On February 1 2012 the Legal Affairs Office of the Guangdong Province People's Government issued three draft local regulations for public comment. If passed, the regulations could have a significant impact on the way in which companies manage their workforce in the province.
Most notably, the draft Administrative Regulations on Labour Dispatch would impose restrictions on the use of dispatched workers (ie, workers who are hired through employment agencies and seconded to a host company). The Employment Contract Law states that dispatched workers should generally be used only for "temporary, auxiliary and substitute positions", but these terms are undefined in national law and no consequences are specified for hiring such workers beyond this scope; as a result, enforcement has been minimal or non-existent. The draft regulations define these terms with some specificity, so that if a host company hires a dispatched worker to work in a position other than a temporary, auxiliary or substitute position, the host company would be deemed to have established an employment relationship with the worker.
Companies would be restricted to using dispatched workers for a maximum of 30% of their total workforce. Moreover, where more than 20 workers are hired through an agency and they make up more than 10% of the total workforce, the company would be required to make a recordal with the local labour bureau. Violation of either provision would carry a fine of up to Rmb300 for each dispatched worker (in the case of non-recordal) or each dispatched worker in excess of the maximum. The new regulations would be relevant only to companies established in China; by contrast, representative offices must use employment agencies to hire staff.
A draft of Several Provisions on Implementation of the Employment Contract Law appears to clarify certain key issues in the law, such as:
- the right of employees (except in limited circumstances) to make a unilateral demand for an open-ended contract once the second fixed-term contract following January 1 2008 expires, instead of requiring both parties to agree to a third term before the employee can make this demand; and
- the right of an employer to make a unilateral adjustment to an employee's job position in certain circumstances (eg, where poor performance can be proven).
Under the draft Administrative Regulations on Employment of Chinese Employees by Permanent Representative Offices of Foreign Enterprises, all representative offices of foreign companies would be required to pay a security deposit, equal to Rmb20,000 for each dispatched worker, to a bank account jointly designated by the representative office and the employment agency. The security deposit would be used to compensate employees in the event that an employee's interests are infringed by the representative office.
For further information on this topic please contact Andreas Lauffs or Jonathan Isaacs at Baker & McKenzie's Hong Kong office by telephone (+852 2846 1888), fax (+852 2845 0476) or email ([email protected] or [email protected]).