PRC Law on Mediation and Arbitration of Labour Disputes: Further Improvement in Handling Labour Issues in China

Compared to the Regulations, the Law extends the scope of case acceptance to “disputes arising from the acknowledgement of the employment relationship”, “disputes arising out of working hours, rest and holidays” and “disputes arising from medical cost for injury at work, economic compensation or damages etc.”, which are the most common labour disputes and of major concern to employees. Their inclusion into the scope of case acceptance will enable employees to make their complaints with effective evidence. In addition, Article 52 provides that “disputes between workers employed under the engagement system in civil service institutions and such institutions shall be dealt with in accordance with this Law; if laws, administrative rules and regulations or the State Council provides otherwise, such otherwise provided regulations shall be observed.” This provision resolves the problem of employees employed in civil service institutions who have no way to make their complaint in labour disputes.

INCREASE IN CHANNELS FOR MEDIATION AND ARBITRATION

One of the basic principles for handling labour disputes in China is that emphasis is placed on mediation. Article 3 of the Law provides that “the resolution of labour disputes shall be based on the facts and adhere to the principles of legality, fairness, timeliness and emphasis on mediation, and shall protect the lawful rights and interests of the parties.”

To increase mediation channels, Article 10 of the Law provides that “when a labour dispute arises, parties concerned may seek mediation to the following mediation organizations:

(i) the enterprise's labour dispute mediation committee;

(ii) a grassroots people's mediation organization established in accordance with the law; and

(iii) a town, township or neighborhood organization that has a labour dispute mediation function.”

The widening of mediation channels not only makes effective use of social resources, but also remedies the disadvantages of the limited mediation organizations struggling to meet the great demands thereof from non-state-owned enterprises.

REVERSED BURDEN OF PROOF

In their institution for arbitration or litigation, employees must first of all prove that there exists an employment relationship between such employee and their employer. In reality, however, such evidence as employment contract, workers payroll etc., is usually kept in the hands of the employers in question. If those employers refuse to produce such evidence, the employees will find it very difficult to prove the existence of a valid employment relationship, and thus often fail while taking the first step in their effort to protect their right in the labour dispute. In order to allocate the burden of proof in a reasonable proportion, this Law provides reversed burden of proof. Article 6 of the Law provides that “when a labour dispute arises, the parties shall be responsible for providing evidence in support of their assertions. If evidence relating to the subject matter of the dispute is in the possession or under the control of the employer, the employer shall provide such evidence. If the employer fails to provide the same, such failure shall be held against it.” Further, Paragraph 2 in Article 39 of the Law also provides that “If the employee is unable to submit evidence relating to the arbitration claims that is in the possession or under the control of the employer, the arbitration tribunal may require the employer to provide such evidence by a specified deadline. If the employer fails to provide the same by the specified deadline, such failure shall be held against it”.

These provisions on the reversed burden of proof are specifically addressed to the employer's intentional refusal to provide evidence despite possession of such evidence, and will effectively restrict employers from engaging in conducts in bad faith. It can also be presumed that employers shall also bear adverse consequence thereon in the event that evidence in their control gets lost, damaged or ruined.

STRENGTHENED EFFECTIVENESS OF MEDIATION AGREEMENT

Article 11 of the Regulations provides that both parties concerned shall “voluntarily perform” their obligations under the mediated settlement agreement. The Supreme People's Court, Interpretation on Several Issues Concerning the Application of the Law in the Trial of Labour Disputes (2) (关于审理劳动争议案件适用法律若干问题的解释(二))promulgated on August 14 2006 provides that a mediated settlement agreement, reached under the labour dispute mediation commission and concerning labour rights and obligations, has the binding force of a labour contract and can be used as the basis for the people's court's judgment. When the parties concerned reach a mediated settlement agreement on labour remuneration under the labour dispute mediation commission, if the employer then fails to perform the payment obligation stipulated in the mediated settlement agreement and the employee directly files a suit at the people's court, the people's court can accept it as a “common civil dispute.”

