With the increased number and complexity of labour disputes
arising in China, the current regulations for dispute
resolution have been considered unsuitable. In an attempt to
remedy the situation The PRC Labour Disputes Mediation and
Arbitration Law (the "Law") was adopted by the
Standing Committee of the National People's Congress on
29 December 2007. The Law will come into force on 1 May 2008
and covers the following issues.
Pre-Requisite Arbitration And Voluntary
The Law places an emphasis on the use of voluntary
mediation, in order to manage the increased number of
labour disputes. It is worth noting that if an employer
fails to perform its obligations provided for in a
mediation agreement, the employee concerned may seek direct
recourse to the competent People's Court for the
issue of a payment order.
As per the existing regime, arbitration is a
pre-requisite to litigation.
Conditionally Final And Binding Arbitral
If any party disagrees with an arbitral award, it may
commence litigation within 15 days of the arbitral
decision, after which time the arbitral award will become
The Law introduces an exception to this rule, which
ensures that any arbitral awards arising from disputes over
the (i) payment of salaries, compensation or damages;
and/or (ii) performance of statutory obligations regarding
working time, rest and holidays or social insurance are
final at the time when they are made (subject to certain
conditions being satisfied). The purpose of this is to
prevent employers from commencing litigation as a means of
delaying or avoiding the performance of their arbitral
obligations in these limited circumstances.
Extended Scope Of Arbitrable Matters
The Law has extended the scope of arbitrable matters to
cover nearly all labour-related disputes. These
include disputes arising from (i) determining whether an
employee / employer relationship exists, and (ii) the
conclusion, modification or termination of an employment
Extended Arbitration Application Period
According to the current regulations, the arbitration
application period is 60 days from the date when the
applicant knew, or should have known, that his rights had
been infringed. The Law has extended this period to 1 year
from the same date.
Clearer Jurisdiction Of Labour Arbitration
The Law now clearly stipulates that the competent labour
arbitration committee shall be the one located either where
the labour contract is performed, or where the employer is
located. This clarifies the current regime, which
does not provide clear guidance on this matter.
Shorter Hearing And Award-Making Period
According to the Law, the competent arbitration
committee shall complete hearings and make arbitral awards
on relevant labour disputes within 60 days of the
acceptance of an arbitration application. This is a
reduction of 30 days from the current equivalent
Heavier Burden Of Proof On Employers
Taking into account the fact that most of the
evidentiary documents required in litigation involving
employers and employees are under the control of employers,
the Law provides that if an employer refuses to provide
such documents, the related fact(s) should be determined in
favour of employees.
No Charge Of Arbitration Fees
Under the new regime, arbitration fees will no longer be
charged. This will alleviate the economic burden that
employees face when trying to protect their interests,
thereby making it easier for arbitration to be
Overall, the amended Law represents a shift towards the
protection of employees. Foreign enterprises in China would
be wise to pay more attention to the statutory
labour-related obligations in order to avoid becoming
involved in unnecessary labour disputes with their
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