Government approval may be required for mass layoffs

December 18, 2008 | BY

clpstaff &clp articles

Move is part of wider labour law developments

Companies throughout China may soon have to seek government approval for mass lay-offs. The minimum wage could also be decreased in order to prevent rising unemployment and social instability.

The Employment Contract Law (中华人民共和国劳动合同法) (ECL), which came into force on January 1 2008, says companies must report lay-offs of more than 20 workers to their local labour authorities.

But authorities in Shandong and Hubei provinces have revised their rules, making it compulsory for companies to get approval for lay-offs of more than 40 employees.

“Clearly there was no approval requirement within the law. Now you have these two provinces that are the first to be more restrictive,” said Andreas Lauffs, partner and head of the employment law group at Baker & McKenzie in Hong Kong.

“This is part of a bigger development that is very worrisome right now,” he added.

After Shandong and Hubei changed their rules, authorities in Beijing announced similar approval requirements for locally-based enterprises wanting to let more than 80% of their employment contracts expire without renewal. Shanghai is also said to be considering imposing approval requirements.

The local response is in line with a notice reportedly circulated by the Ministry of Labour and Social Security on November 17 advising state-owned enterprises to keep lay-offs as low as possible. Unlike the national notice, the emerging local approval requirements appear also to apply to foreign-invested and other private enterprises

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