Appreciating true intent

In summary, the courts have enlarged the scope of eligible cases to protect the employee's right to file lawsuits. This demonstrates the responsibility of the judicial authority for the government. Now the absence of uniform criteria to solve the aforementioned problems and the courts would be regarded as ultra vires.

II) Enlargement of the group of lawsuit parties and the offer of protection to employees

Under Interpretation III, in a case where an employee's employer has failed to apply for a business licence or continues to operate when the business licence has been revoked or the business period has expired, the employer or investor shall be taken as the litigant. If an employer, one who has failed to apply for a business licence or continues to operate when its business licence has been revoked or where the business period has expired, conducts business operations in the name of others by borrowing others' business licences, both the employer and the business licence lender shall be taken as the litigant.

When a party is concerned about an arbitral award relating to a labour dispute made by the arbitration committee, it can bring an action to the court in accordance with the law. If the court, after reviewing the case, holds that the arbitral award omitted a party that ought to have been part of the arbitration, it shall add the omitted person as a party to the legal action. The parties concerned that are added shall be liable and the court shall deal with all parties concerned together.

There remains many problems with the above matters. Firstly, the employer, one who fails to apply for a business licence or continues to operate when the business licence is revoked or where the business period has expired, is not recognised or defined by the PRC Employment Contract Law. Secondly, “the employer or investor shall be taken as the litigant” will be amended as “the employer and investor shall be taken as the litigant”, in order to bring better protection for employees. If, in the second instance, it is found that the arbitration award omitted a party that ought to have been part of the arbitration, would it still be possible to add the omitted party?

III) Special treatment of particular employment relationships

Article 7 of Interpretation III stipulates that with respect to any action brought to the people's court due to a labour dispute between an employer and its employees, in particular those who have already enjoyed pension insurance benefits or received pensions, the court shall view it as a labour relationship instead of an employment relationship.

Article 8 expresses that if an employment dispute arises between a person's new employer and a person whose wage has been halted but remains on a previous enterprise's role, or who is internally retired but has not reached the statutory retirement age, has been laid off or is on extended leave as the result of his/her enterprise having suspended operations, and a legal action is instituted in a people's court in accordance with the law, the people's court shall handle the same as an employment relationship.

Article 8 protects the workers who are in less favourable conditions. However, if requests in respect of social insurance benefits, conclusion of employment contracts with no fixed term, and double wage payment in exchange for not signing an employment contract are made, new issues would arise if such cases are treated as employment relationship cases when further legal clarification is required.

IV) Confirmation of parties' true intent in a consensus

Under Interpretation III, if an agreement entered into between an employee and his/her employer regarding relevant procedures for the discharge or termination of a labour contract, payment of wages, overtime pay, economic compensation or damages, does not violate the mandatory provisions of laws and administrative regulations, and there is no fraud, coercion or the taking advantage of others' difficulties, such agreement shall be determined valid.

China's labour law has always placed priority on the protection of the rights and interests of workers and has always regarded the employee as the weaker party in employment contract relations. Labour law has always clarified and strengthened the legal obligations of employers with little recognition of the true intent of the parties that the agreement is based on, and it places even less emphasis on employees' contract awareness.

As employees are always treated as the vulnerable party, some employers don't follow the rapid changes in China's labour legislation and have yet to adjust the company's payment structure. In some cases, workers are proposing massive overtime requests when leaving the company, or the workers would use this as an excuse to terminate their contracts and request severance pay. There are even some unscrupulous persons familiar with the law who will encourage the employees of a whole department, or even the whole company, to quit utilising the excuse that the company did not pay for their overtime work, and then demand the company to offer overtime pay and monetary compensation. Some workers, even after obtaining the remuneration or compensation that was originally agreed upon, continue to file additional claims from employers using such excuses as that they were taken advantage of and trapped in a vulnerable or difficult position by the company, or that they had been deceived or coerced.

With authorities previously treating workers as the vulnerable group and ignoring the true intent behind agreements - which can lead to employers having to bear additional obligations- this provision of confirming the true intent of parties is advantageous. Not only is it beneficial for supplementary labour legislation in China, but it is also a major step forward in the judicial practice of labour. In addition, where a party concerned reneges on the mediation order made by the employment arbitration commission for labour and personnel disputes that has taken legal effect and therefore triggers a lawsuit, the court shall not accept it and shall reject any prosecution for cases that have been accepted (Article 11). This is also the recognition of the consensus of the parties.

V) Overtime pay: new rules for burden of proof

Article 9 of Interpretation III stipulates that the employee, to pursue a claim for overtime pay, shall prove the existence of overtime work. If the employee can prove that the employing unit is withholding evidence of overtime work, the employing unit assumes the unfavourable consequences of refusing to present such evidence to the tribunal. Under Article 39 of the PRC Law on the Mediation and Arbitration of Employment Disputes (中华人民共和国劳动争议调解仲裁法), where the worker fails to give evidence in relation to the arbitration request handled and managed by the employing unit, the arbitral tribunal may request the employing unit to provide such evidence within the prescribed time limit. Where the employing unit fails to provide such evidence within the prescribed time limit, it shall assume unfavourable consequences.

Obviously, the allocation of burden of proof under this judicial interpretation as to overtime work makes sense to companies as it is close to the principle of evidence: “The necessity of proof always lies with the person who lays the charge.” On one hand, some employee's misuse of the legal process will be limited by this interpretation. On the other, this allows some unscrupulous employers to take advantage of the new rules of burden of proof in order to reduce or altogether skip overtime pay. Before, some official interpretations adopted by several local courts stipulated that an employer had the burden of disproving an employee's claim about overtime hours worked, but Article 9 counters this understanding and clarifies the rules for burden of proof.

Human resources professionals and legal counsels should be conscientious of identifying which file records are possibly relevant to overtime claims and properly keep such records once identified. This is necessary to help the company avoid the consequences of failing to provide such records to the judicial tribunals in labour disputes over overtime pay.

VI) A clear definition of final award standards and the connections between arbitration procedures and litigation procedures

As stipulated by Article 47 of the Law on Mediation and Arbitration of Labour Disputes, the arbitral award shall be the final award in respect to labour disputes. Article 13 of Interpretation III provides this further detail: a worker can claim wages, work injury medical expenses, economic compensation or damages pursuant to Article 47, Article I of the Law on the Mediation and Arbitration of Employment Disputes. If the arbitration award involves a few items, and each item does not exceed the sum amount of local minimum wages for 12 months, the case shall be subject to a final award. Interpretation III provides more cooperation and communication between arbitration and prosecution.

Leo Liu, Zhong Lun Law Firm, Shenzhen