Beijing Issues the New Guidance for the Trial of Labor Dispute Cases

Beijing, China (PressExposure) October 13, 2009 -- On 18 September of the same year, the State Council of PRC released the Regulations on the Implementation of the Labor Contract Law. Even thought such supplementary guidance has been issued, there are still some ambiguities that remain outstanding during the trail and settlement process of labor disputes. This is proving to be of great significance especially during the current economic crisis.

In order to solve such problems and obstacles existing during the trail of labor dispute cases, Beijing High People's Court and Beijing Labor and Social Security Bureau organized a conference recently to discuss some of the substantial and procedural matters that required urgent settlement. The parties reached a consensus on aspects of legal issues. The legal opinions agreed at this meeting (hereinafter referred to as "the Minutes") will definitely play a crucial role in forthcoming trials of labor disputes in Beijing and act as good guidance for lawyers who are involved in the settlement of labor disputes cases. Outlined below are some key points of reference that arose from the Minutes:

1. The acceptance scope of labor disputes 1) Social insurance disputes Under the Chinese Labor Dispute Mediation and Arbitration Law, Article 2 provides that the Law applicability concerns dispute arising from social insurance. However, it does not specify which authority has jurisdiction over such kind of disputes. Outlined within the Minutes, it provides that if a disputes arises then the employee can requests the employer to make a supplementary payment to their social insurance. This will be settled through the labor administrative departments rather than the People's Court. However, if the employee fails to enjoy the social insurance benefits as a result of fault on the employer's behalf, then the People's Court shall be open to accept such cases.

2) Personnel file Personnel file are a confidential document that records detailed personal information concerning the employee. This has strong Chinese character within China. The Minutes provides that the personnel file should be transferred simultaneously as the employee's changes employment. Therefore, disputes arising where the employee requests the employer to compensate for damages resulting from either the loss or the delayed transfer of a personnel file is well within the labor dispute scope. The maximum compensation for the loss of personnel file shall not exceed RMB 60,000.

3) Payment of housing funds and retirement dispute The Minutes clarifies that disputes regarding the payment of housing funds and the retirement issues are not labor disputes accepted by the People's Court.

2. The confirmation of labor relationship In practice, there are different opinions on the confirmation of labor relationships. Stated in the Minutes, it provides that 3 factors may be taken into account when deciding the labor relationship between the employer and the employee: a) Parties with lawful qualifications; b) The rules and systems provided by the employer are applicable to the employee; and the employee works for the employer and get paid c) The work that the employee engaged in is a part of the employer's work;

If the employee stops working for the employer for a length of time and the employer does not terminate the labor relationship lawfully, such kind of labor relationship should be deemed to have been suspended. During the suspension period, there are no labor rights and obligations between the employee and the employer. Furthermore, the time shall not be counted and taken into consideration as forming part of the employee's working year for the employer.

If a foreigner or a citizen from Hong Kong, Macao and Taiwan does not have a lawful work permit in China, then the labor contract is invalid.

If the representative office of a foreign company employs a Chinese employee not through the foreign-related human resources service company, then the relationship between the two parties is an employment rather than a labor contract relationship.

3. Working hours and overtime The employee is entitled to have at least one day rest, and the working hours shall not exceed 40 hours per week. For the reduced one day for rest, it should not be recognized as overtime.

The employee's request of paying overtime salary will not be supported if a) the work is irrelevant with his/her daily work and just for the needs of security, fire protection, and holiday etc.; or b) the employee could have a rest during the work.

The employer is liable for providing evidence to prove that the overtime payment is counted in the salary already paid if there is no written agreement on this matter.

4. Economic compensation payment The monthly wage that is used to calculate the economic compensation, is the employee's average monthly wage for the 12 months prior to the dissolution or termination of his labor contract. Therefore, according to the Minutes, the base number for calculating the economic compensation should be the same although the calculation way provided in the new Labor Contract Law differs from the old Labor Law.

If the employee claims for additional economic compensations based on the Measures for Economic Compensations due to Violation or Rescission of Labor Contracts provided by the Ministry of Labor and Social Security in 1994, the labor arbitration commission or the People's Court may comply with it due to its validity.

5. Insurance Payment If a work injury is incurred by a third party, there is a high possibility that the employee will attain double compensation for damages from the infringer and the employer. In order to avoid this issue, the Minutes provides that if an employee who has suffered from a work related injury gains full payment from the infringer, including the medicine fee and transportation fee, then the employer is not liable for such payment again.

6. Non-competition Compensation If there is no agreement on the payment of non-competition provided under the Labor Contract or the Confidentiality Agreement, it does not necessary mean that the non-competition clause is not valid. The employer and employee could negotiate with the employer again; otherwise the employer may pay the employee 20% to 60% of his/her annual salary prior to the termination of the labor contract. If the employer clearly expresses the wish not to pay compensation, then the non-competition clause will not binding upon the employee.

Author: Sherry Guo

Press Release Submitted On: October 13, 2009 at 2:07 am
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