On January 1, 2009, the Chinese Ministry of Human Resources and Social Security (MHRSS) enacted the Rules for Handling Arbitration Cases Involving Labor and Personnel Disputes. The New Rules abolish two old rules regarding employment dispute arbitration—the Rules for the Labor Dispute Arbitration Committee on Handling Cases, issued in 1993 by the then-existing Ministry of Labor and Social Security (MLSS), and the Rules for Handling Cases Involving Personnel Disputes, issued in 1999 by the then-existing Ministry of Personnel (MOP).
As part of the reformation of Chinese cabinet ministries, MLSS and MOP merged to form MHRSS in March 2008. Nine months later, MHRSS adopted the New Rules, which represent a significant step for the newly-formed ministry. While the primary objective of the New Rules is to consolidate and standardize procedures for handling arbitration cases that previously fell under the purview of MLSS and MOP, there are a few substantive additions to the old rules.
Priority Given to Collective Labor Contract Disputes
According to the New Rules, in accepting petitions and hearing cases, arbitration committees will give priority to disputes involving more than 10 employees and disputes arising out of the performance of collective labor contracts.
The New Rules prioritize collective labor contract disputes because, in general, these disputes have greater social impact. The New Rules also provide that, where disputes involving collective labor contracts cannot be resolved through negotiation, the employees’ labor union or elected representative may apply for arbitration in accordance with the law.
Investors, Promoters or Competent Authorities Assume Joint Liabilities
In the event that an employer involved in a labor dispute is unable to assume its liabilities because it has lost its business license, was ordered to shut down, was eliminated, or has decided to dissolve or wind up its business, the employer’s investors, promoters or competent authorities will be treated as joint parties to the dispute.
Thus, the New Rules make clear that the investors, promoters and authorities in charge of an employer can be held responsible for the employer’s wrongdoing if, at the time when arbitration is initiated, the employer cannot fulfill its responsibilities to its employees. This is consistent with relevant provisions in the Civil Procedure Law, and is expected to provide employees with added protection and leverage in enforcing their rights in labor disputes.
Certain Actions Will Interrupt the Statute of Limitation for Arbitration
The New Rules list three circumstances in which the statute of limitation for arbitration will start over:
- Where either party makes claims against the other party by conducting negotiations, applying for mediation or any other means;
- Where either party seeks a remedy by applying for arbitration, bringing a lawsuit, applying for a payment order or any other means; and
- Where either party agrees to perform its obligation.
Open Access to Case Files
Under the New Rules, arbitration committees will establish a system for reviewing case files, and allow the parties to an arbitration and their representatives to review and photocopy any nonconfidential material in their case file.
In contrast, the old MLSS rules did not allow the parties to an arbitration or anyone associated with the parties to review, let alone copy, their case file. The old MOP rules did not explicitly prohibit the parties from consulting their case file, but instructed the arbitration committees to strictly monitor public access in order to maintain the files’ integrity. Though the New Rules seem less restrictive than the old rules, the New Rules do not specify which materials are confidential and which are not. Therefore, in practice, it remains to be a question whether the New Rules will provide the parties to an arbitration with greater access to their case file than they had under the old rules.
Timeline of Arbitration Procedure Is Shortened
Under the New Rules, an arbitration committee must accept a properly-filed petition for arbitration and issue a Notice of Acceptance within five days of its receipt of the petition. In addition, the arbitration committee must form an arbitrator panel within five days of its acceptance of the petition, and notify the parties that it has formed the panel. Furthermore, the arbitration committee must complete the arbitration itself within 45 days of its acceptance of the petition. If the case is complicated and the arbitration committee needs more time to resolve it, the chairman of the committee may approve an extension of no more than 15 days.
According to both sets of old rules, arbitration committees handling labor and personnel disputes had 60 days, not 45, to complete an arbitration. And if a case was particularly complicated, the committees could apply for an extension of up to 30 days, not 15. The change is intended to expedite the arbitration process as the number of labor dispute cases has risen sharply since the enactment of the Employment Contract Law, on January 1, 2008