The Guangdong Provincial NPC recently promulgated the Regulations concerning Collective Consultation and Collective Contract of Enterprises (Revised Draft) (”Revised Draft”). Key provisions in the Revised Draft include:

Collective Consultation on Wages: In general, the collective consultation on wages shall be organized once per year. Various issues shall be taken into account including labor productive rate and economic benefits, the local CPI for urban residents, guidelines for enterprise wages, minimum wages and existing average incomes of in-service employees.

Industry Collective Contracts and Regional Collective Contracts: Industry or regional collective contracts shall be binding upon employers and employees in the industry or region, To be binding, collective contracts must be concluded upon the collective consultation between the industry or regional labor union and enterprise representative entities such as associations of undertakings or industry associations.

Collective Consultation Procedures: Where a party representing either employees or employers makes a written offer during collective consultation, the other party must give a written reply within 20 days. The written reply must include a response for each item in the offer and negotiations must be held on the specific items. If employers fail to reply within an agreed time period or decline the proposed consultation without an appropriate reason, and a work suspension or sabotage arises as a result, the employers shall not rescind employment contracts on the ground that employees committed a serious breach of internal rules and regulations. However, if employees rescind the employment contract on the same grounds, employer should pay statutory severance to them in accordance with the law.

Prohibited Behaviors of Employees: Employers may unilaterally rescind employment contracts with employees who commit a serious breach of internal rules or regulations, or cause employers to suffer significant losses due to a serious dereliction of duty or corruption during collective consultation. Prohibited behaviors of employees mainly include:

  1. Declining to engage in collective consultation with employers or requesting modification / rescindment of valid and binding collective contracts by conducting a work suspension or sabotage;
  2. Destroying equipment, committing violent attacks, or interrupting the normal production order of employer;
  3. Barring, obstructing, or blockading entry / exit passages, blocking the passing of staff, materials, products, etc.;
  4. Restricting physical freedom or insulting, threatening, intimidating, or assaulting the onnels from the employer side;
  5. Organizing or participating in a work suspension even after an employer has implemented a conciliation statement / mediation opinion concluded after collective consultation.

During collective consultation, if employees conduct work suspension or sabotage and do not provide any labor during the suspension or sabotage period, employers may not pay participants the remuneration for the work suspension or sabotage period.

Prohibited Behaviors of Employers: During collective consultation, prohibited behaviors by employers mainly include:

  1. Refusing to launch or delaying collective consultation without an appropriate reason;
  2. Blocking or hindering employees from entering production premises, or refusing to provide production instruments and other work conditions;
  3. Restricting or interfering with labor union’s carrying out duties;
  4. Modifying / Rescinding employment contracts illegally.

Mediation: If a dispute arises in collective consultation and consent cannot be reached, the parties may submit an application for conciliation or mediation to the local authority of human resources and social security, and the latter should determine whether the conciliation or mediation is to be initiated within 10 working days. The conciliation or mediation is guided by a third party such as the human resources and social security department, counterpart labor union, association of undertakings, etc. The conciliation or mediation should be completed within 30 days, and may not exceed 45 days in any circumstance.

KWM Comments: The Revised Draft provides detailed stipulations on the sensitive labor dispute issues of work suspension or sabotage during collective consultation. If employers fail to reply within an agreed time period or refuses to the proposed consultation without an appropriate reason, and a work suspension or sabotage arises as a result, the employers shall not rescind employment contracts on the ground that employees committed a serious breach of internal rules and regulations. However, if employees rescind the employment contract on the same grounds, employer should pay statutory severance in accordance with the law. In contrast, where employees refuse collective consultation or raise an unreasonable claim, or cause their employer to suffer significant losses by way of serious dereliction of duty or corruption during collective consultations, the employer is entitled to rescind the employment contracts with the employees unilaterally. These stipulations promise employees a right of work suspension and employer units in Guangdong Province must pay additional attention to the compliance of possible collective consultation in future, in order to avoid work suspension or sabotage and the subsequent economic damages paid on employees’ unilateral rescission of employment contracts.