Japan P&I Club, has issued an alert from the Chinese law firm Wang Jing & Co., which is attached the risks in the claims for injury, illness or death of Chinese seafarers expatriate.
These years, WJNCO has handled a number of cases arising from claims for injury, disease or death of Chinese seafarers sent overseas, mostly based on the law of the PRC, but unfortunately a sound system has not yet been established in China to fairly protect the seafarers and ship interests. Loopholes in the law are therefore found, exploited and enlarged, making shipowners exposed to more and more risks, liabilities and burdens.
Key findings
- Description adjustment of employment contracts: potential issues arising from not specifying the period of compensation for medical treatment.
- Risks of double claims.
- Additional liability due to inadequate social security arrangements.
Potential troubles due to unspecified period of medical attention
As informed, when suffering from dread diseases such as cancer, a seafarer will seek medical attention, possibly for an unexpectedly long period, which can put onerous burdens on the shoulder of shipowners, including reimbursement for medical expenses and sick pay (this is frequently seen in the seafarer cancer cases we’ve handled).
Although the Chinese labor law has quite clear provisions on the period of medical attention (dependent on the working years: for example, an employee with over-10-year seniority is entitled to a period of medical attention of 3 months if he has been working in the current company for less than 5 years), those provisions apply only when a labor contract defined under the PRC law exists, and do not cover service/employment contracts or tortious disputes, in which case the SEA and the relevant CBA should become the key to decide the period of medical attention. However, specified periods of medical attention are often absent in lots of SEAs and CBAs, and this obviously will pose great risks to shipowners in respect of their liabilities for the medical attention of sick seafarers (including reimbursement for medical expenses and sick pay).
Expanded risks of double claims
As foreign shipowners cannot sign labor contracts or labor dispatching contracts with Chinese seafarers, nor are they able to place Chinese social insurance for Chinese seafarers, in some cases, Chinese seafarers dispatched overseas to work for foreign shipowners will sign labor contracts with Chinese manning agents, and the latter will place social insurance for them. This leads to the result that when the seafarers suffer from work-related injuries, the manning agents will be held liable for work-related injury compensation under the labor contracts, but meanwhile, the seafarers may also seek for another compensation in tort from the foreign shipowners. This practice is not prohibited by Chinese courts, but even upheld. In other words, a seafarer is allowed to raise respective claims against both the foreign shipowners and the Chinese manning agents.
Additional liability arising from insufficient social insurance
Under the Chinese labor law, an employer shall pay social insurance premiums in full for its employees, and in case of insufficient payment which results in any employee obtaining less social insurance benefits, shall make up the difference. However, in practice, most seafarers are reluctant towards payment of social insurance premiums at their full wage level (as it will not only result in less wages actually received, but also will cause higher personal income tax to be paid); on the other hand, employers also tend to pay the social insurance at a lower wage level in order to lower its contribution.
As a result, the social insurance premiums for many expatriate seafarers, though paid, are in fact paid insufficiently, with a lower figure. When a work-related injury accident occurs to a seafarer, as some claim items under the work-related injury insurance, such as next-of-kin compensation, depend on the social insurance contribution base, the employer would be faced with the liability to compensate for the difference. In a case handled by us, the manning agent was sued for compensation for such a difference in the amount of nearly RMB 2 million.