This Law further strengthens the effectiveness and execution of mediated settlement agreements. Paragraph 2 in Article 14 of this Law provides that “the written mediated settlement agreement shall be signed or sealed by the parties and shall enter into effect once it bears the signatures of the mediators and the seal of the mediation organization. The agreement shall be binding on the parties and the parties shall perform the same.” Payment order may also be applied for involving some special mediated settlement agreements. Article 16 of the Law provides that “If a mediated settlement agreement is reached on the payment of overdue labour remuneration, medical bills for a work-related injury, severance pay or damages but the employer fails to perform such agreement by the deadline specified therein, the employee may apply to a People's Court for a payment order on the strength of the agreement. The People's Court shall issue a payment order according to law.” The strengthening of the effectiveness of the mediated settlement agreement will assist grass-roots mediation organizations to better protect the interests of both parties, particularly those employees in weaker social positions.

JURISDICTION OR ARBITRATION – PRIORITY FOR PLACES WHERE THE LABOUR CONTRACT IS PERFORMED

In accordance with Article 17 and 18 of the Regulations, labour arbitration is generally accepted by the labour dispute arbitration commission in the region where the employer is located. If the employer and employee under the labour dispute are not in the same arbitration jurisdiction, the dispute shall be dealt with at the arbitration commission situated where the employer responsible for the payment of salaries is located. In practice, it is not uncommon that the employer's registered address, the actual address, the place where the employment contract is performed, and the place where the employee's salary is paid are all different. As a result, problems of jurisdiction is are inevitably encountered, to the extent that events of “grabbing the same case” and “shifting the case back and forth by different authorities ” often occur. The employee is thus obliged to run back and forth in different territories, which unnecessarily increases his/her cost in seeking legal protection for his/her rights and interests.

To solve this problem, Article 21 of the Law provides that “a labour arbitration commission shall be responsible for the labour disputes in its jurisdiction. A labour dispute shall come under the jurisdiction of the labour arbitration commission situated where the labour contract is performed or where the employer is located. If one party applies to the labour arbitration commission situated where the labour contract is performed and the other to that situated where the employer is located, the labour arbitration commission situated where the contract is performed shall have jurisdiction.”

This provision, while giving full respect to the parties' rights to choose a jurisdiction, also gives priority to the jurisdiction where the labour contract is performed whenever a jurisdictional conflict occurs. This not only makes it convenient for employees to file for arbitration but also makes it easier for labour dispute arbitration commissions and courts to resolve any labour disputes in a timely manner.

EXTENDED TIME FOR STATUTE OF LIMITATIONS

Formerly, Article 82 of the PRC Labour Law (中华人民共和国劳动法)provided that “the party that asks for arbitration shall file a written application to a labour dispute arbitration commission within 60 days starting from the date of the occurrence of a labour dispute. Generally, the arbitration commission shall produce a ruling within 60 days after receiving the application. The parties involved shall implement arbitration rulings if they do not have any objections to those rulings.” The reason for a statute of limitations of 60 days is to solve labour disputes as quickly as possible. In practice, however, due to the short time limit some employees often lose their opportunity to obtain legal remedy.

This Law extends the statute of limitations for arbitration from 60 days to one year and makes special provisions on interruption, suspension, exemption from the time limit under special circumstances. Article 27 of the Law provides that “the time limit for applying for arbitration for a labour dispute shall be one 1 year and such time limit shall commence to count from the date on which a party got to know or should have known that its rights were infringed upon. The time limit specified in the first paragraph hereof for arbitration shall be interrupted if a party asserts their rights against the other party or files a complaint with the relevant authority, or if the other party agrees to perform his or obligations, and shall be counted anew from the time of interruption. The time limit specified in the first paragraph hereof for arbitration shall be suspended if force majeure or another legitimate reason prevents a party from applying for arbitration before the arbitration time sets in, and counting of the time limit shall resume from the date on which the reason for its suspension is eliminated. If a dispute over overdue labour remuneration arises during the term of an employment relationship, the application for arbitration by the employee shall not be subject to the time limit specified in the first paragraph hereof. However, if the employment relationship has terminated, the employee must submit his or her application within one year from the date on which the employment relationship was terminated.”

