China Employment Law Update - July 2017
Legal News & Analysis - Asia Pacific - China - Labour & Employment
25 July, 2017
The settlement of labour disputes in China is largely governed by the PRC Labour Dispute Mediation and Arbitration Law, the subordinate Rules for Handling Arbitration Cases Involving Labour and Personnel Disputes (the "New Rules") and the PRC Civil Procedure Law. There are typically three stages in the PRC labour dispute resolution system:
- Arbitration in the labour arbitration tribunal;
- Litigation in the District Court (if the parties do not settle in the labour arbitration tribunal, or either party appeals against the tribunal's decision); and
- Litigation in the Intermediate Court (if the parties do not settle in the District Court, or either party appeals against the District Court decision).
Subject to very limited exceptions, the employer bears the burden of proof to establish the material facts in any dispute.
Generally, the limitation period for bringing statutory and contractual claims arising out of or in connection with employment is one year. Employment-related claims are typically settled via settlement agreements and arbitration awards. Civil courts will also issue binding awards in limited cases where they have jurisdiction.
The New Rules enacted by the Chinese Ministry of Human Resources and Social Security came into force on 1 July 2017and aim to:
- put in place a summary procedure to achieve fast and flexible solutions for eligible cases;
- broaden the scope of cases subject to non-open hearings; and
- provide detailed guidelines on arbitration jurisdiction priority, the priority given to collective labour disputes and the scope of final awards.
Overall, the amendment is an attempt to improve efficiency, consistency and practicability within labour disputes arbitration.
Previously, cases where: (i) the material facts were clear, (ii) the rights-obligation relationship was evident, (iii) the dispute was
not serious, and (iv) both parties agreed to go through the summary procedure to obtain a solution, could take advantage of the summary procedure in arbitration. The New Rules add one more category - cases where the subject amount does not exceed the local city annual average employee wage for the previous year; thus expanding the scope of cases which can be resolved expediently under this procedure.
For arbitration cases handled through the summary procedure:
The period for preparing the defence may be shortened or cancelled following consent from the respondent.
Arbitration instruments, other than mediation agreements and arbitration awards, can be served through simplified electronic means e.g. text message, e-mail, fax, etc.
The period for adducing evidence, setting the date and determining the procedure of the hearing, and other matters are all subject to the discretion of the arbitral tribunal, provided that the parties have a guaranteed right to present their case.
Arbitration Jurisdiction Priority
The New Rules increase the practicability of arbitration jurisdiction rules through detailed rules on jurisdiction priority. It is clear that the arbitration committee for the place where the labour contract is performed shall have jurisdictional priority over the arbitration committee at the locality of the employer. When the labour contract is performed in more than one location, the committee that first accepts such application shall have jurisdiction. In circumstances where the location of performance of the labour contract is unclear, the committee at the locality of the employer shall have jurisdiction. Additionally, apart from the employer's registered location, the location where its main administrative office is situated is also regarded as the employer's locality under the New Rules, which grants the local arbitration committee jurisdiction.
Priority given to Collective Labour Disputes
Pursuant to the New Rules, in accepting petitions and hearing cases, arbitration committees 'should' (rather than 'can'; the word used in the previous rules) give priority to disputes involving over 10 employees who make a common request or those arising from the performance of collective labour contracts. Detailed rules for solving the disputes quickly and amicably are as follows:
The location for holding the hearing sessions can be that of the employer or anywhere else that is convenient and time-efficient.
When handling collective labour personnel disputes, arbitration committees should encourage the parties to negotiate with each other on their own or mediate before hearing the case.
Third parties such as legal workers, lawyers and scholars can be invited to participate in mediation.
The scope of Final Awards
The finality of arbitration awards in the context of labour disputes implies that the award is legally binding on the parties once it is granted. Where an employee has an objection to the award, they may commence litigation in the people's court within 15 days of receipt of the statement of award. However, an employer can only apply for revocation of an award under certain circumstances listed in Article 49 of the PRC Labour Disputes Mediation and Arbitration Law (e.g. misapplication of law, undue process, forged evidence etc.) to the intermediate people's court at the location of the arbitration committee within 30 days of receipt of the statement of award. Only if the award is revoked by the people's court can the employer initiate legal proceedings regarding such dispute within 15 days.
The New Rules refine the scope of final awards in order to release relevant parties from vexatious suits and save judicial resources. It clarifies that where applicants make claims under Article 47(1) of the PRC Labour Disputes Mediation and Arbitration Law for labour remunerations, medical expenses for work-related injuries, economic compensation or damages, if there are concurrent claims, the arbitral award shall be final if the amount adjudicated for each, rather than for the total claim, does not exceed the aggregate of 12-months of an employee's wages based on the local minimum monthly wage scale.
Furthermore, the New Rules clarify the definition of compensatory payments to include those made during the non-competition period and for terminating the labour contract as stipulated in the PRC Labour Contract Law. "Indemnity" is also specified to be provided for: double pay as a result of the failure to sign a labour contract; probation illegally agreed upon; illegal termination or rescission of the labour contract, etc.
Ying Wang, Partner, Bird & Bird