1. BUSI 3001 SBLC Week 8(10), Spring 2010
New Labor Contract Law
BUSI 3001 SBLC
Week 8(10), Spring 2010
Charles Mo & Company
April 26, 2010

2. Background Issued on June 29, 2007, effective January 1, 2008
Improve basic worker rights amid widespread complaints of withheld wages
Unpaid overtime
Worker abuses
Applicable to all domestic and foreign companies
Established standards for
Labor contract
Probationary period
Severance
Mass layoff
Non compete clause
Penalty for violation

3. continued
Before this law, workers are poorly treated. Majority don’t have contracts, withhold wages, demand excessive overtime, dismiss workers anytime,
First draft presented December, 2005 to the Standing Committee of NPC
Made public for input from March 20, to April 20, 2006
The draft has sparked heated controversy and debated throughout China
response were received.
European Chamber and Amcham submitted input

4. Law of PRC Employment Contract
General Provision
Conclusion of Employment Contracts
Performance and amendment of Employment Contracts
Termination of Employment Contracts
Special Provisions
Monitoring Inspection
Legal Liability
Supplementary Provisions

5. General Provision
Principles
Defines the rights and duties of the employer and employee
Applicable to organizations inside China whether incorporated or not

6. Employment Contracts 劳动合同的订立
Article 7-employer/employee relation begins when the employer start the worker for assignment.
Article 9- employer may not withhold employee ID card/other ID document or demand a security deposit or money or a guarantor
Article 10- Written employment contract must be established within one month of start date.
Article types of employment contract
Fixed Term
Open ended term
Term to expire upon completion of project.

7. Fixed Term Labor Contract
There is an ending date of the contract
Date of expiration is agreed between the employer and employee

8. Article 14-Open Ended Term Contract
Agreed between employer and employee, anytime can sign open ended term contract
Unless employee choose to fixed term labor contract, otherwise open ended term contract must be signed if:
Employee worked for 10 consecutive or more years
For first timer instituting employment contract system employer or state enterprise changing status, 10 consecutive or more years of employment and is less than 10 years away from legal retirement
Renewing the employee contract follows 2 consecutive fixed term employment contract
If no written contract is provided and the employee worked for a year, the contract is treated or deemed as open ended

9. Employment contract with a term to expire when a job is completed
Employment contract ends when the project is completed

10. Article 17 – items included in the employment K
1.Name, domicile, legal representative or main person in charge of the employer.
2. Name, domicile, resident ID card or other paper of worker
3. Term of the employment contract
4. Job description and place of work
5. Working hours and vacation
6. Compensation
7. Social welfare insurance
8. Labor protection and working conditions
9. other requirement by laws
10. May include probation, training, confidentiality of trade secrets

11. Probation Period (A 19) Employment term Probation allowed
3 to 12 months
1 month
1 year < Term < 3 years
2 months
Term > 3 years or Open Ended
6 months
1 probation only
Project completion or less than 3 months,
No probation

12. Probation Wage must be higher than (A20)
Lowest wage level of the same job
80% of the agreed upon wage in contract
Minimum wage in that locale (province, township)

13. Employer provided training (A22)
Liquidated damage agreed in the contract can be recovered from the employee:
If employee leaves before the agreed service term
Damage may not exceed the actual cost of training
Damage is allocated to the extent of unfilled service time

14. Non Compete Clause (A23)
Employer must pay the worker to keep confidentiality after contract expired.
If the worker(employee) breaches the non compete clause, the worker must pay liquidated damage.
A24 Only applicable to senior management, senior technicians and personnel have knowledge of trade secrets
Term of non compete cannot exceed two years.

15. A25
Other than training and non disclosure clause, no other dollar damage may be assessed to the employee

16. A26 Invalid Contract Deception Coercion
Taking advantage of the other party’s difficulty
Contrary to the party’s real (true) intent
Employer disclaim its responsibility or denies worker’s right
Violated administrative law

17. A27 Partial Invalidity of the employment contract does not affect the remaining provisions of the rest of the contract

18. Employee to terminate contract
A37 Worker may terminate employment by a written notice 30 days in advance
During probation, a 3 day advance verbal notice is adequate for terminating employment contract

19. A38 Verbal Notice by Employee for Terminating contract
Failure to provide safety
Failure to pay wages
Failure to pay social welfare
Failure to comply with law
Employer commits deception and coercion

20. A39 Employer can terminate an employee
During probation, does not qualify for the job
Materially violate company policies and procedures
Material negligence, graft, causing financial losses to the employer
Worked for another employer
Material misrepresentation when signing the contract
Involved in a Felony (differ from civil violation)

21. A 40 Terminate with 30 day notice or one month wage
After the period the medical care prescribed by the hospital due to illness or non work related injury, the employee cannot fulfill the job duty of his original position, or the job responsibility of another position assigned by the HR Department
The employee cannot fulfill the job duty after training or change of duty.
Circumstances at the time of contract signed changed rendering the employment contract not implementable or executable, no agreement can be reached

22. A41 Employee Reduction in Force
Reduction of 20 employees or 10% of workforce
Explain to labor union or all employees 30 days in advance
Notify the plan to Labor Bureau
Pursuant to bankruptcy law
Severe production issue
Change in enterprise structure, production technique, still needs to reduce employees
Other circumstances changed rendering contract not executable
Priority to retain the employee
Employees with longer term fixed contract
Employees with open end term contract
Employee is the only wage earner and needs to support older parents
Layoff under bankruptcy.
If rehiring starts within 6 months. Those laid off should be rehired first

23. A 42 Cannot terminate under other termination A40 or layoff A41
Engaged in occupational disease related line of duty or being diagnosed for occupational related disease.
Confirmed harmed by an occupational disease
Still within the prescribed medical care period due to an illness or injury
Female employee pregnant, during delivery, or nursing time
15 year tenure and within 5 years of legal retirement age
Other laws prohibited circumstances

24. A44 Labor contract terminates upon
Contract expires
Employee starts to draw basic government pension
Employee died or declared dead or missing by the court
Employer bankrupt
Employer is dissolved, revoked business license, ordered to be closed by government
Other administrative law order to end the contract

25. A46 Compensation for terminating contract
A38 Failure to pay and provide safe working conditions
A40 Employee sick, incompetent, change in circumstance
A41 Bankruptcy, reduction in production
Consensus Termination
A44 if offered the same contract or better, no agreement is reached, contract expires
A44 employer license revoked, bankrupt, ordered to cease business

26. A47 Severance Pay One month per year
Less than 6 months 0.5 year, more than 6 months, 1 year
Highly paid employee, 3 times the average of company employee

27. A 50 Administration of Termination File
On the date of termination
Employer must issue a proof of termination or ending of the employment contract
Within 15 days
Arrange the social welfare transfer and employee personnel file transfer
Agreed time frame
Duty transfer
Severance pay
For two years
Keep the termination file

28. A74 Monitoring and Inspection
State Council’s Labor Administration is responsible for inspection
Labor administration at the county level oversees the implementation of employment contract