The Draft is enacted in accordance with the new rules on labor dispatch specified by the Decision on Amending the Employment Contract Law issued by the Standing Committee of the National People’s Congress (“Decision”) (全国人大常委会关于修改《劳动合同法》的决定) on December 28, 2012, aimed at establishing an administrative licensing system for labor dispatch. The Decision requires all existing labor agencies and labor agencies to be incorporated to obtain licenses to carry out labor dispatch activities after it comes into force on July 1, 2013 (see our Newsletter of January 2013).

The Draft reiterates the requirements that labor agencies must meet when applying for a labor dispatch license (“License”) as specified in the Decision, including those on registered capital, business premises and internal regulations and rules on labor dispatch. The competent labor authority will issue Licenses for a term of 3 years to the qualified applicants and such License can be renewed upon application by the labor agency 60 days prior to its expiration.

The Draft clarifies that the “internal regulations and rules on labor dispatch” of a labor agency must include information such as template employment contract, template labor dispatch agreement, internal control and management systems, and numbers of full-time staff, among others.

The Draft stipulates that, if a labor agency intends to carry out labor dispatch activities beyond the provincial jurisdiction where it is registered, it shall set up a branch in the place it intends to do so. The branch is subject to a record filing registration with the competent labor authority.

The Draft reinforces the labor authorities’ supervision of labor agencies by requiring them to submit annual reports of the operation of labor dispatch activities by the first quarter of the following year. Information on employment contracts, dispatch agreements, participation in trade unions, salaries, and social security contributions with regard to the dispatched employees must be included in the annual reports. A labor agency will be disqualified from renewing its License if it:

  • fails to submit the annual report on time, still failing to so do after two warnings;
  • submits the annual report with false information, still failing to rectify this after being warned; or
  • violates labor laws and regulations, and receives administrative punishment for two or more times.

The Draft establishes the following legal liabilities to be assumed by labor agencies for their illegal operation and non-compliance of the law:

  • Where a labor agency illegally carries out labor dispatch activities without the License, the labor authority can order it to stop operating and confiscate the amount it has gained illegally, imposing a fine of between one and five times the amount of the illegal gain. If there is no illegal gain, it can impose a maximum fine of RMB 50,000.
  • Where a labor agent fails to rectify its violation of the Employment Contract Law after being warned by the labor authority, the labor authority may revoke its License and impose a fine of between RMB 5,000 and RMB 10,000 for each employee dispatched illegally.
  • Where a labor agency fraudulently obtains or incorrectly uses its License, the labor authority can impose a maximum fine of RMB 10,000 for minor offences, and between RMB 10,000 and RMB 30,000 for serious offences.

Date of issue: April 19, 2013. Deadline for submitting comments: May 19, 2013.