily be a happy thing for employees who are unwilling to leave the embrace of their motherland. After all, how much money they can give to employees cannot be fully based on the provisions of China's labor law, but more depends on the content of the signed contract between them and the employees, as well as the company's proactive performance. For other friends who want to join Web3 companies, it is recommended to consult professional lawyers and review the relevant contract content before joining, to ensure that their legal rights as employees are safeguarded.

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