Employers Get a Break on Labor Disputes

headshot.png

By Liu Zhenghe and Samuel Yang

The unilateral termination legal system for employers affects employees’ rights of labor, employment stability and development, employers’ ability to operate autonomously, and the reasonable and orderly mobility of labor.   

The system of unilateral termination in China has experienced two milestones; one was the “employer friendly” unilateral termination under the Labor Law of the People's Republic of China implemented in 1995, and the other was the “employee friendly” unilateral termination under the Labor Contract Law of the People's Republic of China implemented in 2008.

The termination system for labor contracts was quite strict under the Labor Law legal system, and the conditions, procedures and compensation of termination were all strictly stipulated under the law. However, there was no limit to the expiry of a fixed-term labor contract. Therefore, an employer often preferred to utilize short-term labor contracts to avoid the strict termination system.

The Labor Contract Law, however, included new clauses for mandatory conclusion of an open-ended labor contract and financial compensation based on the termination of a fixed-term labor contract. As a result of the Labor Contract Law’s implementation in 2008, there was no way for an employer to avoid the strict termination system.

Since the 2008 implementation of the Labor Contract Law, debate has raged regarding the law and if the system overprotects employees. The discussion on potential revisions of the Labor Contract Law was particularly fierce during 2016, but the revision of the Labor Contract Law has not been officially included in the National People's Congress legislative planning.

Though the Labor Contract Law has not been revised, in some areas the referee criteria of labor arbitration and litigation have been changed. Recently, the Beijing Higher People's Court and the Beijing Labor and Personnel Dispute Arbitration Committee jointly released the Explanation on the Application of Law in the Trial of Labor Dispute Cases(“Explanation”), in which there were many clauses that involved labor contract termination disputes. Overall, the Explanation did not change the fact that the termination system for labor contracts is quite strict under the Labor Contract Law legal system, but it did make some favorable provisions for employers on the referee criteria for labor dispute cases.

For instance, the employer’s burden of proof that the employee does not meet the conditions of employment is appropriately reduced in case of termination of the labor contract during the probationary period. If the employee has serious breaches of labor discipline or professional ethics, even if the rules and regulations of the employer or labor contracts do not clearly define or stipulate such circumstances, the employer can still unilaterally terminate the labor contract.

In a case where the employer is deemed to have illegally terminated the labor contract and the employee insists on the resumption of the labor relationship, it points out the circumstances in which labor arbitration or litigation should adjudicate the labor relationship that cannot be resumed.

The changes to the referee criteria may indicate the direction of legal amendments in the future. Even without a fundamental revision of the basic legal system and relatively relaxed restrictions on employers, the changes seem likely to help appropriately reduce the risks and costs to employers of unilateral dismissal. 

Liu Zhenghe is a partner at AnJie Law Firm, and focuses on employment and labor law. Samuel Yang is a partner at AnJie Law Firm, and has extensive experience in the Technology, Media and Telecommunications, and also advises on employment law. The authors contributed this article on behalf of Lexis Nexis, an AmCham China member company.