EMPLOYMENT LAW PROMPTS FOREIGN COMPANIES TO CLEAN HOUSE
July 02, 2007 | BY
clpstaff &clp articles &The nation's long-awaited, much-debated and controversial new law on employment contracts was promulgated on June 29 2007 (see our translation on p. 30…
The nation's long-awaited, much-debated and controversial new law on employment contracts was promulgated on June 29 2007 (see our translation on p. 30 and analysis on p. 26). Employment lawyers across China are now finding their hands full as companies take on the monumental task of reviewing and updating their contract templates, codes of conduct and other internal rules and regulations to ensure compliance with the new law.
"Everybody who is operating in China should re-write their employment contracts ... and re-write all of their employee handbooks, employee manuals, and codes of conduct," says Andreas Lauffs, principal partner head of the Employment Law Group at Baker & McKenzie. Lauffs notes that employers should also look at procedures that would make such documents binding and enforceable.
The law, which takes effect on January 1 2008, clarifies and expands the 1995 PRC Labour Law (中华人民共和国劳动法)and other piecemeal local and national regulations. Officials received hundreds of thousands of responses to the March 2006 draft, and its decidedly pro-employee bent brought intense criticism from foreign-invested enterprises operating in China, which feared that their costs would greatly increase.
"I would say that the FIEs' [foreign-invested enterprises'] argument is that they're the most compliant, and they're the most high-profile, and hence the biggest target," says Patti Walsh, partner and head of the greater China employment and human resources practice at Minter Ellison.
In April 2006, a group claiming to represent the Shanghai branch of the US Chamber of Commerce threatened a withdrawal from China if the draft was allowed to go forward as written, claiming that it amounted to going backwards by 20 years. AmCham Shanghai later denounced the group.
Later revisions took into account many of the comments from both local and foreign parties, and by the time the third draft was passed around, it was better received. "In some sense, it's a more balanced piece of legislation," says Walsh.
Criticism of the draft law by US business has added to debates in Congress, where labour groups and legislators in the US have also expressed concerns over labour issues in China. Meanwhile, International Brotherhood of Teamsters president James Hoffa travelled to Hong Kong and Shanghai in May 2007 to lead a fact-finding delegation, meeting with fellow union leaders in both territories.
The new law contrasts sharply with practices in the US, where employees are essentially hired "at will" unless they belong to a union. In China, according to the new law, every company now has a union chapter in the All-China Federation of Trade Unions (ACFTU) and every employee is, in theory, a member.
"In the past, management was pretty free about how to run a business," says Lauffs. However, with the passage of the new company law in 2006 and now the Employment Contract Law(劳动合同法), even FIEs are being pressured to host Communist Party and the ACFTU representatives., Both of these organizations have quotas to set up operations in up to 90% of all private enterprises, including FIEs, by the end of this year.
Large companies will now be pressured to establish 'employee representative congresses' to give employees greater bargaining power within their companies, similar to the works councils in Europe, after which legislators have modelled provisions in the new law. Last year's company law had already put in place supervisory boards, with one-third employee representation, to oversee boards of directors. One or more of these four groups, including Communist Party and ACFTU representatives, will then be able to engage in collective bargaining and will have a say in the drafting of contracts, handbooks and codes of conduct
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