On July 1, 2013, the Interim Measures of Guangdong Province on Administration of the Collection of Union Fees (“Guangdong Fee Measures”), which was jointly issued by the Guangdong Federation of Trade Unions, the Guangdong Taxation Bureau and the Guangzhou Branch of People’s Bank of China, came into effect. In light of the new measures, local union officials and tax authorities have been putting pressure on companies to establish a union or pay a union preparation fee.

The Guangdong Fee Measures provide that the employer should pay a union preparation fee (equivalent in amount to the union fee), if it has not established a labor union within 6 months after the company’s establishment or starting operations. However, the legal authority of the provincial tax bureau and union officials to impose a union preparation fee on companies without unions is unclear, since there are no regulations passed by the local people’s congress requiring companies to pay a union preparation fee. Before agreeing to establish a union or to pay a union preparation fee, employers in Guangdong Province should pay attention to what kind of enforcement actions will be taken and what position the courts will take on this issue, and be prepared to respond to pressure or queries from tax and union officials in the coming months.