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China enacts Labour Dispute Mediation and Arbitration Law

2008-05-09

Introduction

On 29 December 2007, the Standing Committee of the Chinese National People’s Congress promulgated the Labour Dispute Mediation and Arbitration Law (‘the Law’). It will come into effect on 1 May 2008. The Law aims to achieve an impartial and timely settlement of labour disputes, protect the legal rights and interests of the relevant parties and promote harmonious relations between employer and employee.

We highlight below the more significant developments brought about by the Law.

 

Mediation

Extrat from news report on May 2008 provided by CLYDE & CO

The Law provides a comprehensive framework for the mediation of labour disputes.

Pursuant to the Law.upon the occurrence of any labour dispute within a corporation, either the employer or employee may apply for mediation. Mediation may be provided by any of the following mediation organisations:(1) labour mediation committee of a corporation;(2)a legally established mediation organisation at the grassroots level:or(3) organisations or groups established at the township level.

The Law further provides that the labour mediation committee of a corporation shall consist of member(s) representing both the employer and employee. The employee’s Representatives shall be members of the trade union or persons recommended by the employees while the employer’s representatives shall be appointed by the person in charge of the corporation.In addition, the chairperson of such a labour mediation committee shall be a member of the trade union or a person recommended by both parties.

Any agreement reached as a result of mediation must be documented in writing and signed or sealed by the employer. The emoloyee and the mediator. Whereupon it shall be legally bingding upom both the employer and employee.

It must be highlighted that the law also provieds for circumstances where an emoloyee may apply to the court directly for a Payment Order should the employer fail to perform its o bligations under the mediation agreement. These circumstances relate to labour disputes for delayed payment of labour remuneration. Medical expenses for work-related injuries.economic loss suffered by the employee or work compensation.

 

Arbitration

Under the Law, parties may also choose to proceed to arbitration directly without going through the mediation process. In any case, a labour dispute may go through mediation first before proceeding to arbitration under the following circumstances:

(a) Where parties fail to reach an agreement within 15 days after the receipt of a mediation application by the relevant mediation committee:or

(b) Where any party fails to fulfil its obligations under the mediation agreement.

An important change brought about by the Law is that it provides for certain scenarios where an arbitration award will be final and bingding immediately upon it being issued. These scenarios are as follows:

(a) Where the dispute is in relation to the recovery of wages, medical expenses for work-related injuries and economic losses or compensation, for an amount not exceeding the local minimum monthly salary of twelve months(note:the minimum monthly salary level varies across cities and provinces in China. For example, the minimum monthly salary in Shanghai is RMB 960 or US$137 at current exchange rate): or

(b) Where the dispute is in relation to the implementation of national standards regarding working hours, vacation and social insurance etc.

The Law further extends the time limit for either party to apply for labour arbitration from 60 days to 1 year, counting from the date on which a party knows or should have known that his/her rights have been infringed.

The Law also attempts to improve the efficiency of arbitration proceedings for labour disputes. It stipulates that the arbitration trilbunal shall render an award within 45 days from the date of acceptance of the application for arbitration. In complicated cases, this period may be extended, but such period of extension shall not exceed 15 days. If the arbitration tribunal fails to render an award within the stipulated time, either party may start legal action before the Courts directly.

 

Miscellaneous issues

Generally, when an employee initiates a labour claim, he/she shall also be responsible for adducing evidence to support the claim. Howere, the Law also provieds that if the employer is in possession or control of evidence relating to the labour dispute, it has an obligation to produce such evidence accordingly.

The Law also clarifies the position where employees have entered into labour contracts with third-party staffing firms and are subsequently dispatched to work at the relevant corpoprations. In such cases, both the staffing firm and the corporation are considered joint parties in the labour dispute with the employee.

 

Conclusion

The Law aims to resolve labour disputes between employers and employees in China fairly and quickly. However, it is quite clear that the Law has made it substantially easier for employees to pursue labour claims against employers. It remains to be seen whether this will result in an increasing number of labour disputes(some possibly without merit and frivolous)being brought before the local labour arbitration commissions in China.

Extrat from news report on May 2008 provided by CLYDE & CO

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