In its recent meeting, which closed on 29 December 2007, the National People's Congress Standing Committee passed the Labour Dispute Mediation and Arbitration Law.

Labour Dispute Mediation and Arbitration Law

The newly passed Labour Dispute Mediation and Arbitration Law embodies a number of important changes.

The law makes the decisions of local labour arbitration commissions, which are subordinate to local labour bureaus, legally binding immediately upon issuance. The arbitration commissions are empowered to issue binding decisions on disputes that involve:

  • “economic damage” worth less than 12 months of the average local salary;
  • implementation of national standards for working hours, vacation and sick leave, and social insurance; and
  • implementation of collective contracts.

The law also extends the time limit for either side to apply for labour arbitration from 60 days to one year, either from the date of the incident in question or from the termination of employment, whichever period is longer.

Mediation and arbitration procedures

In general, a labour dispute is first referred to mediation, which will involve the employer, the employee and the mediator (this may be either the local union or the local labour bureau). The mediator should usually be a neutral party who seeks to effect a reconciliation between the parties. However, the fact that the mediator may be the local union may be cause for some concern since the union may not necessarily be considered to be entirely “neutral”.

If this resolution fails to result in a settlement, then either side may apply to the local labour arbitration commission for arbitration. The law clarifies that, in cases where an employee contracts with a labour dispatch agency and is dispatched to an enterprise, both the labour dispatch agency and the employer are jointly considered parties to a labour dispute and are subject to resolution and arbitration.

Commentary

The Labour Dispute Mediation and Arbitration Law is the result of considerable debate between the various stakeholders and the final Law was only reached after several drafts.

Allowing labour arbitration commissions to issue legally binding and (in some cases) non-appeallable decisions is an expansion of their powers. This may be a cause of some concern, as previous case history and anecdotal evidence from labour disputes would suggest that these commissions often favour employees over employers, particularly if the employer is a foreign-invested enterprise. In preparation for the passage of the new law, some localities have begun to revise labour arbitration procedures. In particular, some have publicly noted that local labour arbitration commissions will allow workers to submit cases to arbitration for free. As a result, this will likely result in an increasing number of labour disputes being brought before these commissions.