On February 1, 2013, the Interpretation of Several Issues on the
Application of Laws of Employment Disputes IV (the
"Interpretation ") was promuulgated by the Supreme Court
and implemented on the same day pursuant to Labor Law of
People's Republic of China, Employment Contract Law of
People's Republic of China, and Employment Dispute Mediation
and Arbitration Law of People's Republic of China and other
relevant laws, regulations and civil practices. We hereby
illustrate and analyze the Interpretation as follows for
pharmaceutical companies' information when dealing with
employment issues, especially for the employment dispute,
Stipulate the Power of Judicial Review
The Interpretation stipulates that where a party files a lawsuit
of employment dispute as a result of rejection by Labor and
Personnel Arbitration Committee on the ground of no jurisdiction,
the court shall make its own decision on whether this Committee has
subject matter jurisdiction over this case upon examination and
shall inform the party in accordance with different situations
noted in the Interpretation.
The Interpretation clarifies that the type of effectiveness of
arbitration is determined by its decision in the award. If not
clearly stated, the case filed by the employer to the lowest level
of court should be dealt in accordance with the different
situations set out in the Interpretation.
Express the Judicial Power of Confirmation of Mediation
The Interpretation stipulates that when parties make a
conciliation statement on the payment obligation at a Mediation
Committee, if necessary, they may jointly apply for a judicial
confirmation at the lowest level of court where that mediation
KWM Note: The Mediation Committee is a governmental agency for
Judicial Administration. Whether this article could be interpreted
broadly to the extent of non-governmental mediation committees is
not clear. Literally, the scope of this judicial power of
confirmation is limited.
Confirm Seniority at the Former Company
The worker's request to combine the former employment term
to the new one for a final account of severance shall be granted by
the court, if the worker, due to non-personal reasons (listed in
the Interpretation), is transferred to the new company from the
former one who has not paid the severance for his/her leave, and
the new employment contract terminates or is terminated by the
KWM Note: In a circumstance that the counterparty of the
employment contract is changed from the former company to a new one
whilst the worker maintains the same position at the same place of
work, the old format as signing up a new employment contract after
rescinding the first one may not be applicable. The acquiring
company should request the merged unit to pay the severance to
avoid potential legal risks in terms of the prescribed
Clarify the Roles of Compensation of NCC and Default
The Interpretation clarifies that when parties have a mutual
agreed Non-Competition Covenant ("NCC") without a
specific amount of compensation, a worker's demand on that
compensation paid monthly by the employer shall be granted, up to
30 percent of monthly average salary of previous twelve months
before his termination.
When parties have both NCC and a fixed amount of compensation,
the worker's claim requesting the revocation of this covenant
shall be granted if his compensation has not been paid for three
months at employer's fault.
Furthermore, the Interpretation states that the employer's
request to revoke NCC shall be granted by the court during the
performing period; a worker's petition to receive
three-extra-month compensations shall be granted as well if the
covenant is revoked.
KWM Note: The requirement of 30 percent of monthly average
salary prescribed in the Interpretation is not applicable to
certain areas, such as Shenzhen, where its local protection to
employees is higher than the standard set out here, up to 50
percent of monthly average salary.
Stipulate the Effectiveness of Factual
The Interpretation stipulates that if a verbal modification of
an existing employment contract is generated and has been performed
as a matter of fact for more than one month, and it is not against
any laws, administrative regulations, state policies or public
moral standards, neither party's petition shall be granted as
claiming the modification is void as a result of failure to it put
KWM Note: The Interpretation confirms the effectiveness of
factual change to a verbal modification of an employment contract,
which set a higher requirement of the preservation of non-written
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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