CHINA Law and Practice Contributed by: Yang Cheng, Songshan Liu, Yan Yu and Weina Wang, Lantai Law Firm
control, which in practice makes internal fact-finding indispensable. Permitted but non-mandatory investigations are primarily grounded in the employer’s management authority. Although labour law does not expressly require investigations in all cases, employers must conduct adequate fact-finding to substantiate seri - ous misconduct, gross negligence or corruption before imposing disciplinary measures or unilateral termination. Employers may also investigate sus - pected breaches of internal rules, conflicts of inter - est, trade secret leakage or unfair competition in order to determine appropriate employment or compliance responses. All internal investigations are subject to general legal constraints, including personal information protection, non-discrimination requirements and, where applica - ble, democratic management and trade union supervi - sion. Failure to conduct appropriate fact-finding or to observe these constraints may expose employers to PRC law does not impose a uniform obligation on employers to establish a specific internal reporting or whistle-blowing channel. However, taken as a whole, employment and trade union law expect employers to provide effective and accessible means for employees to raise concerns and report misconduct. procedural and compliance risks. 1.3 Communication Channels This expectation is reflected in requirements for employee participation, democratic management and trade union supervision, as well as in the statu - tory right of individuals to report labour law violations. Although these rules do not mandate a particular reporting mechanism, they presuppose the existence of internal channels through which concerns can be raised and addressed in a timely manner. In regulated areas such as labour supervision and work safety, statutory reporting rights to authorities further reinforce this expectation by encouraging ear - ly internal identification and handling of risks, even though the reporting obligations themselves are pri - marily external.
PRC law generally permits anonymous reporting and does not allow reports to be rejected solely because they are anonymous. While employers are not univer - sally required to provide anonymous internal chan - nels, accommodating both anonymous and named reports is widely regarded as good practice, particu - larly in sensitive matters involving power imbalance or personal rights. 1.4 Responsibility PRC law does not prescribe who must be responsi - ble for conducting an HR internal investigation. The allocation of responsibility is primarily a matter of cor - porate autonomy and is usually determined by the employer’s internal governance, compliance or audit framework. There is no legal requirement for trade unions or employee representatives to lead investiga - tions, nor is there a general requirement that investiga - tors be independent of the respondent’s reporting line. Although labour authorities have supervisory powers, such external oversight does not replace the employ - er’s own responsibility to investigate internal matters. Regulatory supervision presupposes that employers are able to conduct internal investigations in a profes - sional and documented manner. In practice, investigation leadership is risk-driven. Routine misconduct matters are commonly handled by HR, legal or compliance teams; cases involving financial misconduct, asset risks or trade secrets are often led by internal audit functions; and matters involving senior management or heightened regula - tory or reputational risk are frequently handled by board-level committees or external professionals. Employers may engage external counsel at any stage of an investigation, and often do so to enhance pro - cedural compliance, confidentiality and overall risk control. 1.5 Obligation to Carry Out an HR Internal Investigation Under PRC law, employers are required to conduct HR internal investigations in certain circumstances and may not remain passive.
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