Guangdong Province, Guiding Opinion on Several Issues Concerning the Application of the «Law on the Mediation and Arbitration of Employment Disputes»and the «Employment Contract Law»

(Issued by the Guangdong Provincial Higher People's Court and the Guangdong Employment Arbitration Commission on, and effective as of, June 23 2008.)

Yue Gao Fa Fa [2008] No.13

The following guiding opinions are set forth based on relevant provisions such as the PRC Law on the Mediation and Arbitration of Employment Disputes (the Law on the Mediation and Arbitration of Employment Disputes) and the PRC Employment Contract Law (the Employment Contract Law), in order to impartially handle employment disputes in a timely manner:

Article 1: In handling employment disputes, people's courts and employment arbitration commissions shall abide by principles such as the equal protection of the lawful rights and interests of workers and employers, full utilisation of employment arbitration resources and rational allocation of trial resources, lawfulness, impartiality, timeliness, non-retroactivity of laws, and the unity of legal effect and social effect.

Article 2: The following disputes shall be handled as employment disputes:

(1) a dispute between a worker and his/her employer over the duration of payment of old age insurance premiums;

(2) a demand by a worker that his/her employer pay him/her work-related injury, unemployment, maternity or medical benefits or indemnities on the grounds that he/she incurred a loss due to a failure by the employer to pay social insurance premiums for him/her; and

(3) a demand by a worker that his/her employer bear his/her work-related injury benefit losses on the grounds that he/she incurred a loss due to his/her employer reducing the wage rate for the payment of his/her social insurance premiums.

Article 3: A dispute arising between a worker and his/her employer over contributions to the housing reserve shall not be handled as an employment dispute.

Article 4: If, after a people's court accepts a bankruptcy petition, a worker raises an objection to the list of wage, severance pay, medical expense and other such employment claims set forth by the managers and the managers do not correct the same, he/she may directly institute a legal action with the people's court that accepted the bankruptcy petition. If the court that accepted the bankruptcy petition is an intermediate court, it may designate a basic level people's court to try the aforementioned case.

Article 5: If a dispute arises between a worker and his/her employer, which employer does not have lawful business qualifications, over the work relationship, he/she shall name the employer or the investor(s) as a party. If the employer without lawful business qualifications borrowed another party's business licence to carry on its business, the party that lent the business licence shall also be named as a party.

If, in the course of the construction of a project, a dispute arises between a natural person, who is the actual contractor, and a worker who was illegally recruited and the worker applies for arbitration or institutes a legal action, the employer that has the qualifications to employ workers shall be named as the respondent or defendant and, as required by the case, the natural person carrying out the construction, the subcontracting party and/or illegal subcontractor may be named as respondent(s) or defendant(s), or as (a) third party/parties.

Article 6: If a party directly institutes a legal action in a people's court on the grounds that the employment arbitration commission failed to render its acceptance decision by the specified time, the worker shall submit to the people's court the voucher indicating that the employment arbitration commission has accepted his/her application materials and proof that it has not yet accepted the case.

If a party directly institutes a legal action in a people's court on the grounds that the employment arbitration commission failed to render an arbitration award by the specified time, the people's court shall accept the case once it determines after examination that no grounds for suspension, such as an expert appraisal, delay in service, transfer of jurisdiction, case scheduling, and waiting for the outcome of a review of a work-related injury, lawsuit or disability assessment exist. When conducting its examination, the people's court may require the worker to provide the Acceptance Notice issued by the employment arbitration commission and proof that it has not yet rendered an award.

If the people's court decides to accept the worker's application, it shall, within five days from the date of acceptance, notify the employment arbitration commission in writing to terminate the arbitration of the relevant case.

Article 7: The “three days” and “five days” specified in the Law on the Mediation and Arbitration of Employment Disputes refer to working days.

Article 8: If a worker applies to a people's court for a payment order in accordance with the second paragraph of Article 30 of the Employment Contract Law or Article 16 of the Law on the Mediation and Arbitration of Employment Disputes, such application shall comply with Part 17 of the Civil Procedure Law.

After the people's court renders a ruling concluding the debt recovery procedure, the worker shall first apply to the employment arbitration commission for arbitration of the employment dispute.

