Legal News

Is China’s New Labor Contract Law Getting Harmonized out of Existence?

China lawyer

As regular CLB readers know, we have been flacking China’s new labor contract law since even before its inception at the beginning of this year. Without a doubt, it has been one of our two or three most popular topics. To wit:

Must recently, in The Impact Of China’s Labor Contract Law, we discussed how the new law was influencing China’s labor situation.

We have talked so much about the labor law because it applies to every business in China with an employee. This is –by a wide margin — topic number one for our clients when they speak with the China lawyers at my law firm. We typically tell them that complying with the new labor law is relatively easy, but 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 most other labor law violations. My client and I agreed it nonetheless needed to remain in strict compliance with the labor laws because it had nothing in writing from this one official who does not control everything in the province or the country relating to labor laws and because violations of China’s 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” China’s labor laws surrounding everything but layoffs are being loosened.

What are you hearing?

7 responses to “Is China’s New Labor Contract Law Getting Harmonized out of Existence?”

  1. We have also heard from lower-level officials and elsewhere on the grapevine that the government will be lax regarding implementation, and I’m sure that in practice they are not holding factories to the letter of the law (have they ever?). But we’ve not been given any kind of a “deal” (YOU don’t lay off workers and WE won’t hold you to the law). Were are in Guandong– maybe Shandong is different.
    And what happens when the economy picks up and the labor bureau is no longer so concerned about layoffs? Will they still honor a vague sort of verbal “promise” from one of its officials to be lax in enforcing the written law? How lax? Which laws will the “allow us” to violate? For how long?
    Anyway, we remain in compliance with the law for a number of ethical as well as practical reasons.

  2. Its coming down to rationality, the government wants people to have jobs and could care less about “minor” things like the “shixi” period, fixed contracts, etc. Though I definitely agree with your assessment, just because this official says so, doesn’t mean the courts will follow through, especially when it comes to a foreign company.

  3. We’ve had an official in charge of social benefits ask us why we declare so much gross salary for employees. He thought it silly that we should declare their real salaries.

  4. I can understand the position of some of the government agencies. But I understood also that the new law provided for workers to go after employers that do not comply with the law, and there is certainly no sweet deal with them I guess. Did I understand well or did I miss something.
    Of course, I understand that employees will not easily go after companies if the government is pushing against it.

  5. outcast, off the top of my head (and if I’m not mistaken) the courts are far from the first actor. Any worker problem/issue is first taken up between the company and the union/worker’s representative, then to arbitration, and if the result is still unsatisfactory, then the courts can step in.

  6. Yes, the courts are brought into a dispute only after it has gone through arbitration. This process should have been speeded up by the arbitration law that went into effect on May Day this year, but things seem backlogged.
    It may be that some local governments are loosening their implementation of labor laws, including the Labor Contract Law (LCL), but I can’t imagine that they will back away wholesale. Workers expectations have been raised and I think the central government is committed to moving up the production ladder and, at least in the medium-term—if not right at this minute—losing some of the nastier sweatshops.
    Again, most of the “new” provisions that people are complaining about have been there a long time…

Leave a Reply

Your email address will not be published. Required fields are marked *