China: Updates of local judicial practice in labor disputes — highlights of Guiding Opinions of Anhui Provincial High Court on Certain Issues in Handling Labor Disputes

Last Updated: 8 May 2015
Article by Hu Ke and Pan Faluan

To hear labor dispute cases fairly and efficiently and to keep the trial criteria of labor dispute cases consistent, many local arbitral and judicial organizations have promulgated guiding opinions based on labor related laws, regulations, and judicial interpretations and with the consideration of local judicial practice. Anhui Provincial High People's Court ( "Anhui Provincial Court") promulgated the Guiding Opinions of Anhui Provincial High Court on Certain Issues in Handling Labor Disputes ("Guiding Opinions") on January 20th, 2015. The Guiding Opinions absorb some major opinions of national judicial interpretations of labor disputes and local guiding opinions of other municipalities and provinces, and also have some updates on current local judicial practices in handling labor disputes. A good command of these updates could help enterprises mitigate the risks in handling labor disputes. In this article, we will highlight and briefly discuss three main points of the Guiding Opinions.

1. Employee's claim for double salary will not be supported under particular situation

Article 82 of the Labor Contract Law provides that the employer must pay double salary to employees for failing to conclude a written employment contract. Some local labor dispute arbitration and judicial organizations have already formulated guidelines of judicial practice in this regard with a focus on the determination of the period during which the double salary is applicable and the limitation of actions.

The Guiding Opinions go further from the guidelines and clarify that in certain situations an employee's claim for double salary will not be supported. These particular situations include that where the employee has arranged to work for a new employer other than for personal reasons, and the new employer does not conclude a written employment contract with the employee during the period covered by the term of an employment contract with a former employer, the employee's claim for double salary against the new employer will not be supported.

In practicing human resource management, the transfer of an employee to another company is, in many cases, a position transfer between affiliated companies, or among transaction parties or cooperation parties under certain transaction or cooperation arrangements. If the transfer has been accepted by the employee, such an arrangement looks similar to an amendment to the original employment contract. Although the employer has changed, the new employer will be accepting and operating under the relevant rights and obligations under the unchanged provisions of an original employment contract. Under such conditions, even though a new employment contract has not been concluded, there is no actual damage to the employee's rights and interests, as relevant rights and obligations normally will be clearly addressed in documents like notice of transfer, order of transfer, and etc.

2. Determination of employee's losses for not paying social insurances contributions

Article 1 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (III) provides that where an employee claims for compensation for losses in social insurances benefits caused by the employer's failure to complete social insurances formalities for the employee and the social insurance agencies' inability to go through the formalities retroactively, such claim shall be accepted by the people's court. However, in practice, for some kinds of social insurance (e.g. endowment insurance) , it is quite difficult to determine the losses caused by not paying social insurance contributions for a certain period at the time of trial. This difficulty has caused inconsistence of judicial practice in handling this issue.

The Guiding Opinions provide specific measures in determining losses of social insurance benefits, which are: if the employee claims for compensation of losses, based on specific conditions of different kinds of social insurances, the losses can be determined either based on the payment standards or the actual losses in benefits. In addition, the Guiding Opinions further stipulate that if there is a local labor related policy providing specific compensation standards, such standards shall apply. Also, the court may entrust a social insurance agency to calculate the losses. In other words, if there is no local policy regarding compensation standards and the court decides not to engage a social insurance agency to do the calculation or it is not feasible to calculate the losses (for instance, the pension under endowment insurance needs to be determined and calculated based on various elements such as the social economic level of the year when the pension will be paid. If the employee is not eligible to receive the pension at the time of trial, it is not feasible for the social insurance agency to calculate the losses of pension benefit in the future), the court may use the payment standards to determine the losses.

In most cases, the payment amount of social insurances contributions is much lower than the actual losses of benefit. However, considering the technical difficulty in calculating and determining the actual loss, this provision demonstrates a compromise between the fairness of law and the difficulties in calculating the value of the damage.

3. Small claim procedure is applicable to labor dispute cases

Article 162 of Civil Procedure Law (revised, 2012) provides the procedure for small claims in civil proceedings, which applies to simple and small cases and the first instance judgment is the final judgment under such procedure. In judicial practice, the small claim procedure has already been used in labor disputes by the courts of some cities. The Guiding Opinions firstly clarify that the small claim procedure is applicable for handling labor disputes with formal judicial guidelines.

Article 30 of the Guiding Opinions specifies that the small claim procedure applies to two kinds of labor dispute cases: (i) where the employee is not satisfied with the arbitral award which falls within the scope of Article 47 of the Labor Dispute Meditation and Arbitration Law, and the labor relationship is clear; (ii) the dispute is with regard to the amount or payment time of remuneration, medical treatment expenses for work-related injury, severance pay, or compensation for wrongful termination. If the amount in dispute of the foregoing kinds of cases is not higher than 30% of the annual average salary of employees in the previous year of Anhui province, the small claim procedure may apply.

Article 47 of the Labor Dispute Meditation and Arbitration Law stipulates that for labor disputes regarding application of certain labor standards, or disputes on remuneration, medical treatment expenses for work-related injury, severance pay, or compensation for wrongful termination, and the amount in dispute is not higher than twelve times of the local minimum monthly salary, the arbitral award of such cases is a final award, and the employer does not have right to file a lawsuit. If the employee is not satisfied with a final arbitral award and files a lawsuit with the court, according to the Guiding Opinions, the small claim procedure may apply. For labor disputes where a final award is not applicable, it is still possible the small claim procedure will apply (e.g. if the amount in dispute is higher than twelve times the local minimum monthly salary but lower than 30% of the annual average salary of the province). Under the small claim procedure, the first instance judgment will become effective immediately and both parties to the labor dispute may not appeal to the intermediate court.

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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