Labour disputes in China mainly show the following characteristics:
- Since the implementation of the Labour Contract Law in 2008, the number of labour dispute cases has surged and remains high. According to data published by the National Bureau of Statistics of China, the total number of national labour dispute arbitration cases was 813,859 in 2015, 828,410 in 2016 and 785,323 in 2017.2
- The success rate for employees in labour dispute cases is relatively high. According to data published by the National Bureau of Statistics of China relating to labour dispute arbitration cases that closed in 2017, employees were successful in 33 per cent of cases and employers were successful in 11 per cent of cases. In the remaining majority of cases (56 per cent), there was partial success for the two sides.
- Labour dispute cases are mainly about remuneration, termination of employment contracts and benefits disputes.
- The handling of labour dispute cases is subject to mandatory labour dispute arbitration as a first procedure.
- Regarding the handling of labour dispute cases, the relevant provisions of local regulations, normative documents and the judging standards of local labour arbitration and courts vary.
The substantive legal basis for resolving labour disputes includes:
- laws (including the Labour Law, the Labour Contract Law, the Trade Union Law, the Law on Mediation and Arbitration of Labour Disputes, the Social Security Law, the Employment Promotion Law, the Law on Prevention and Control of Occupational Disease and the Work Safety Law);
- the relevant judicial interpretation of the Supreme People's Court on labour law;
- administrative regulations;
- local regulations and rules;
- administrative regulations of state administrative departments of labour; and
- normative documents issued by local labour administrative departments.
In addition, the Civil Procedure Law, the Law on Mediation and Arbitration of Labour Disputes and the relevant judicial interpretations set out detailed provisions on the procedural aspects of labour dispute resolution.
China's labour legislation adopts the principle of 'inclined protection', that is to say that while it does take into account the interests of employers, it is more inclined to protect the interests of employees. The principle of inclined protection is reflected in some legislative content and the standards in judicial practice.
The resolution of labour disputes in China can involve consultation, mediation, arbitration and litigation.
Consultation is mostly used to settle labour disputes within an enterprise. When a dispute arises, an employee may consult with his or her employer, or request the trade union or a third party to jointly consult with the employer, to reach a settlement agreement.3 If the procedures used and the content of the settlement agreement are found to be lawful and effective, the arbitral tribunal may use the settlement agreement as evidence.4
When a labour dispute arises, if one party does not desire a consultation, if both parties fail to settle the dispute through consultation, or if one party does not comply with the concluded settlement agreement, either party may apply for mediation by the labour dispute mediation committee within the enterprise, or a legally established grass-roots people's mediation organisation, or an organisation established in a township or neighbourhood community that has a labour dispute mediation function. Where an agreement is reached through mediation, a mediation agreement paper shall be drawn up. That paper shall be signed or sealed by both parties and take effect after the mediator signs it and the seal of the mediation organisation is affixed thereon. The executed mediation agreement paper is binding upon both parties. If a mediation agreement is drawn up on a matter of delayed payment of labour remuneration, medical expenses for a work-related injury, economic compensation or damages, and the employer fails to comply within the period of time prescribed in the mediation agreement, the employee may apply to the people's court for a payment order based on the mediation agreement and the people's court shall issue a payment order according to the law.
Consultation or mediation is not a legally mandatory procedure for resolving labour disputes. When a dispute arises and the parties are not willing to make use of consultation or mediation, or the consultation or mediation fails, or one or both parties fail to comply with the settlement or mediation agreement, the parties may apply directly to the labour dispute arbitration commission that is responsible for arbitrating disputes arising within the district under its jurisdiction. The commission shall be composed of three arbitrators, although simpler cases may be arbitrated by one arbitrator.
When a labour dispute arbitration commission hears a labour dispute case, the procedure is in five stages: the applicant's statement on the claims and facts; the respondent's defence; adducing the evidence and cross-examination; the arbitrator's inquiry; and the debate. The arbitral tribunal shall mediate before making an award. It will render the award within 45 days of the date on which the labour dispute arbitration commission accepts the arbitration application.
