Transcript Slide 1

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The Draft Labour Contract Law – Practical
Implications
Presented by Pattie Walsh and Lihui Zhou
10 January 2007
Why has this been Introduced?
• Labour Law in effect from 1.1.1995
• Significant changes in society
• SOES less dominant in the labour market
• Move from rural to urban roles
• Differences in different regions
• The aim is greater protection for Employees
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Why has this been introduced? (cont.)
• Increase in trade union power?
• More cohesive approach to labour regulation
• Incited lots of views and opinions
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Background and Current Status
• The State Council submitted a draft to NPC for a first
reading in December 2005
• NPC circulated a further draft on 20 March 2006 for
public consultation
• Internal amendments – “July version”
• Second Reading – 25 to 29 December 2006
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What is an Employer?
• Employers are the legal “persons” lawfully
incorporated within PRC who independently bear
civil liabilities
• Workers will not include (this is subject to on-going
amendment):
• Legal representatives and senior managerial
personnel
• Soldiers and armed police
• Full-time students
• Household workers
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What is the Guiding Principle?
“The employers and workers must conclude the
labour contract in accordance with the principles of
legitimacy, fairness, equality, voluntariness, good
faith and unanimity through consultation and must
perform the labour contract in accordance with the
principle of legitimacy and good faith”
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The Employer’s Rules
Rules which relate to immediate interests of
employees (pay, hours, benefits, discipline, etc)
should be discussed with the employee
representatives or with all staff and then agreed
through mutual negotiation
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Disclosure of Information
• Employer to disclose
• Job requirements, working conditions, work place,
occupational hazards, remuneration and other issues
related to the labour contracts “which the workers want
to know”
• Consider non-disclosure agreements at the
recruitment stage?
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Disclosure of Information (cont.)
• Employee to disclose
• Age, physical health, working experience, knowledge
and skill, current employment status
• Consider making the fact the employer has relied on
these representations very clear in the contract itself
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Form of the Labour Contract
• Must be in writing
• 3 categories:
• Fixed term
• Non-fixed term
• “Job basis” i.e. accomplishment of certain work will
trigger the termination
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What Happens if An Employer does not
Conclude a written Agreement
• Once a labour relationship is established a written
contract should be signed within one month
• In the absence of a written contract the standards
provided in the collective contract of the employer or
industry applies or if no collective agreement on the
basis of equal pay for equal work
• If no written contract is signed employer must pay
double salary
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Encouragement to Sign Non-Fixed Term
Agreements
• If an employer seeks to renew a contract it should
sign a non-fixed term if:
• The employee has worked for 10 years continuously
• The contract is renewed after 2 renewals of fixedterms
• Failure to sign non-fixed term results in double
severance payment
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What if the Parties Feel Differently About
Whether a Labour Relationship Exists?
• Unless these is clear evidence to the contrary the
worker’s understanding will prevail
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What if the employer accepts there is a
labour relationship but the parties disagree
on the terms!
• If the event of different understandings on the terms
of the labour contract a “general understanding”
prevails. Where there are 2 or more interpretations
possible the one in favour of the worker will be
adopted
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What must go into the Labour Contract?
• Name address and legal representative of the
employer
• Name and ID number of the worker
• Terms for terminating the labour contract
• Job requirements and work place
• Working hours, rest and vacation
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What about Probationary Periods?
Contract: Less than 1 year - Maximum 1 month
1-3 years
- Maximum 2 months
3 years (and
non-fixed term)
- Maximum 6 months
• Salary during probation no less than 80% of the
minimum of the same job or the salary in the contract
• No termination unless the employer can show the
employee does not meet recruitment requirements
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Training Expenses
• Employers can agree that workers shall pay
damages if they beach conditions linked to the
provision of training i.e. a service period
• Total damages shall not exceed the total training
expenses (pro-rata for the un-performed part of the
service period)
• This applies to off-the-job-professional, technical, or
vocational training of more than a month
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Non-Competition
• For those who are subject to obligations in the labour
contract
• Period of non-competition no longer than 2 years
• The protection is limited to senior management,
senior technicians and others who know the trade
secrets of the employer
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Terminations
• Through consultation with agreement
• A worker does not satisfy employment standards
during probationary period
• There is a serious violation of the rules and
regulations of the employer
• Deception occurs causing losses to the employer
• Other labour relations with another employer are
established by the worker
• Worker is subject to a criminal liability
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Terminations (cont.)
Following 30 days’ Notice or payment of a month’s
salary:
• After treatment of non-work related injuries the worker
cannot do his/her job and no agreement on modifying
the contract can be reached
• The worker is not competent for the job assigned even
after being trained or given other jobs
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Redundancy
• Restructure under bankruptcy law
• The business operation is undergoing serious
difficulty
• Relocation for pollution prevention
• Other major changes in the objective conditions
according to which the labour contract was
concluded
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Terminations (cont.)
• Redundancy of 20 or more people or more than 10%
of the total staff the employer must inform the trade
union or employees 30 days in advance, listen to
views, and report the redundancy to the labour
authorities
• “Last in First Out” Principle for selecting employees
• Protection for those on longer fixed-term, permanent
contracts, where family member has no job, the
elderly and those under 18
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Terminations (cont.)
No Terminations for the following individuals:
• Those who have lost capability to work due to
occupational disease or job injury
• Those in the period of treatment for diseases or
injury
• Workers who are pregnant on maternity leave or in
the breast-feeding period
• Worker’s representatives
• Others determined by law or regulations
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Trade Union Role
• Employer must notify the union before dissolving a
labour contract and the union has the right to raise
opinions
• If there are legal violations the trade union can
demand correction
• The employer must study the opinions of the trade
union and notify the decision in writing
• The trade union shall support and assist a worker
who applies for arbitration or goes to court
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Employee’s termination obligations
Generally 30 days’ notice is required
but various exceptions including:
• The absence of a written labour contract
• It is agreed to increase the notice period following the
provision of off-the-job professional study or vocational
training with fees paid by the employers (a maximum
of 6 months’ notice may be agreed)
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Fixed-Term Contract
• These are still acceptable but
• Economic compensation must be paid if the labour
contract is not renewed
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Practical Tips for Employers
• Audit existing employment and HR management
• Plan new arrangements in accordance with the new
law
• Prepare documentation
• amend existing rules, procedures and contracts and
draft of new ones
• Report to management and notify employees of the
changes
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Q&A
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