China issues new provisions in relation to labour dispute mediation

Towards the end of last year the Ministry of Human Resource and Social Insurance issued the Provisions for Consultation and Mediation of Enterprise Labour Disputes (“Labour Mediation Provisions”).  Those provisions, which came into force on 1 January 2012, were introduced as a result of the Chinese government’s aspiration to build a harmonious society and also to relieve the pressure created by the large volume of labour dispute cases that has arisen since the PRC Labour Contract Law came into force on 1 January 2008.

Background

The Law on Mediation and Arbitration of Labour Disputes was introduced on 29 December 2007. This law supplements the PRC Labour Law (which took effect on 1 January 1995) and provides further details about China’s labour dispute resolution system, including mediation, arbitration, civil lawsuit and appeal.

Under the Labour Mediation and Arbitration Law, mediation includes intra-company mediation, mediation through lowest level government mediation body and mediation through a township or neighbourhood community.  However in China, the mediation route is often neglected or bypassed mainly because it is not a mandatory step required by the law.

The New Provisions

The Labour Mediation Provisions introduce new and more practical guidelines for intra-company mediation and set out a general timeline for consultations and mediation (although these are still voluntary).

More importantly, the Labour Mediation Provisions require all medium and large-sized enterprises (regardless of whether it is a foreign invested company or a domestic company) to set up and fund a mediation committee in accordance with the law.  If such an enterprise fails to establish a compliant mediation committee and frequently has individual or collective labour disputes which cause a major social impact, the relevant enterprise will be put on a blacklist. Those on the blacklist will be reprimanded by the labour authorities at county level or above.

In addition to the blacklist deterrent, the Labour Mediation Provisions state that “those enterprises that violate laws or regulations shall be dealt with in accordance with the law”.  However, there is a lack of clarity with regard to what other sanctions the labour authorities may adopt.

Comment

The Labour Mediation Provisions reflect the Chinese government’s strong commitment to the labour mediation system.  The changes expand the channels of communication between the individual employee and the employer, which, in turn, should help prevent and resolve collective labour disputes. It is hoped that the use of intra-company mediation will also help relieve the pressure on the judicial system.

Although it is still too early to comment on whether mediation can effectively help prevent small or individual issues from becoming labour cases or group dispute cases, medium and large-sized foreign invested enterprises (especially those labour-intensive entities) should quickly move to establish their internal labour mediation organisations in accordance with the Labour Mediation Provisions.