Quick links:
To what extent does the new law alter the relationship between employers and employees?
The new PRC labour law updates the existing Chinese labour law, which dates from 1995. These are alterations; one or two benefit the employer, and some (or most) the employee. It is, however, very relevant to note that the final version represents a compromise position on a number of issues that were debated during drafting. Several draft provisions, which had been criticised as too harsh on employers, have now been softened. Nevertheless, the law is still far more protective for employees than, for example, would be the case in Hong Kong. For example, in common with several other Asian countries, it’s very hard to terminate employment in China. This general position however, pre-existed, and the principle has not been changed by the new law.
Does the new law include any unusual provisions that corporate legal departments should pay particular attention to?
The new law alters the previous law relating to fixed term contracts. Once the new law comes into effect, employees will only be able to offer their employees a maximum of two fixed term contracts. After that, they must either let the employee go or their employment contract will convert to an open-ended contract. Once an employee is engaged on an open-ended contract the avenue for natural expiry is gone and so it is extremely difficult to terminate their employment. I am not aware of any other jurisdiction where this type of conversion condition is part of a country’s employment laws.
The new law does not prescribe duration for each fixed term contract, so employers will have to decide how long is appropriate. In reality, this issue is likely to be determined more by market conditions rather than by the law.
At present, the market for talent is very competitive – especially in the cities. To ensure the ability to maintain maximum flexibility initially, it may be appropriate for employers to engage key employees for, say, a one-year fixed-term trial contact, followed by - for example - a second four-year agreement.
The new law also requires employers to consult with all employees, or an employee representative congress, on rules and regulations that have “a direct bearing on the immediate interests of the workers.” At this time, we are also not sure how this consultation process will work in practice. For example – must employers consult collectively, or individually? We suggest the former, but this is yet to be confirmed.
There is also no guidance on what “consultation” means, and what happens if the employees or labour unions disagree with the company’s proposed rules or regulations. Local employment bureaus will have to publish implementation guidelines before employers can be sure what these new requirements mean in practice.
Overall, what is your impression of the new law?
Many aspects of the new law are vague, and will require the publication of additional guidance notes before their implications become clear.
For example, the new law reinforces a pre-existing rule in relation to restrictive covenants. It states that, if an employer wishes to enforce restrictive covenants, the employee must be paid. But the new law (still) doesn’t say how much the employer should pay. As a result, companies will have to guess what an appropriate amount is, and hope that the tribunal will uphold that decision.
^Top
|
