The prior law in operation relating to labour disputes, which can generally be described as “mediation, arbitration, and two trials,” contained significant loopholes that impacted its efficacy. The new regulations, which came into effect on May 1, 2008, have addressed these issues and brought about radical changes in relation to labour law in China. Below we discuss these changes in order to examine the impact they will have on future labour disputes in China.
EXPANSION IN THE SCOPE OF CASE ACCEPTANCE
Previously, it was common for employees’ cases to be rejected by the court simply because the labor disputes in question were beyond the scope of case acceptance dictated by the previous body of law. As a result, cases that were not accepted left employees without a legal venue to air grievances. Article 2 of the new regulations addresses this problem by including a greater number of scenarios under which courts may accept cases.
The new Law extends the scope of case acceptance to “disputes arising from the acknowledgement of the employment relationship,” “disputes arising out of working hours, rest and holidays” and “disputes arising from medical cost for injury at work, economic compensation or damages etc.” These are the most common labor disputes and of major concern to employees. Their inclusion into the scope of case acceptance will enable employees to make their complaints, provided they have effective evidence. Additionally, Article 52 provides that “disputes between workers employed under the engagement system in civil service institutions and such institutions shall be dealt with in accordance with this Law; if laws, administrative rules and regulations or the State Council provides otherwise, such otherwise provided regulations shall be observed.” This provision resolves the previous problem whereby employees employed in civil service institutions had no means to address labour grievances.
REVERSED BURDEN OF PROOF
Prior to any labour action employees must first prove that an employment relationship exists. A fundamental problem, however, is that the evidence necessary to prove this relationship (for example evidence as employment contract, workers payroll etc), is usually kept in the hands of the employer. Where the employer refuses to produce such evidence the employee finds it difficult to prove the existence of a valid employment relationship which often leads the case to be thrown out. The new law reallocates the burden of proof, making it more difficult for the employer to withhold relevant evidence. Article 6 of the Law provides that “When a labor dispute arises, the parties shall be responsible for providing evidence in support of their assertions. If evidence relating to the subject matter of the dispute is in the possession or under the control of the employer, the employer shall provide such evidence. If the employer fails to provide the same, such failure shall be held against it.” Further, Paragraph 2 in Article 39 of the Law also provides that “If the employee is unable to submit evidence relating to the arbitration claims that is in the possession or under the control of the employer, the arbitration tribunal may require the employer to provide such evidence by a specified deadline. If the employer fails to provide the same by the specified deadline, such failure shall be held against it.”
These provisions on the revised burden of proof are specifically designed to prevent the employer from intentionally withholding evidence in order to frustrate the employee’s case. It can also be presumed by implication that employers shall also bear responsibility should they claim that relevant evidence is damaged or stolen.
INCREASE IN CHANNELS FOR MEDIATION AND ARBITRATION
Mediation is central to the resolution of labour disputes in China, confirmed by Article 3 of the Law provides that “the resolution of labor disputes shall be based on the facts and adhere to the principles of legality, fairness, timeliness and emphasis on mediation, and shall protect the lawful rights and interests of the parties.”
Furthermore to expand mediation channels, Article 10 of the Law provides that “when a labor dispute arises, parties concerned may seek mediation to the following mediation organizations: (i) the enterprise’s labor dispute mediation committee; (ii) a grassroots people’s mediation organization established in accordance with the law; and
(iii) a town, township or neighborhood organization that has a labor dispute mediation function.”
The widening of the scope of mediation channels not only makes effective use of social resources, but also remedies the disadvantages of the limited mediation organizations struggling to meet the great demands thereof from non-state-owned enterprises.
STRENGTHENED EFFECTIVENESS OF MEDIATION AGREEMENT
That parties voluntarily perform their obligations under the mediated settlement agreement is set out in Article 11 of the Regulations. The Interpretation of the Supreme People's Court on Some Issues Concerning the Application of Laws for the Trial of Labor Dispute Cases (II) promulgated on August 14 2006 provides that a mediated settlement agreement, reached under the labor dispute mediation commission and concerning labor rights and obligations, has the binding force of a labor contract and can be used as the basis for the people's court's judgment. Any failure to perform a payment obligation stipulated in a mediated agreement enables an employee to directly file a “common civil dispute” with the People’s Court.
This Law also further strengthens the effectiveness of mediated settlement agreements: Paragraph 2 of Article 14 of this Law provides that “The written mediated settlement agreement shall be signed or sealed by the parties and shall enter into effect once it bears the signatures of the mediators and the seal of the mediation organization. The agreement shall be binding on the parties and the parties shall perform the same.”
Article 16 also of the Law provides that “If a mediated settlement agreement is reached on the payment of overdue labor remuneration, medical bills for a work-related injury, severance pay or damages but the employer fails to perform such agreement by the deadline specified therein, the employee may apply to a People’s Court for a payment order on the strength of the agreement. The People’s Court shall issue a payment order according to law.” The strengthening of the effectiveness of the mediated settlement agreement will assist grass-roots mediation organizations in better protecting the interests of those employees in weaker social positions.