If any party is dissatisfied with the arbitral award, or the labour dispute arbitration commission rejects an application or fails to make a decision within the specified time limit, the labour dispute in question may be submitted to a people's court that has jurisdiction to judge. In the case of trial of first instance of a civil case by a people's court, the judges and the jurors shall jointly constitute a collegiate or the judges shall constitute a collegiate. There shall be an odd number of collegiate members. Civil cases using the simplified procedures shall be tried by one judge. The procedure for hearing labour dispute cases is conducted in six stages: the plaintiff's statement on the claims and facts; the defendant's defence; adducing the evidence and cross-examination; the court investigation; a debate between the parties; and final statements by the parties. When a civil dispute lawsuit lodged by a litigant with a people's court is suitable for mediation, mediation shall be carried out first, except when a litigant refuses mediation. If a litigant disagrees with a judgment of first instance by a people's court, the litigant shall have the right to file an appeal with the higher-level people's court within 15 days of the date of the judgment letter being served. If a litigant disagrees with a ruling of first instance by a people's court, the litigant shall have the right to file an appeal with the higher-level people's court within 10 days of the date of the ruling letter being served.
China's labour law provides for a collective negotiation system, in which the employees and the employer may enter into a collective contract on labour remuneration, working hours, rest days and holidays, labour safety and hygiene, insurance and welfare and other related matters.
If a dispute arises in the course of collective consultation and it cannot be resolved by the parties through consultation, one or both parties may apply in writing for the administrative department of labour security to coordinate a resolution of the dispute. The administrative department of labour security shall bring together the relevant personnel from three sides, such as the labour union and the enterprise organisation, at the same level to jointly coordinate a resolution of the dispute.
If there is a dispute about the implementation of a collective contract, an application may be filed with the labour dispute arbitration committee to seek arbitration under the law. The resolution procedure is basically the same as that used for individual labour disputes.
III TYPES OF EMPLOYMENT DISPUTES
According to the Law of the People's Republic of China on Labour-dispute Mediation and Arbitration, labour disputes that arise between employers and employees within the territory of the People's Republic of China mainly fall within one of the following categories:
- disputes arising from the confirmation of labour relations;
- disputes arising from the conclusion, performance, alteration, cancellation or termination of labour contracts;
- disputes arising from expulsion, charge, resignation or severance;
- disputes that arise relating to working hours, periods of rest and vacation, social insurance, welfare benefits, training and occupational protection;
- disputes arising from labour remuneration, medical expenses for job-related injury, economic compensation or damages, inter alia; and
- other labour disputes prescribed by laws and regulations.
To facilitate the litigation and to standardise the work of the people's court on filing, trial and judicial statistics, the Supreme People's Court has formulated the Provisions on Causes of Action for Civil Cases to classify and manage civil cases. According to these Provisions, labour dispute cases largely fall into one of two categories: labour disputes and personnel disputes.
Labour disputes can be subdivided into disputes about labour contracts, social insurance or benefits. Disputes about labour contracts can be further divided into disputes about confirmation of labour relations, collective labour contracts, labour dispatch contracts, disputes about part-time employment, disputes about claims for labour remuneration, disputes about financial compensation and disputes about non-compete agreements.
Personnel disputes refer to those between public institutions and their employees regarding resignation, dismissal or the performance of employment contracts.
IV YEAR IN REVIEW
- In 2017, there were calls from many sectors of society for the Labour Contract Law to be revised. Some believe that the Law, which was promulgated and took effect in 2008, imposes over-arduous obligations on enterprises, resulting in inflexible employment models and high expenditure. In February 2018, an official of the National People's Congress, China's national legislature, said in a media interview that the amendments to the Labour Contract Law had been widely debated but that the conditions for a formal amendment were not yet in place and it was not the right time to take action. Thus, the proposal for revising the Labour Contract Law has been shelved.