Article 9: Article 47 of the Law on the Mediation and Arbitration of Employment Disputes shall be understood as follows:

(1) if a worker seeks recovery of work remuneration, medical expenses for a work-related injury and/or severance pay or damages and his/her claims involve more than one item and the amount calculated for each item does not exceed an amount equivalent to 12 months of the local minimum wage rate, the arbitration award shall be final; and

(2) the arbitration award in a dispute in which a worker requests the implementation of working hours and the enjoyment of rest and leave in accordance with state statutory standards or in a dispute between a worker and his/her employer over social insurance as specified in Article 2 hereof shall be final.

If the arbitration claims of the applicant involve both matters that are subject to a final arbitration award and to a non-final arbitration award, the employment arbitration commission shall render separate awards in respect of the final matters and the non-final matters.

Article 10: If a worker institutes a legal action in a basic level people's court in respect of a final arbitration award and his/her employer applies to an intermediate people's court for vacation of the award in accordance with Article 49 of the Law on the Mediation and Arbitration of Employment Disputes, the intermediate people's court shall not accept the application. If it has accepted the application, it shall render a ruling terminating the lawsuit. However, the basic level people's court shall, when trying the case, also address the employer's pleadings.

If the worker withdraws his/her suit after the institution thereof or if his/her suit is rejected due to his/her exceeding the period for the institution thereof, his/her employer may, within 30 days from the date of receipt of the ruling, apply to the intermediate people's court of the place where the employment arbitration commission is located for vacation of the arbitration award.

After the intermediate people's court accepts the application of the employer for vacation of the arbitration award or after the basic level people's court accepts the case concerning the worker's dissatisfaction with the final award, either shall, before commencing the trial, check to see whether there are concurrent suits for vacation of the award and concerning the worker's dissatisfaction with the final award so that they can coordinate and liaise with respect to the cases.

Article 11: If, in the course of an employment arbitration procedure, the employer could abscond, divert property, etc., the worker may, on the strength of the Acceptance Notice from the employment arbitration commission, submit a petition for property preservation to the people's court of the place where the employer is domiciled.

If the worker's petition complies with Article 93 of the Civil Procedure Law, the people's court shall render a ruling for property preservation in accordance with the law. If the worker does not apply to a people's court for enforcement within three months after the entry into effect of the arbitration award or of the judgment of the people's court, and the employer requests the lifting of the preservation measures, the people's court shall lift such measures. If the worker is genuinely unable to provide property as security due to economic difficulties, he/she may provide security in the form of a guarantor.

Article 12: If, pursuant to Article 44 of the Law on the Mediation and Arbitration of Employment Disputes, the employment arbitration commission transfers an advance enforcement award to the basic level people's court of the place where the party subject to enforcement is domiciled or where the property is located for enforcement, it shall provide the following materials to the people's court:

(1) a letter of transfer for enforcement (with the letter noting the contact telephone numbers and domiciles of the parties to the case);

(2) the advance enforcement award; and

(3) the proof of service of the award.

Article 13: While examining whether the application by an employer for vacation of an arbitration award satisfies the statutory conditions, the people's court may opt not to suspend enforcement of the effective arbitration award.

If the application to the people's court for vacation of an arbitration award is rejected and the employer, in the course of the enforcement procedures, submits an application for denial of enforcement on the same grounds, the people's court shall reject such application.

Article 14: If actually required in the course of trying a case of vacation of an arbitration award or enforcement of an arbitration award, the people's court may ask the employment arbitration commission that rendered the original award to provide it the case files. The employment arbitration commission shall, within five days after receipt of the letter from the people's court, provide such case files.

The people's court shall send the ruling or rulings rendered by it in the course of handling the aforementioned case to the employment arbitration commission that rendered the original award.

Article 15: If an employer has failed to pay work-related injury insurance for a worker and he/she requests that it bear his/her work-related injury benefits but fails to provide the written determination of a work-related injury issued by the labour administrative authority, the employment arbitration commission shall render an award denying his/her claim or the people's court shall render a ruling rejecting his/her lawsuit, except in the following circumstances:

(1) the employer does not deny the work-related injury; or

(2) the case involves a dispute in respect of damages arising between an illegal worker user and persons who have been injured or died during the illegal use of workers.

