Supreme Court improves workers' rights
July 06, 2012 | BY
clpstaff &clp articles &The Supreme People's Court has published a draft Interpretation that could increase compensation for workers dismissed during appraisals and award compensation for using non-compete agreements
The Court published a draft of its fourth Interpretation on Several Issues Concerning the Application of Law in Hearing Labour Dispute Cases (最高法院关于审理劳动争议案件适用法律若干问题的解释（四）) on June 27.
The 18-clause draft for comment strongly favours employees and states that the long-standing practice of terminating contracts based on the principle of “last-one-cut” may not be compatible with the existing PRC Employment Contract Law (中华人民共和国劳动合同法).
“Article 40 of the Employment Contract Law specifies that the termination of contracts when an employee is incompetent or incapable or unqualified for the job is possible, but poor working performance does not constitute incapability,” said Meachell Mu of Shanghai HR&L Law Firm, a labour and employment boutique.
During a company's regular appraisal of the performance of its employees, employers would usually dismiss the one ranked last. Mu said that the corporate management practice that prevails at the moment is not at the root of the problem. “The problem is essentially making it compatible with China's Labour Law regime.”
Mu advised that employers need to consider providing training or adjusting the employee's post and procedurally issue 30 days of prior notice before dismissing them. “These were specified in Article 40(2) of the Employment Contract Law,” she said.
Clause 16 of the draft Interpretation specifies that failure to comply with the above provision results in the employer being liable for monetary compensation.
In comparison with the third Interpretation issued last October, which focused on procedure, the draft deals with more substantive issues. For example, clause 8 centres on an employee's ability to work for a competitor after the termination of the labour contract.
“Employers need to review the compensation for these non-compete obligations in the labour contracts,” said Betty Tam of Herbert Smith.
“If there is no agreement on the amount of compensation for such an obligation in the labour contracts, an employee would be able to claim monthly compensation equivalent to their average salary in the past 12 months," she added.
Tam also pointed out the need to obtain a work permit for foreign nationals working in China, as specified in Clause 18. Foreign professionals working in representative congresses are normally hired through recruitment agencies. If they do not hold a work permit, they are only classified as contractors, which are not protected under the Employment Contract Law.
If an employee was transferred or assigned to a subsidiary company that has a separate legal entity from the parent company, Clause 6 considers how their working years are counted. This is a common problem as employers always use transfers as an excuse to deprive employees of their working years at the company, so the employee's benefits are impaired. Clause 13 also specifies the need to establish labour unions.
The draft Interpretation is open for public comment until July 28.
By Janice Qu
Further reading:
PRC Employment Contract Law (中华人民共和国劳动合同法)
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