JURISDICTION FOR ARBITRATION – PRIORITY FOR PLACES WHERE THE LABOR CONTRACT IS PERFORMED
Under Articles 17 and 18 Labor arbitration is generally accepted by the labor dispute arbitration commission in the region where the employer is located. Where the employer and employee are not in the same arbitration jurisdiction, the dispute shall be dealt with at the arbitration commission situated where the employer responsible for the payment of salaries is located. Often however the employer’s registered address and its actual address are in two different places. The result of this is problems relating to jurisdiction leading occasionally to cases bouncing between jurisdictions. The consequence of this is that the employee must incur the expense of traveling between various jurisdictions often making it impractical to pursue the case.
To solve this problem Article 21 of the Law provides that “a labor arbitration commission shall be responsible for the labor disputes in its jurisdiction. A labor dispute shall come under the jurisdiction of the labor arbitration commission situated where the labor contract is performed or where the employer is located. If one party applies to the labor arbitration commission situated where the labor contract is performed and the other to that situated where the employer is located, the labor arbitration commission situated where the contract is performed shall have jurisdiction.”
The provision gives priority to the jurisdiction where the labor contract is performed whenever a jurisdictional conflict occurs. This not only makes it much more convenient for employees to file for arbitration but also makes it easier for labor dispute arbitration commissions and courts to resolve such issues.
SHORTENED ARBITRATION PERIOD
Under the regulations an arbitration commission shall determine whether the case is acceptable within seven days. If accepted, the arbitration commission must serve the duplicate of the application letter to the party against whom the application is targeted within seven days. Furthermore, all labor dispute arbitration cases must be completed within 60 days from the date the tribunal is formed. Certain cases may necessitate a time extension; these may be extended with the approval of the arbitration commission for a maximum period of 30 days.
In contrast, according to Article 29 and Article 43 of the Law, the labor dispute arbitration commission has five days to decide whether or not to accept a case. If accepted the arbitration judgment must be made within 45 days of formation of the tribunal. Under certain circumstances the arbitration period may be extended but not for a period exceeding 15 days. The difference between the new law and the regulations is that the arbitration period has been shortened by a third.
More importantly the arbitration commission must operate efficiently or risk the delay being brought the attention of the People’s Court as the Law provides that “in the event that arbitration rulings are not made within the prescribed time period, the parties concerned are entitled to bring a lawsuit in connection with such labor dispute to the People’s Court.”
EXTENDED TIME FOR STATUTE OF LIMITATIONS
Article 82 of the prior Labour law states that “the party that asks for arbitration shall file a written application to a labor dispute arbitration commission within 60 days starting from the date of the occurrence of a labor dispute. Generally, the arbitration commission shall produce a ruling within 60 days after receiving the application. The parties involved shall implement arbitration rulings if they do not have any objections to those rulings.” The reasoning behind a 60 day statute of limitations of 60is to expedite the process, leading to a quick resolution. The practical effect though has often been to deny the employee justice by locking him or her out the procedure due to their tardiness in filing a complaint.
This Law extends the statute of limitations for arbitration from 60 days to one year and also adds special provisions on interruption, suspension, and exemption from the time limit under special circumstances. Article 27 of the Law provides that “the time limit for applying for arbitration for a labor dispute shall be one 1 year and such time limit shall commence to count from the date on which a party got to know or should have known that its rights were infringed upon. The time limit specified in the first paragraph hereof for arbitration shall be interrupted if a party asserts their rights against the other party or files a complaint with the relevant authority, or if the other party agrees to perform his or obligations, and shall be counted anew from the time of interruption. The time limit specified in the first paragraph hereof for arbitration shall be suspended if force majeure or another legitimate reason prevents a party from applying for arbitration before the arbitration time sets in, and counting of the time limit shall resume from the date on which the reason for its suspension is eliminated. If a dispute over overdue labor remuneration arises during the term of an employment relationship, the application for arbitration by the employee shall not be subject to the time limit specified in the first paragraph hereof. However, if the employment relationship has terminated, the employee must submit his or her application within one year from the date on which the employment relationship was terminated.”
A primary concern for employees under the old law was the mantle that winning a case meant losing a job – the new rules solve this problem as labour disputes regarding remuneration for employees can now be extended to a year entitling the employee to all remuneration and benefits so long as the employee remains in an employment relationship.
CONCLUSION
The PRC Law on Mediation and Arbitration of Labor Disputes is a significant improvement over the prior regulations by expanding the scope of case acceptance, increasing channels for mediation and arbitration, extending the time for statute of limitations, shortening the arbitration period, strengthening the effectiveness of mediation agreement and adjusting jurisdiction for arbitration and allocation of burden of proof. The Law also includes several other key provisions; for example Article 16 whereby the People’s Court will issue a payment order according to the law at the application of the employee if a mediated settlement agreement is reached (for payment of overdue labor remuneration, medical bills for a work-related injury, severance pay or damages) where the employer fails to perform their obligations under the agreement by the stated deadline. The end result of these changes is a fairer Labour law that allows for lower costs and increased efficiency, contributing to the fundamental goal of building an equitable and harmonious society.
