China has reported a significant increase in applications for labor dispute arbitration during the economic downturn, a trend that likely was influenced by the Labor Disputes Mediation and Arbitration Law, which became effective May 1, 2008. As a result of this trend, it has become increasingly important for businesses to be aware of Chinese law concerning the reduction of financial obligations to employees based upon financial difficulties. Under the PRC Employment Law, an employer has two options in such a situation: 1) negotiate with employees to significantly decrease work assignments and salary up to the minimum salary standard allowed by law; or 2) terminate certain employees.

Either option involves specific requirements of which employers should be aware. An article by Gaopeng & Partners summarizing these requirements may be found here. Gaopeng & Partners, an ALFA International member firm with which Dinsmore & Shohl collaborates, provides articles such as this one through its China Business Law Alert.