Obviously, these provisions provide more time for employees to assert their rights. Of particular importance is that the time limit for labour disputes regarding remuneration for employees may be prolonged for one year after the termination of employment relationship. Consequently, as long as the employee remains employed and the employment relationship thus continues, any and all salary payment in arrears can be acquired. From a legislative perspective, this relieves employees from concerns that they may “win a case at the cost of losing a job.” It also serves as a warning and punishment measure to employers with salary payment in arrears.

SHORTENED ARBITRATION PERIOD

In accordance with Article 25 and Article 32 of the Regulations, an arbitration commission shall determine within seven days upon its receipt of the application letter thereon as to whether the case is acceptable. If acceptable, such arbitration commission shall within seven days of the date of such determination serve the duplicate of such application letter to the party against whom such application is targeted and form an arbitration tribunal. Any labour dispute arbitration case shall be completed within 60 days as of the date on which the arbitration tribunal is formed. Complicated cases which necessitate a time extension may be properly extended upon the approval of the arbitration commission, but in no event shall the extended time period exceed 30 days. In accordance with this provision, an arbitration period is generally 67 days as calculated from the date on which determination of acceptance is made up to the date on which arbitration rulings are made. For complicated cases, it can be extended for 30 extra days; thus, the longest time period thereon is 97 days.

In contrast, according to Article 29 and Article 43 of the Law, the labour dispute arbitration commission shall determine within five days upon its receipt of an application letter whether or not the dispute is acceptable. If it is acceptable, the arbitration case shall be completed within 45 days as of the date on which arbitration application was accepted. Any complicated case which necessitates a longer time may be extended upon the approval of the director of the labour dispute arbitration commission. The parties concerned shall be notified in writing thereon, provided that such extended time period is more than 15 days. Therefore, from the date when the arbitration commission determines to accept a dispute to the date when arbitration rulings are made, the arbitration period is generally 45 days, the longest being 60 days. In comparison with the Regulations, the arbitration period has been shortened by a third.

More importantly, Article 43 of the Law provides that “in the event that arbitration rulings are not made within the prescribed time period, the parties concerned are entitled to bring a lawsuit in connection with such labour dispute to the People's Court.” This requires that arbitration authorities operate efficiently and without unnecessary delay.

CONCLUSION

The PRC Law on the Mediation and Arbitration of Employment Disputes has made several significant improvements for handling labour issues by expanding the scope of case acceptance, increasing channels for mediation and arbitration, strengthening the effectiveness of mediation agreement, extending the time for statute of limitations, shortening the arbitration period, and adjusting jurisdiction for arbitration and allocation of burden of proof. Moreover, the abovementioned points do not represent all the new provisions in the Law. The Law also includes several other relevant provisions, such as Article 16 whereby the People's Court shall issue a payment order according to the law at the application of the employee if a mediated settlement agreement is reached (for payment of overdue labour remuneration, medical bills for a work-related injury, severance pay or damages) but the employer fails to perform such agreement by the deadline specified therein; and Article 44 whereby the arbitration tribunal may, upon application by a party, render an award for advance execution in cases involving recovery of labour remuneration, medical bills for a work-related injury, severance pay or damages. All these will work to make the mediation and arbitration procedures for labour disputes in China operate at a lower cost and higher efficiency, as well as bring sufficient justice and fairness to both parties concerned, eventually furthering the goal of building a harmonized society.

*About the author

Jiangang Li, Ph. D candidate at the Graduate School of the Chinese Academy of Social Sciences, also practices as lawyer with Lehman, Lee & Xu law firm, Beijing. His academic and practice areas include intellectual property law, corporate law and labour law.