The Ministry of Human Resource and Social Security recently held an internal conference to discuss the draft Opinions Regarding the Implementation of the Labour Contract Law ("Draft Opinions"). The Draft Opinions are intended to clarify various aspects of the Labour Contract Law, including formulation of internal rules and regulations, termination of labour contracts, and the granting of open-term labour contracts. We set out below a summary of the key provisions.
Formulation of Internal Rules and Regulations
Participation by dispatched workers in the formulation of internal rules and regulations – When formulating internal rules and regulations that involve the interests of dispatched workers, employers must solicit opinions from the dispatched workers. Dispatched workers may appoint representatives to participate in the discussions between employers and employees.
Application of existing internal rules and regulations to new employees – Employers should duly inform new employees of existing internal rules, regulations and decided matters that directly impact the employees' vital interests. Once new employees are informed they will be bound by the existing rules, regulations and decided matters.
Termination of Labour Contracts
Time limit for termination for certain causes – Employers must terminate employees within one year of knowing, or within one year of when they should have known, that they have a right to terminate under Articles 39(2), (3), (4), (5) or (6) of the Labour Contract Law.
Timing of expiry of a labour contract – Unless otherwise agreed by the parties, a labour contract expires at 12 am (midnight) at the end of the last day of the term of the contract.
No termination based on "lowest score elimination" – Employers may not terminate employees merely because their performance rating is ranked the lowest in the team.
Open-term Labour Contracts
The Labour Contract Law requires an employer to enter into open-term (permanent) labour contracts with an employee that has already signed two fixed-term labour contracts or if the employee has already worked for the employer for more than 10 years. The Draft Opinions clarify that:
- unless certain statutory exceptions exist, the employer must enter into an open-term labour contract with an employee who requests to continue being employed on an open-term labour contract upon the expiry of the second fixed-term labour contract;
- an employee who continues working beyond the term of his/her second fixed-term labour contract, without indicating that they want another fixed-term contract, must be given an open-term contract;
- if the original employment term of an employee is less than ten years, but ends up exceeding ten years due to his/her statutory medical treatment period, the employee must be given an open-term labour contract; and
- an employee who is entitled to an open-term labour contract, but who instead opts to enter into another fixedterm contract with the employer, will again be entitled to an open-term contract upon expiry of the fixed-term labour contract.
Although the Draft Opinions are still in draft form, they reflect likely legislative trends in Chinese employment law in the near future. Companies should keep an eye on legislative developments in this regard and prepare for the possible changes.