Article 16: Employment disputes accepted after May 1 2008 shall be governed by the Law on the Mediation and Arbitration of Employment Disputes, however, the time limit for applying for arbitration and the right to institute a legal action shall continue to be governed by the Labour Law where the employment dispute arose before May 1 2008.

Article 17: If an employer recruits persons who have reached the statutory retirement age but are still not drawing old age insurance benefits or a pension, the work relationship arising between the parties may be treated as an employment relationship.

If an employer recruits persons who are drawing old age insurance benefits or a pension, the work relationship arising between the parties shall be treated as an engagement relationship.

Article 18: The work relationship arising when a foreign national or a resident of Hong Kong, Macao or Taiwan takes up employment in mainland China shall be treated as an employment relationship. If the foreign national or the resident of Hong Kong, Macao or Taiwan fails to carry out the procedures for a Foreigner Employment Permit or Employment Permit for a Person from Hong Kong, Macao or Taiwan in accordance with the law, the relevant employment contract shall be held to be invalid. If the foreign national or the resident of Hong Kong, Macao or Taiwan has done work, the employer shall pay him/her work remuneration with reference to the contract.

Article 19: If the resident representative office of a foreign enterprise or if an enterprise from Hong Kong, Macao or Taiwan directly recruits a Chinese employee without recourse to a foreign-related employment agency, the relevant work relationship shall be held to be an engagement relationship.

Article 20: If rules and regulations formulated by an employer before the implementation of the Employment Contract Law have not been subjected to the democratic process specified in the second paragraph of Article 4 of the Employment Contract Law, but the contents thereof do not violate laws, administrative regulations or policies and have been announced or communicated to the workers, such rules and regulations may serve as a basis for the employer's management of its workers.

Rules and regulations or material matters that have a bearing on the immediate interests of workers and formulated or amended by an employer after the implementation of the Employment Contract Law but that have not been subjected to the democratic process specified in the second paragraph of Article 4 of the Employment Contract Law may not, in principle, serve as a basis for the employer's management of its workers. However, if the contents of such rules and regulations or material matters do not violate laws, administrative regulations or policies, are not markedly unreasonable, have been announced or communicated to the workers and the workers do not have any objections thereto, they may serve as a basis for an employment arbitration award or judgment/ruling of a people's court.

Article 21: If a worker and his/her employer fail to reach a consensus on the execution of an employment contract within one month from the date on which the employer commenced using the worker, and the employer proposes termination of the employment relationship, it shall not be required to pay severance pay.

If the employer has sufficient evidence demonstrating that the reason for its failure to execute a written employment contract with a worker during the period commencing one month after the date it commenced using the worker and before the lapse of one year is entirely attributable to the worker and that it itself is not at fault, it shall not be required to pay twice the worker's wages. However, if the employer proposes termination of the employment relationship, it shall be required to pay severance pay.

Article 22: If an employer commits any of the acts set forth below in order to maliciously circumvent Article 14 of the Employment Contract Law, such act shall be held to be invalid and the worker's years of service and the number of times he/she has concluded a fixed-term employment contract shall continue to count without interruption:

(1) it compels the worker to resign and then execute a new employment contract so as to cause his/her years of service to return to zero;

(2) through the establishment of an affiliate, it changes the employer's name when executing a contract with the worker;

(3) it makes use of an illegal placement; or

(4) it commits another act of circumvention that clearly violates the principles of good faith and fairness.

If, prior to the implementation of the Employment Contract Law, an employer has carried out employment contract termination procedures in accordance with state and provincial provisions on the separation of core and secondary businesses and reorganisation of such secondary businesses, closure and withdrawal of weak enterprises and the settlement of redundant personnel, etc. and paid severance pay in accordance with the law, the workers' years of service shall not continue to count without interruption.

Article 23: A change in the name, legal representative, main person in charge of, or investors in, an employer shall not affect the performance of employment contracts and the workers' years of service shall continue to count without interruption. If a worker requests that his/her employment relationship be terminated and that the employer (investor(s)) pay him/her severance pay, such claim shall be rejected.

