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.
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Pre-Requisite Arbitration And Voluntary
Mediation
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.
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Conditionally Final And Binding Arbitral
Awards
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 binding.
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.
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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 contract.
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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.
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Clearer Jurisdiction Of Labour Arbitration
Committee
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.
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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 regulation.
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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.
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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 commenced.
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 employees.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 07/04/2008.
