Much ink has been spilt over the implementation of China's Labour Contract Law (LCL) since its passage in 2008. The law, which raised workers' awareness of their rights, has brought along sweeping changes to the labour status in China. Now that the law has taken effect for two years, it is a good time to review its impact and development.

Signing of Contracts
The LCL set standards for various labour issues including the signing of labour contracts, use of temporary workers, termination of employment, etc. However, as found by a recent study released in May on the impact of the LCL, despite the fact that 60 percent of the interviewees had a contract at the time of interview, the number of workers who have signed valid labour contracts remains low, which reflects that a certain number of organisations are still not in compliance with the law.

Rise in Labour Disputes
Another impact seen is the sharp increase in individual and collective labour disputes. According to the study, in the year after China's Labor Contract Law took effect in early 2008, the number of labour disputes accepted by Chinese arbitration panels and courts nearly doubled. Therefore, the actual implementation of the LCL deserves more attention.

In view of the challenges brought by the LCL, China Labour Contract Law Forum, organised by China Talent Group, was held at Renaissance Harbour View Hotel in late May to explore critical issues in China with labour dispute case analysis.

Mr. Kevin Han, Chief Financial Officer, China Talent Group delivered his welcoming note at the forum. He said, “It is the first time we organise seminar in Hong Kong. Seeing that the LCL has posed tough challenges to employers and HR practitioners, and more organisations are investing in China, we hope to assist employers and HR practitioners in dealing with labour problems that caused by the LCL.”

Prof. Peng Guanghua, Deputy Director, The Institute for Labour Relations and Associate Professor, School of Labour and Human Resources, Renmin University of China mentioned the continuous increase of labour disputes in China and said, “The causes of the disputes are complicated. Whilst it is difficult to settle labour disputes, employers should strive to maintain good employment relationship for the prevention of any unpleasant incidents.”

“In fact, the enactment of the LCL aims to promote harmony, so it values the implementation of procedures, and hope to encourage communication between employers and labourers. To prevent labour disputes, integrity and communication is the key. Enterprises have to be impartial and transparent, with robust systems and policies in place that comply with the law. Remember, to treat your people well,” he continued.

Prevention is better than cure. Therefore, employers are suggested to learn more about previous cases and the law to prepare for any unpleasant happenings. Mr. Tony Jin, Director of Legal Affairs, China Talent Group shared a dispute case with the audience and conducted analysis afterwards.

The background of the case is as follows:
* Company A fired a departmental manager because of his poor work performance and appointed a new manager from members of the department.
* An employee from the department was discontent with the new arrangement and told the company's leadership that he would quit if the company really appointed that employee as the new manager.
* He requested the company to reply him in one week. At last, the company did not accommodate him and he really left the company.
* A few days later, the employee suddenly went to arbitration and requested compensation from the company for labour contract termination.

In this case, is resignation equal to automatic severance? Is a resignation letter necessary and in what form? What can the company do as it did not receive any resignation letters?

“When we refer to the law, we’ll see there isn't the concept 'automatic severance'. And we have to bear in mind that, the employee only talks about his resignation orally, without sending out any formal written documents, so the company can handle this as absence,” Mr. Jin explained.

Mr. Jin strongly suggests that employers should keep all the possible evidence to protect themselves. “Some companies may accept resignation in the form of email. In this case, you still have to print it out and ask the employee to sign on it to make it effective evidence. Still, I suggest better not using email or phone. If you are not familiar with the law, you' d better consult legal experts to ensure compliance.”

Despite the wave of challenges and problems facing enterprises in China, the LCL is believed to have a positive impact on stabilising the labour market, providing a stable supply of labor, and guaranteeing social stability and harmony in the long run. Employers are suggested to ensure compliance of the law for lower labour cost, and should be cautious in dealing with their labour matters.


Reference:
The Impact of China's Labour Contract Law on Workers, by International Labour Rights Forum, 12 May 2010.