Collective labor contracts, being contracts which award certain rights to all employees of a particular employer, have been recognized by PRC regulations for 15 years. However, it was not until recently that the PRC governments began to strongly promote this following labor unrest in China and in response to the financial crisis. On May 5, 2010, a joint notice was issued by the Ministry of Human Resources and Social Security (MOHRSS), the All-China Federation of Trade Unions (ACFTU), which is controlled by the Chinese government, and the Chinese Enterprise Association/Chinese Entrepreneur Association (the Notice), urging the use of collective labor contracts and the implementation of the Rainbow Plan. The Rainbow Plan was introduced by the MOHRSS as long ago as April 2008, with the hope of increasing collective consultation and collective labor contracts in eastern China by 2009, the middle of China by 2010 and throughout China by the end of 2012.

The Notice particularly emphasizes that there should be collective consultation on wages, and sets out the following aims:

  • By 2012, all entities that already have a trade union shall have entered into collective labor contracts, with at least 60 percent of them having done so by the end of 2010 and at least 80 percent by the end of 2011; and  
  • By 2012, those small entities that do not have a trade union shall have entered into a regional or an industry-wide collective contract.  

The Notice also provides that if an entity’s trade union (that a trade union which is run by the entity’s employees) has difficulties in presenting a consultation offer to the employer, then the relevant local counterpart of the ACFTU may present the consultation offer to the employer on that trade union’s behalf. If an entity does not have a trade union, the relevant local counterpart of ACFTU shall assist the employees to select their representatives and to present the consultation offer to their employer.  

Following the central government’s promotion of collective labor contracts, some local governments, including those in the Tianjin, Guangdong and Heilongjiang provinces, have issued detailed rules on the procedures for collective consultation and the agreement of collective labor contracts. It is likely that more local governments in the PRC will follow their lead.  

While it is not mandatory for employers in China to enter into collective labor contracts, foreigninvested enterprises in China, with or without a trade union, may now face pressure from the PRC governments to enter into collective labor contracts, and therefore they would be well-advised to familiarize themselves with the relevant regulations so as to enable them to manage union or workforce requests for collective consultation, in accordance with the Rainbow Plan.