Article 24: If a worker requests the termination of his/her employment contract and payment of severance pay by his/her employer on the grounds that the employer failed, before the implementation of the Employment Contract Law, to pay social insurance premiums for the types of insurance specified locally, such claim shall be rejected.

If, after the implementation of the Employment Contract Law, an employer fails to enroll a worker in social insurance for the types of insurance specified locally and the worker requests the termination of his/her employment contract and payment of severance pay by his/her employer, such claim shall be upheld, but the term of service for the payment of severance pay shall count from January 1 2008. If a worker requests the termination of his/her employment contract and payment of severance pay by his/her employer on the grounds that his/her employer failed to pay insurance premiums in full or is late in the payment thereof, such claim shall be rejected.

Article 25: If a worker requests the termination of his/her employment contract and payment of severance pay by his/her employer on the grounds that his/her employer failed to pay his/her work remuneration on time and in full before the implementation of the Employment Contract Law, such claim shall be rejected unless it complies with the circumstances set forth in Article 15 of theSupreme People's Court, Interpretation on Several Issues Concerning the Application of the Law in the Trial of Labour Disputes.

If an employer fails to pay work remuneration on time and in full after the implementation of the Employment Contract Law and a worker requests the termination of his/her employment contract and payment of severance pay by his/her employer, such claim shall be upheld.

Article 26: If an employer has agreed upon non-compete provisions with a worker, it shall pay the worker economic compensation in accordance with the law during the non-compete period. If the employer fails to pay such economic compensation as agreed, the worker may demand that his/her employer perform the non-compete agreement. If the employer has failed to undertake to pay the worker economic compensation by the time of completion of work handover, the non-compete provisions shall not be binding on the worker.

If the liquidated damages specified by the employer in the non-compete provisions greatly surpass its actual losses, the people's court or employment arbitration commission may appropriately revise the amount thereof at the request of the worker.

Article 27: If an employer has not specified in writing that the wages actually paid to a worker include overtime wages but it has evidence that the wages it has paid include wages for normal working hours and for overtime, it may be held that the wages paid by the employer include overtime wages, unless the wages for normal working hours, after calculation pro rata, are lower than the local minimum wage rate.

Article 28: The base figure for the calculation of a worker's overtime wages is his/her wage for normal working hours. If the employer and worker have provided that items such as bonuses, allowances and subsidies do not constitute part of the wages for normal working hours, such provision shall apply, unless the wages specified for normal working hours are lower than the local minimum wage rate.

Article 29: If a worker claims overtime wages and his/her employer denies that he/she worked overtime, the employer shall bear the burden of proving the fact that the worker did not work overtime. If the employer presents the electronic attendance record confirmed by the worker as evidence that the worker did not work overtime, the employer's electronic attendance record shall be accepted as probative.

If a worker claims overtime wages from two years before, the worker shall, in principle, bear the burden of proof. If the amount of the overtime wages for the period exceeding two years genuinely cannot be ascertained, that portion of the overtime wages shall in general not be accorded protection.

Article 30: If, after the implementation of the Employment Contract Law, an employer terminates or ends an employment contract in violation of the law but the worker does not demand that it continue to perform the contract or the continued performance of the employment contract has become impossible, the employer shall pay damages to the worker in accordance with the Employment Contract Law, but it shall not be required to separately pay him/her severance pay. The years of service for the purpose of calculating the damages shall commence from January 1 2008 and the damages for the years of service prior to that date shall be calculated in accordance with the Labour Law.

If an employer concludes a written employment contract with a worker more than one month but less than one year after the date on which it started using him/her and it is required to pay him/her twice his/her monthly wage, the extra multiple that it is required to pay him/her shall not be included in the base figure for the calculation of severance pay or damages.

Article 31: People's courts at all levels and employment arbitration commissions throughout the province shall refer to and implement the Opinion from the date of issuance. In the event of a discrepancy between the Opinion and relevant guiding opinions issued prior to the implementation hereof, the Opinion shall prevail. If a law, regulations or judicial interpretation contains new provisions, matters shall be handled in accordance with such law, regulations or judicial interpretation.