Chinese labor law
Chinese labor law can be divided into individual and collective labor law. In the area of individual labor law the employer has the obligation to conclude written contracts with his employees. With the exception of employees at management level, overtime, work on weekends and public holidays are in principle to be monetarily compensated. Employees now enjoy quite extensive protection against dismissal and entitlement to adequate labor protection.
Post-contractual non-competition clauses can be agreed, however, they are only effective if the employee receives a compensation for the duration of the agreed non-competition period. In practice, the enforcement of such non-competition clauses is (other than the payment obligation of the employer) very difficult.
As long as the applicable regional minimum wages are attained, the employer is relatively free to determine the remuneration of its employees.
In collective labor law, the Chinese legislator has been trying for some years to strengthen the role of trade unions and works councils. Employees have the right to establish a works council if the company reaches a certain number of employees. The trade union, which from a German point of view resembles more like an administrative authority than as an employee representation. It encourages the employees to take this step and also exerts considerable pressure, particularly on foreign-invested companies, to conclude a collective labor contract with the works councils.
In other areas, local trade union officials frequently try to force, especially foreign-invested companies, to take certain actions or representations. From our experience, the denial of such requests shall usually not be punished if they are not based on a clear legal basis.
The actual participation rights of the employee representatives are, however, limited. Moreover, in most cases, the works councils are very cooperative with the management team, and the management can usually influence the council elections by nominating certain candidates. Strikes hardly take place except in the case of mass layoff.
In foreign invested companies, the position of the management team is actually still quite strong, as the demand for well-qualified and English speaking employees often exceeds the supply. This has caused significant annual wage increases for a long time. Nevertheless, the employee turnover is still high.
Labor disputes are usually first heard before a local arbitration tribunal. Either party, not satisfied with the arbitral award, may submit their dispute to a competent court.
Our consulting services concerning Chinese employment law include:
- Drafting of individual and collective labor contracts
- Drafting of operational manuals and other internal regulations
- Advice on how to deal with union representatives and works council
- Implementation of employee participation procedure, especially during mass layoffs and corporate restructuring
- Support labor law proceedings at courts and arbitration tribunals in cooperation with local law firms