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 828,410 in 2016, 785,323 in 2017 and 894,053 in 2018.2
- 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 2018, employees were successful in 31 per cent of cases and employers were successful in 10 per cent of cases. In the remaining majority of cases (59 per cent), there was partial success for the two sides.
- Labour dispute cases are still mainly about remuneration, termination of employment contracts and benefits disputes, although disputes regarding non-compete agreements and confidentiality are continuously increasing.
- 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 Employment Contract Law, the Trade Union Law, the Law on Mediation and Arbitration of Labour Disputes, the Social Insurance 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 employment 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', which 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 in the standards observed 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 grassroots 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 one party fails to perform the concluded mediation agreement within the time prescribed in the agreement, the other party may apply for arbitration. 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 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 statute of limitations for applying for labour arbitration shall be one year, from the date when the party concerned becomes or should have become aware of the infringement upon its rights. The one-year statute of limitations shall be suspended if one party raises any claim against the counterparty. For example, if the employee seeks any remedy from the competent authorities, or if the employer agrees to perform its obligations, the one-year statute of limitations shall be recalculated.
In the case of a dispute arising from a default in payment of labour remuneration during the existence of an employment relationship, the employee may apply for labour arbitration without being restricted by the one-year time limit. However, if the employment relationship ends, the labour arbitration application for the dispute must be submitted within one year of the end date of the employment relationship.
The arbitration tribunal shall be composed of three arbitrators, although simpler cases may be arbitrated by one arbitrator.
When a labour dispute arbitration tribunal 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. Concluded collective contracts shall be submitted to the labour administrative authority; where the labour administrative authority raises no opposition within 15 days of receipt of the text of a collective contract, the collective contract shall come into force. A collective contract concluded according to the law shall have binding force upon both the employer and the employees.
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 on Mediation and Arbitration of Labour Disputes, disputes that arise between employers and employees within the territory 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 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 employment contracts, social insurance or benefits. Disputes about employment contracts can be further divided into disputes about confirmation of employment 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. Disputes about social insurance can be further divided into disputes about pension insurance, work-related injury insurance, medical insurance, maternity insurance and unemployment insurance.
Personnel disputes refer to those between public institutions and their employees regarding resignation, dismissal or the performance of employment contracts.
Notably, since December 2018, 'equal employment' has been added as a new cause of action for civil cases and it will be worth monitoring to see whether more anti-discrimination cases arise.
IV YEAR IN REVIEW
i Labour disputes
As a result of the overall recession, labour disputes have been increasing continuously over the past year. As the most important law in the employment field, the Employment Contract Law has now been promulgated for 12 years and employees are familiar with using it to raise their claims through labour arbitration and litigation. The financial burden is comparatively low for employees, because labour arbitration is free.
In addition to the 'traditional' rights disputes (i.e., labour remuneration, termination, and work-related injury), non-compete, confidentiality, employee stock rights and senior employee disputes are occurring increasingly more often and involve many topical and complex issues. For example, on 22 October 2019, Beijing No. 1 Intermediate Court published its '10 Model Non-Compete Labour Dispute Cases'. It is reported that from 2014 to June 2019, Beijing No. 1 Intermediate Court concluded 211 non-compete cases, the features of which can be summarised as follows:
- cases arising from the technology and education industries were the most frequent, accounting for 18.01 per cent and 10.9 per cent of all non-compete cases respectively;
- the variety of industries involved is expanding;
- cases regarding technical, sales and training positions are common;
- about 70 per cent of non-compete cases focus on the payment of non-compete compensation and liquidated damages for breach of non-compete obligations, and the value of the amounts concerned is relatively high; and
- the percentage of non-compete disputes that reach settlement is no more than 5 per cent, which is markedly lower than the settlement percentage for other labour disputes.
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.
iii Social security
In 2019, China promulgated the Interim Provisions for Hong Kong, Macao and Taiwan Residents' Participation in Social Security Schemes in Mainland China, requiring employees who are Hong Kong, Macau or Taiwan residents working in Mainland China to participate in the mainland social security insurance scheme.
iv Judicial practice
In judicial practice, opinions and standards implemented by courts in different regions regarding the same issue may differ a lot. In recent months, a few provinces, such as Jilin, Guangdong and Anhui, have issued legal documents regarding the application of law in labour dispute trials. These legal documents do not have the same binding force as laws and regulations, but courts in these provinces do refer to these documents when judging cases.
v Equal employment
Equal employment has been given increasing attention. To protect the right of equal employment, and particularly to safeguard women employees' right to equal employment, Beijing has promulgated the Notice on Further Reinforcing the Administration of Recruitment Activities and Promoting Employment of Women in relation to the preparation of recruitment plans, publishing of recruitment information and recruitment of candidates.
V OUTLOOK AND CONCLUSIONS
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) was expected last year but has still to be introduced. However, according to sources, this judicial interpretation may provide judging standards for practical issues such as employment models for internet platform enterprises, cohesion between labour arbitration and court adjudication, and disputes about amendment or termination of employment contracts. In response to the economic recession and increasing disputes about senior employees with stronger employment bargaining power, the judicial interpretation may also reflect the shift from inclined protection of employees (see Section I) to 'balancing the interests between enterprises and employees', which has been evident in some labour disputes in recent years.
Given that the competition between enterprises for talent and technology is increasingly intense, 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 cases in these areas is relatively complex.
Affected by the tense China–United States trade relationship and the increasing risk of economic recession, business operations are facing difficulties, with bankruptcies, liquidations, closures and business relocations happening more often. Enterprises 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.
Finally, employees are now paying greater attention to social security insurance and social security-related disputes are therefore likely to increase substantially.
1 Zhenghe Liu, Hongquan (Samuel) Yang and Kaitian (Kai) Luo are partners at AnJie Law Firm.
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.