In September 2010, the Supreme People’s Court issued its third judicial interpretation concerning labor disputes. This interpretation mainly reaffirms proceeding issues related to labor litigation. Highlights include:

  • Overtime – Under the current regulations, employees are generally required to provide evidence for overtime claims. Now, the Interpretation has clarified that if an employee can prove that his/her employer holds evidence of the existence of overtime work but fails to provide such, the employer bears adverse consequences, meaning provide overtime payment. Agreement on Termination.
  • Related Issues – The Interpretation reaffirms that an agreement on termination related issues, (e.g., formalities, severance payment, and etc.) is valid as long as it observes mandatory provisions; it is not concluded by means of fraud, coercion or exploitation of the employee’s vulnerability.

At the end of October the long-awaited Social Insurance Law was promulgated and is set to take effect on July 1, 2011. The final provision of the law stipulates that foreigners working in China must also pay social security contributions. Employers are well advised to prepare for future payment obligations for foreign employees as this will certainly have a financial impact.