Resolving China Labor Disputes

Employment disputes in China are typically resolved in one of the following ways: consultation, mediation, arbitration or litigation. As compared to other methods, consultation usually makes the most sense because if the parties are able to reach a settlement, it saves them time and money.

Alternatively, the parties may choose mediation, either through an internal mediation committee within the company, or through an external mediation organization. After the parties execute a written mediation agreement and that is signed by the mediator and the mediation organization, the agreement is binding upon the parties. If either party fails to perform under the mediation agreement, the other party may bring a claim for labor arbitration.

The parties may choose arbitration instead of mediation. The usual statute of limitations for initiating arbitration for an employment law dispute is one year and it begins to run as soon as the party knows or should have known the injury has occurred. Before the arbitration proceeding begins, the arbitrators will usually attempt to mediate. If the parties refuse to mediate, or fail to reach agreement after mediation, the tribunal proceeds with arbitration. The law requires the arbitral award be made within 45 days after acceptance of the application to arbitrate. For complicated cases, an extension of up to 15 days may be granted.

Generally, each party has 15 days after receipt of the arbitral decision to file a lawsuit. For the following “special” cases, however, the arbitral award becomes effective immediately after it is issued and remains so until it is invalidated by the court: (1) claims for payment of the employee’s work compensation, work-related injury expenses or economic compensation, provided that the disputed amount is no more than 12 times the local minimum monthly wage; (2) claims concerning the implementation of national labor standards on work time, rest time, vacation or social insurance.

The employer’s right to pursue litigation is more restricted: within 30 days of receiving the arbitral decision, the employer may submit a request with the applicable intermediate court to invalidate the arbitral award only when it can prove one of the following has occurred: (1) there is an error in application of the law or regulation, (2) the arbitration committee lacks jurisdiction, (3) there is a violation of due process, (4) the evidence on which the decision is based on is false, (5) the prevailing party concealed evidence sufficient to impede a fair ruling, and (6) the arbitrator(s) committed wrongdoing, including demanding or accepting bribes, committing graft or intentionally making a decision contrary to the facts and laws.

Finally, the parties may also choose to litigate but it is usually the last resort because for a labor law dispute (sometimes it can get tricky whether a dispute can be categorized as a labor law dispute), the parties must first go through labor arbitration even before they can take the issue to court.

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