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China’s Labor Laws: Worry me or Worry me Not.

China employment lawyers

About a month ago, we did a post entitled, China’s New Labor Contract Law. Harmonized Out Of Existence? In that post, we (I say we here because some of what I was reporting was coming to me from co-blogger Steve Dickinson who is based in China) talked about how China’s local and provincial employment bureaus were giving out broad hints that they were not going to strictly enforce China’s labor laws, other than those related to preventing layoffs:

We have talked so much about the labor law because it applies to every business in China with an employee. Complying with the law is relatively easy and the penalties for failing to comply can be so harsh.

But last week, a long-time client of ours with a factory in Shandong Province (just outside Qingdao) told me of how a Chinese government employee had essentially told him not to worry so much about China’s labor contract law. The gist of the government employee’s statements to our client was that so long as this company did not lay off any of its approximately 250 Chinese employees, the government would look the other way regarding other labor law violations. My client and I agreed that it needed to remain in strict compliance with the labor laws because it had nothing in writing from this official, because this official does not control everything in the province or the country relating to labor laws, because violations of the labor laws can lead not only to problems with the government, but to employee lawsuits.

I have since talked with a couple other of our Shandong Province clients and they report no such conversations, but they do say they have “heard” that China’s labor laws surrounding everything but layoffs are being loosened

In a recent Danwei post, entitled China trade unions and social unrest in 2009, [link no longer exists], Peter Ford of the Christian Science Monitor (one of the best reporters in China) talked about hearing similar things:

I have heard, though not been able to confirm, that provincial governments have been quietly telling employers for several months that if they do not abide by the provisions of the Labor Contract Law they need not worry, and this seems perfectly plausible.

A lot of employers have been complaining for a year or so that the labor law, along with the rising value of the RMB until last July, was a major factor in making them uncompetitive.

That may be true of the low margin, low quality producers, and while the government clearly did not mind driving them out of business last year (so as to move China’s economy up the value chain) such firms do at least offer jobs while they are still in business, and jobs are going to be in short supply this year.

Actually, since we did the December post on this, our China employment lawyers have heard the same things from a couple more clients, one from Dalian and one from Tianjin. So what is a foreign company doing business in China to do in light of this? Should it all of a sudden start violating China’s labor laws in the hope of sliding by?

Our advice is to continue following China’s employment laws to the letter and we base this largely on two things. One, just because one government official says one particular government entity is going to be lax on enforcing China’s employment laws does not mean much. This one government official may believe in lax enforcement, but that does not mean all his or her cohorts do. Also, it does not mean Beijing does either. Two, one of the biggest risks of not complying with China’s employment laws is a private lawsuit by a disgruntled present or former employee. A local government may be able to bring about a decline in private lawsuits and more favorable rulings from the administrative bodies or courts that rule on such lawsuits, but I do not believe such lawsuits will be extinguished completely and I also think foreign companies will continue to fare rather poorly in such lawsuits. And down economy or not, a Chinese worker suing a foreign company will always go in with an advantage.

4 responses to “China’s Labor Laws: Worry me or Worry me Not.”

  1. “Chinese worker suing a foreign company will always go in with an advantage”–as someone grown up in China, and based on my conversation with friends and family members in China, I am not sure about this, especially in smaller cities. Regional economical disparity is so big in China now; many officials in small cities would literally do anything to attract or keep foreign investment in their town, hoping that the presence of foreign companies would help local economy and, mostly importantly, help their face in the eye of provincial and central governments. In addition, local government and court systems are deeply intertwined in these places. When the collective welfare of officials needs a judge to look the other way, she will. Therefore, in smaller cities, I actually believe that when a Chinese worker sues a foreign company, the advantage is on the foreign company’s side.

  2. I have to agree that a Chinese worker suing a foreign company will always go in with an advantage. Very informative article. Thanks for sharing

  3. “China’s Labor Laws. Worry Me Or Worry Me Not.”law is a system of rules, usually enforced through a set of institutions.So as you can see Law is a system of rules so why are they asking if it is worrying me or worrying me not,of course law is made by people for the rights of people also.

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