Employee disputes can occur in any company, but every company needs to be aware of China's employment law writes Ying Wang of Bird & Bird

China's top-down decision-making process may no longer be the most effective way of selling labour disputes. Employees who once accepted certain conditions as industry standards might now be looking for more.

As Chinese workers start asserting their labour rights, conflicts are increasingly common. Efficient collective bargaining via trade unions may help businesses minimise unnecessary work stoppages and losses as a result of disturbances.

Before implementing or attempting to conduct collective bargaining in China, businesses need to be aware of the current systems. The Chinese government has shown a strong willingness to build an employee-friendly legal environment by supporting trade unions, which are indispensable organs in advocating labour rights.  The All-China Federation of Trade Unions (ACFTU) operates at a national level, under which local all-level federations of trade unions or basic-level trade unions in towns can be established in enterprises with 25 or more union members.  Unlike their overseas counterparts, Chinese trade unions are quasi-government bodies, led by the China Communist Party. Therefore, foreign businesses operating locally cannot simply avoid the current agenda; increased trade union involvement will be part of doing business in China.

The country's employee-friendly legal environment is further strengthened by the recent enactment of two local regulations. In September 2014, the newly issued Provisions on Guangdong Enterprises' Collective Contracts, set out guidelines for employers and trade unions to follow to when conducting collective bargaining. The Standing Committee of the National People's Congress of Shanghai subsequently promulgated an amendment to the Rules of the Shanghai Municipality of Collective Agreements in June 2015.

Both pieces of legislation demonstrate the Chinese government's strong commitment to building an effective mechanism for businesses to settle disputes with workers. They specify unacceptable conduct for employers and employees engaged in collective bargaining, explicitly providing that neither party should disrupt or obstruct the proceedings with violence, duress, or any other illegal means. Employers affected by the legislation would be well advised to study the regulations to avoid inadvertent breaches. This is a developing area of law, and businesses should keep abreast of the current local legislation.

Although useful, collective bargaining will not solve all problems. When this fails, employers can take other measures to mitigate potential losses and disruption.

In many cases, maintaining effective communication channels between parties can help avoid intensifying or escalating a dispute. The company should provide negotiation skills training to managers that share good relationships with employees. These managers will potentially perform crucial roles in times of employee unrest.

Entrenched disputes sometimes make a strike inevitable. Employers should have emergency plans to mitigate potential loss during a strike.  It helps to establish project teams consisting of business people, HR and PR managers, and labour lawyers as well as (of course) a decision-maker. The project teams can collaborate on strategies for both resolving disputes and managing business during a strike.  As well as trying to ensure effective communication with employees, businesses should not forget that both the government and public opinion can be powerful tools in resolving an employment dispute. An effective communication plan that conveys the correct message is increasingly important in China.

Important to bear in mind is that although violation of company rules or employee handbooks can constitute legitimate grounds for dismissal, it is not lawful for companies to dismiss workers because they have participated in strikes. Companies concerned that striking workers are engaged in serious rule violations must ensure they have compelling and concrete evidence before effecting any dismissals. Video surveillance is becoming an increasingly useful tool for employers.

Conflicts are unavoidable in business operations, but companies can prevent major damage by keeping them under control. When both parties are operating in good faith based on the principles of equality and mutual respect, conflicts can be stepping stones to a friendly working environment. With effective collective bargaining and employee communication, these conflicts can turn into positive experiences that take the company to new heights.

Article first appeared in FOCUS Magazine, October 2015