Provisions on Guangdong Enterprises' Collective Contracts (the "Provisions") were issued on  25 September, 2014 with an aim for concerned parties to operate the entire process  concerning collective bargaining and collective contract under a pragmatic and enforceable  mechanism. Compared to its precedent promulgated in 1996, this new version can be viewed  as progress with regards to the more detailed and exhaustive provisions on the procedure,  means and scope of collective bargaining and dispute resolution. 

More notably, compared to the current applicable legislations on the same subject in  Shanghai, Beijing and Shenzhen, the highlights of the Provisions are: 

  • The pragmatic and enforceable procedural design which may clarify the  necessary steps for employees in Guangdong to start collective  bargaining with their employers. 

In accordance with the Provisions, if employees intend to initiate collective  bargaining with their employer, they must raise this request with the company's trade  union which will in turn decide whether to proceed. Should a situation arises where  more than half of the total employees or more than half of the representatives for the  employee representative congress put forward a request for collective bargaining to  the union, then the union must present this request to the enterprise. If the  employer has no trade union, employees will have to raise such requests to the  general trade union at the location where the company is registered. After obtaining  agreement by more than half of the total employees or more than half of the  representatives for the employee representative congress, the general trade union  should raise the request of collective bargaining with the enterprise. The employer  must respond to the request within 30 days. Subsequently, a collective bargain  process then commences. The current legislation in Shanghai, Beijing and Shenzhen,  are seemingly easier in the sense that any employee may be required to commence  collective bargaining with its employer, which in practice, will most likely leave  employees uncertain, and which may then result in accumulated unrest. 

  • Stipulation of legal consequences for disclosure of trade secrets by  collective bargaining representatives. 

​Though the legislations on the same subject in Shanghai, Beijing and Shenzhen also  stipulate that the collective bargaining representatives shall keep the company's trade  secrets confidential, only the Provisions provide the legal consequence of the  violation of such obligation. If the employer incurs loss due to the violation, the  employee will be held liable. A serious breach may lead to criminal liability. 

  • This is the first legislation on this subject that addresses certain  misconducts which are likely to be committed by employees and  employers in the course of collective bargaining. 

For example, both sides involved in the bargaining should not disrupt or obstruct  collective bargaining by violence, duress or other illegal means, nor threaten or entice  by promises of gains the bargaining representatives of the opposing side. Employers  are forbidden to retaliate against the bargaining representatives on the employees'  side. On the other hand, the employer should not, in a breach of the employment  contract, cease to work, violate the work discipline, compel his/or her co-workers to  stop working, or block the main entries or exits of the employer's facilities, etc.  Similarly, these actions may result in civil or criminal consequences. Such banning provisions actually indicate that employees are not allowed to strike in the course of  collective bargaining, especially with regards to employees in the public service  sectors. However, in reality when collective bargaining fails to meet employees'  expectations, strikes are mostly a stronger weapon for employees to gain bargaining  power. Through this piece of legislation, the government is making an effort to draw  both the employees and the employers back from confrontation or conflict to a  negotiation table and to navigate the process in a reasonable and peaceful manner. 

  • Stipulating a three-month deadline for collective bargaining which can be  at most extended by an additional 60 days. 

This may hinder a situation where the bargaining may go on for an extended period  and ultimately result in going nowhere. . But another opinion may argue that five  months is too long for collective bargaining during which process, the employees are  already disadvantaged and may gradually be weakened during such a period.

  • A more structured mechanism for resolving disputes arising in the  course of collective bargaining is to ensure an effective and fluent  process. 

Pursuant to the Provisions' counterparts in Shanghai, Beijing and Shenzhen, the local  labour security administrative authority, supported by the trade union of the same  level and enterprise associations, is the sole organ in charge of solving such disputes  between the local enterprises and their employees. However, according to the  Provisions, there are more options offered for dispute resolution. In the event of a  dispute arising from collective bargaining or performance of a collective contract, the  parties may file for mediation from a local people's mediation organisation or other  mediation organisations specialising in labour disputes. As to disputes in connection  with collective bargaining, the employees' side may turn to the general trade union at  the place where the employer is located for coordination while the enterprise  associations should actively participate in solving such a dispute. If the local general  trade union and the enterprise associations fail to solve the dispute, the local human  resource and social security authority will appoint certain personnel, or designate  specialists from a specialist list on collective bargaining to solve the dispute. 

The Provisions may be viewed as a synergised move with a campaign issued by the Chinese  government earlier this year ("the Enhancement Plan攻坚计划"), which sets out that no less  than 80% of all employers in China shall have established collective bargaining mechanisms  by 2015. This campaign and the Provisions may indicate that the Chinese government is in  an endeavour to leverage collective bargaining and collective contract to improve employees'  wages and welfare benefits, and on the other hand alleviate the tension between employers  and employees to try to lessen strike situations and other forms of employee collective  actions. The Provisions will be effective from 1 January, 2015. One will just have to observe  the enforcement to assess the practical and legislative impact!