The recently effective PRC Labor Contract Law contains crucial new provisions not present in the existing Labor Law. The major changes and additions are as follows:
Within the first chapter, General Provisions, private non-enterprise entities and other organizations are for the first time considered as employers upon whom the law can be applied. This means the application scope of labor related laws has been enlarged.
In addition, specific requirements are now imposed on the execution, performance, dissolution, and termination of labor contracts.
Moreover, as stipulated in Article 5, the labor administrative department at the county level or above shall, together with the labor union and the representatives of the enterprise, establish a sound three-party mechanism to coordinate employment relationship and shall jointly seek to solve the major problems related to employment relations. This clearly shows the ambition of the government agencies to participate in the resolution of labor disputes.
In the second chapter, Formation of Labor Contracts, legislators require that an employer establish an employment relationship with an employee from the date when the employer puts the employee to work and prepare a roster of employees for inspection, and that a written labor contract shall be concluded in the establishment of an employment relationship. Such a new requirement is mainly set out to avoid such employers’ previous conducts as not signing a written agreement and denying actual employment relationships with the employees. At the same time, employers’ liability of the absence for breach of said written contract is much heavier.
Also in this chapter, there are some prescriptions upon labor contracts without a fixed term. For instance, “if the employer fails to sign a written labor contract with an employee after the lapse of one full year from the date when the employee begins to work, it shall be deemed that the employer and the employee have concluded a labor contract without a fixed term”, and, as set forth in Article 14, a labor contract without a fixed term shall be concluded unless the employee proposes to conclude a fixed-term labor contract should the employee have already worked for the employer for 10 full years consecutively. Furthermore, a labor contract without a fixed term shall be deemed existing between both parties to the employment relationship if no written labor contract is concluded when it is more than one year from the date of the establishment of such relationship. In this way, Chinese Government wants to make the employees feel much more secure about their employment period.
The most significant change in this chapter is with respect to probation periods. Employers used to set a relatively long probation period to evade statutory liability by asserting that employees did not meet the requirement of hiring. They could evade liability because, under the old prescription, employers were entitled to fire those so-called unqualified employees without paying relevant compensations. And there were many similar actions by other employers to exploit their employees in a manner of utilizing this mentioned legal provision. As a result, Article 21 of the Labor Contract Law reads that during probation periods, employers shall not dissolve labor contracts except under any of the circumstances as described in Article 39 and Article 40 (i) and (ii). Prescribed in the same Article, an employer shall make an explanation when dissolving a labor contract during the probation period.
Apart from probation periods, worker dispatch service is another hot spot upon which there are several new rules. Compared with laws and regulations in the past, the Labor Contract Law sets clear restriction on the period of worker dispatch service, as well as the liabilities of worker dispatch service providers and accepting entities (Article 58, 60, 66 & 67). Further, the two types of agencies shall be, jointly and separately, responsible for the aggrieved dispatched workers (Article 92).
Last but not least, at the time of dissolution or termination of a labor contract, the employer shall issue a document to prove the dissolution or termination of the labor contract and complete, within 15 days, the procedures for the transfer of the employee’s personal file and social security relationship (Article 50).
As all the above changes demonstrate, China is looking forward to regulating various labor relationships as well as protecting employees within its territory much better than ever before. But, before any implementing regulation is promulgated, how well this new law will work is uncertain.