- In cases arising from unilateral termination by a company for an employee's breach of contract, the business entity bears a heavy burden of proof, as required by the legal provisions and in judicial practice, which puts the business entity at great risk of losing the case. For example, as well as having to prove the employee's breaches, the entity is required to have written rules and regulations which specify that the irregularity performed by the employee falls under the provisions whereby the enterprise has the right to unilaterally terminate the contract of employment. Besides, during the course of formulating their rules and regulations, business entities must follow the legal procedures for seeking advice from employees or trade unions, publicising the rules and regulations, and keeping employees informed. In recent cases, courts and arbitral tribunals have paid more attention to good faith and the professional ethics of the employees, and if employees have been found to have committed serious irregularities, the courts and arbitral tribunals have upheld the enterprise's unilateral termination. For example, in a retrial of a labour dispute case between Alibaba, a well-known internet enterprise, and Ding, the Beijing Higher People's Court, the retrial court considered the company's unilateral termination to be lawful on the ground that the employee had violated the good faith principle, although the courts of first instance and second instance had ruled that the employee was not in violation of the company's rules and regulations because they were not specific about the irregularity in question.
- Non-compete disputes are occurring more often than ever and involve many hot and complex issues. For example, in a non-compete case between Tencent Technologies (Shanghai) Limited, a well-known internet enterprise, and Xu Zhenhua, the Shanghai First Intermediate People's Court ruled that the employee was liable for 19.4 million yuan. This case involved value recognition of restricted stocks for the purposes of non-compete compensation.
- Internet platform enterprises are more frequently involved in labour disputes because of their flexible employment arrangements. In a dispute in June 2018 to confirm the labour relationship between FlashEx, an internet platform enterprise providing cargo transport services, and a deliveryman, the People's Court of Haidian District, Beijing upheld the existence of a labour relationship. This case has attracted much attention and discussion because, in most similar cases, labour relationships are not recognised.
- Personnel from Taiwan, Hong Kong and Macao no longer need to apply for an employment permit to work in mainland China. On 3 August 2018, the State Council announced its decision to abolish a batch of administrative permits, including the cancellation of employment permits for residents of Taiwan, Hong Kong and Macao working in mainland China.
- From 1 January 2019, the responsibility for collection of social insurance premiums for employees is transferred from the social security administration department to the tax authorities. This change might lead to more rigorous collection of social insurance premiums and strengthen accountability for illegal acts.
V OUTLOOK AND CONCLUSIONS
- The Supreme People's Court is drafting the latest Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trials of Labour Dispute Cases (V), which is expected to be introduced by the end of 2019. The judicial interpretation may provide judging standards for practical issues such as employment models for internet platform enterprises, the cohesion between labour arbitration and court adjudication, and disputes about amendment or termination of employment contracts. The judicial interpretation may also reflect the shift from 'inclining to protect employees' to 'balancing the interests between enterprises and employees', which has been evident in some labour disputes in recent years.
- With the increasingly intense competition among enterprises for talent and technology, dispute cases involving trade secrets and competition restrictions will continue to increase. These types of disputes involve many legal areas, including labour law, competition law, intellectual property law and criminal law, and the handling of related cases is relatively complex.
- With the increasing risk of economic recession, business operations are facing difficulties and a need to make adjustments, while for organisational institutions, business strategy adjustments may trigger staff redundancies or reorganisations. As a result, the number of collective dispute cases relating to staff redundancy placements is highly likely to increase.
- Employees are now paying greater attention to social security insurance, and related disputes are therefore likely to increase substantially.
1 Zhenghe Liu and Hongquan (Samuel) Yang are partners at AnJie Law Firm.
2 From the data published by the National Bureau of Statistics of China, available at http://data.stats.gov.cn/easyquery.htm?cn=C01 (in Chinese only).
3 See Article 4 of the Law on Mediation and Arbitration of Labour Disputes.
4 See Article 11 of the Provisions on Negotiation and Mediation of Labour Disputes of Enterprises.