An update in ongoing developments regarding labor relations and employment in China

Baker & McKenzie

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Law Firms Key Workplace Documents 
August 2007 
China Employment Law Update - August 2007 
Baker & McKenzie 
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China Employment Law Update - August 2007 
Abstract 
An update in ongoing developments regarding labor relations and employment in China. 
Keywords 
China, labor law, employment, public policy, labor relations 
Comments 
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Copyright by Baker & McKenzie. Document posted with special permission by the copyright holder. 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/lawfirms/22 
People’s Republic of China
August 2007
China Employment Law Update
www.bakernet.com
Beijing 
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©2007 Baker & McKenzie 
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Andreas Lauffs 
Head 
Employment Law Group 
Direct: +852 2846 1964 
PRC Mobile: +86 13601979592 
andreas.lauffs@bakernet.com
To find out more about how our 
Employment Law Group can add 
value to your business, please 
contact:
Plans initiated to implement Employment 
Contract Law
National and local authorities have initiated efforts to implement the 
Employment Contract Law (ECL) (劳动合同法) following the law’s 
approval by the Standing Committee of the National People’s Congress 
(NPC) on June 29, 2007. The law becomes effective on January 1, 2008. 
According to officials at the Ministry of Labor and Social Security 
(MOLSS), the MOLSS will issue implementing rules for the ECL before 
the end of this year. The implementing rules may address key issues such 
as the required procedures for implementing company rules as well as 
when an open-term contract must be provided to an employee who has 
completed two fixed terms of employment. 
On July 12, 2007, the MOLSS also issued a notice requiring local labor 
bureaus to revise employment-related laws and regulations for compliance 
with the ECL. Among the areas of concern were probation periods, 
economic layoffs, severance payments, agency workers, and part-time 
employees. 
Local authorities have reportedly begun the review process, with Beijing, 
Shanghai, and Jiangsu provinces among the jurisdictions revising their 
labor contract regulations. 
For more information regarding the details of the Employment Contract Law, please 
refer to our recent Client Alert. 
Labor disputes law slated for approval
On August 26, the Law on the Mediation and Arbitration of Labor 
Disputes (劳动争议调解仲裁法) was submitted to the Standing 
Committee of the NPC with a goal of approval by December 2007 and 
implementation on January 1, 2008.
The most significant proposal in the draft law is likely the extension 
of the statute of limitations from 60 days to six months. The draft law 
also incorporates grounds listed in a 2006 Supreme People’s Court 
interpretation regarding when the statute of limitations period should be 
tolled.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
2A provision of the draft that is intended to bar appeals to courts and 
therefore expedite the resolution of disputes would subject the following 
types of disputes to final determination in labor arbitration:
• disputes involving claims that do not exceed the equivalent of 12 
months of the local minimum monthly wage;
• disputes relating to work hours, rest, leave, and social insurance; and 
• disputes relating to the enforcement of collective contracts.
The draft law would not affect the rights of parties to appeal other types 
of claims to People’s Courts.
There appear to be discussions on whether mediation prior to arbitration 
should be expanded, and possibly made mandatory. 
Shanghai approves collective  
contract regulations
On August 16, 2007, Shanghai approved the Collective Contract 
Regulations (上海市集体合同条例) regarding collective bargaining. 
The regulations become effective on January 1, 2008. The regulations 
supplement national rules on collective bargaining as well as provisions in 
the ECL.
The new Shanghai rules obligate employers to engage in collective 
bargaining if demanded by a union or employee representative unless 
a “justifiable reason” exists. The rules prohibit, without exception, 
employers from refusing to engage in collective bargaining if:
• the employer plans to lay-off  at least 20 employees or 10% of the 
workforce; 
• a labor dispute causes a work stoppage or results in the submission of 
a complaint; or 
• an unsafe work condition is discovered.
No penalties except for orders to initiate bargaining are provided in 
the rule. The Shanghai rules reduce the period when an employer must 
respond to a request for collective bargaining from 20 days to 15 days. 
These rules also provide details on procedures for industry-wide and 
regional collective bargaining as well as collective bargaining involving 
branch offices. 
In a related development, collective bargaining regulations in Shenyang, 
Liaoning province became effective on August 1. Unique features of these 
regulations include a five-day limit for employers to respond to requests 
for collective bargaining and penalties for refusing to engage in collective 
bargaining such as the labor bureau officially recording the enterprise as 
not being of good standing and announcing this to the public, and fines 
3of up to RMB20,000 for an employer and up to RMB10,000 for an 
employer’s chairman in serious cases.
Employment Promotion Law is passed
The Standing Committee of the National People’s Congress passed the 
Employment Promotion Law (就业促进法) on August 30, 2007. 
This law will take effect on January 1, 2008. Full text was not available at 
the time of writing this update. More details on the law will be provided 
in a later client alert.
Guangdong requires employers to establish 
procedures to prevent sexual harassment
In regulations issued during May, Guangdong province became the 
first reported jurisdiction to explicitly require employers to establish 
investigation and complaint procedures to protect women against sexual 
harassment. The regulations also require employers to create “appropriate 
working environments”.
Details regarding the new requirements and penalties for failure to 
comply were not included in the amended Implementing Rules of the Law 
of the Protection of the Rights and Interests of Women (实施妇女权益保
障法办法). 
Additional rules issued for employee  
stock plans 
On April 6, the State Administration of Foreign Exchange (SAFE) 
issued guidelines governing the approval and procedural requirements 
for overseas-listed stock plans provided to employees in China. These 
guidelines specifically cover employee stock purchase plans (ESPP) and 
employee stock option plans (SOP), but may be extended to cover other 
types of equity awards. The guidelines supplement rules issued in January 
2007 that announced SAFE’s jurisdiction over overseas stock plans. 
According to the April guidelines, PRC national employees must use a 
domestic agent to participate in overseas stock plans. The agent, which 
may be an affiliate or subsidiary of the overseas-listed company, must 
open an onshore foreign exchange account to handle the conversion of 
Renminbi into foreign exchange for the purchase of shares. The agent 
must also apply for an annual quota for foreign exchange conversion 
and payment. All foreign exchange derived from participation in the 
stock plans must be repatriated into the onshore accounts for periodic 
monitoring.
4The guidelines also set for procedures for companies with existing ESPPs 
and SOPs to obtain approval of their plans.
For more information regarding the April 2007 guidelines, please refer to our recent 
Client Alert.  
Firms sanctioned for labor violations in 
Olympics-related case
Four firms in Guangdong province that manufactured licensed Olympics 
products were sanctioned in July by the Beijing Organizing Committee of 
the Olympic Games (BOCOG) for labor violations. 
The BOCOG terminated Le Kit Stationery Co.’s right to manufacture and 
sell licensed products because the company had used child labor and failed 
to sign labor contracts with some employees.
Three other companies had their licenses suspended by the BOCOG for 
violating overtime requirements. Among these three companies, Yue Wing 
Cheong Light Products (Shenzhen) and Mainland Headwear Holdings 
Ltd., (Shenzhen) were respectively fined RMB 883,700 and RMB 533,700 
by the Shenzhen labor bureau for exceeding the maximum number of 36 
hours of overtime per employee per month. The fines were reportedly 
suspended pending a hearing.
Investigations by the BOCOG and national and local labor authorities 
against the four companies were sparked by a report released by the non-
governmental organization PlayFair Alliance 2008.
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China Employment Law Update - August 2007

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