China now has its legal system in place, and in recent years it has assembled substantive laws and regulations that govern the workplace, the employment relationship, and the contractual and statutory rights and benefits of its workers. As China moves ahead to raise the legal standards and levels of coverage and enforcement in these areas and its social security safety net, it also seeks to balance its very successful economic growth and competitive advantages especially as these relate to labor. Employers face increasing obligations and technical legal requirements, which in earlier years did not exist or at least were not consistently enforced. The current global economic downturn now puts added pressures on China to maintain advancement in labor and employment laws.

Although the Labor Law was issued in 1994 with its broad outlines and promises of regulation, the more substantive labor and employment laws were not issued and put into operation until the mid-2000s.

Suddenly, in the mid-2000s, Wal-Mart was unionized and the Chinese trade union, the All China Federation of Trade Unions (ACFTU), launched organization drives aimed especially at the Global Fortune 500 companies doing business in China. Early draft provisions of the new Labor Contract Law sent the American Chambers of Commerce reeling and arguing that the new labor laws and added regulations and costs would drive American companies out of the country. The discussion was so intense that the Chinese government raised issues about foreign interference in China's affairs.

Employer Work Rules and Discipline

The Labor Law and Labor Contract Law require employers to establish labor rules and regulations to ensure that workers enjoy their rights and perform their labor obligations; the LCL further requires the employer to have certain “consultations” with employees about those rules. Under the LCL, the employer first has a duty of “discussion” with the worker's Congress or all of the employees when it “formulates, revises or decides on rules and regulations or material matters that have a direct bearing on the immediate interests of its workers.” These topics include “labor compensation, work hours, rest, leave, work safety and hygiene, insurance benefits, employee training, work discipline, or work quota management.” The Congress or employee group shall put forward a “proposal and comments,” whereupon the matter shall be determined by “consultations” between the employer and the labor union or the employee representatives. If there is disagreement on the rules' appropriateness, the employer is to seek to improve the rules by amendments. Interestingly, the law does not explicitly require consent before the rules are implemented. Handbook rules and regulations on the above topics that are in conflict with the law are invalid.

Employers' work rules on conduct typically lay out conduct standards with consequences for violations, including warnings, suspensions, terminations, loss of pay, and demotions. They also provide a basis for employers and arbitrators in evaluating the performance of employees, and they offer justifications for personnel decisions other than discipline, such as granting leaves and bonuses.

At the central government level under the State Council, the Ministry of uman Resources and Social Security (MOHRSS) administers labor and employment policies. In March 2008, this ministry took over the functions of the Ministry of Labor and Social Security (MOLSS) (see Table 2.1) and the Ministry of Personnel (MOP). It maintains vertical supervision at the local level through local labor bureaus, which are at the same time also greatly controlled by local governments through their funding and appointments power.

The MOHRSS is one of China's newly designated “super ministries.” Since 1998 its predecessor, MOLSS, has been responsible for social security management and development of policies and legislation for urban, rural, and government workers. Before its 2008 reorganization, it was organized into the following departments: legal affairs, planning and finance, training and employment, labor and wages, pension insurance, unemployment insurance, medical insurance, work-related injury insurance, rural social insurance, social insurance fund supervision, international cooperation, and personnel and education. With the reorganization in 2008, it assumed the functions of the former MOP, with the exception of its civil service department, which is now part of the State Public Servants Bureau.

The reorganized ministry has twenty-three departments, including several new ones (see Table 2.2).

Responsibilities and Functions of the MOHRSS

The MOHRSS, through its departments and subordinate institutions (unchanged from MOLSS, see Table 2.3), is responsible for formulating and implementing policies in the following areas.

Legal Regulation of Labor Disputes

Labor disputes arising from statutory or contractual bases are resolved by the governmental labor mediation and arbitration process. The mediation process traditionally occurs within the enterprise and is voluntary. Arbitration is available, but claims must be filed within time limits. The Labor Mediation and Arbitration Law (LMA) became effective on May 1, 2008. It provides increased accessibility for employees and greater finality to the arbitration process. It also clarifies the relationship of arbitration awards to judicial appeal. Certain exceptions to the usual exhaustion requirement are now included where direct access to the court is permitted. The new law seems to have spurred an increased use of arbitration: “Guangdong's courts and arbitrators handled more than twice as many labor disputes this May than a year earlier, after introduction of rules giving workers more rights and making arbitration free.”

The evolving legal regulation of labor arbitration, resulting in the current, primary regulations, began in 1993 with Regulations on Settlement of Labor Disputes in Enterprises, which were followed by the 1994 Labor Law and two Supreme People's Court Judicial Interpretations in 2001 and 2006. The LMA and the Labor Contract Law (LCL) were passed in 2007 and became effective in 2008. On January 1, 2009, new Labor and Personnel Dispute Arbitration Procedure Rules were issued by the MOHRSS. Altogether, the laws make available a three-step process of mediation, arbitration, and litigation.

Rights, Remedies, and Multiple Forums

Labor rights in China, as elsewhere in the world, may emanate from a variety of sources, including international, national, statutory, and contractual law. From these sources come alternative avenues of regulation and enforcement: administrative, labor arbitration, and the courts. The use of these varied approaches can be seen from a brief illustration. Suppose a female employee with a labor contract is discriminated against at work by her employer. Under the Women's Rights and Interests Law, she may complain to administrative authorities, which may investigate and impose sanctions; under this law, she also has a right to proceed to court, but because it is a “labor dispute,” she also has a right (if not a duty) to go to labor arbitration. Similar alternatives are available for an employer that has a trade secret compromised by an employee. The Law against Unfair Competition prohibits infringement of trade secrets, and the employer may take the matter to the State Administration of Industry and Commerce (SAIC), which is empowered to deal with and resolve disputes related to trade secrets. If a labor contract protects confidential information, the labor arbitration process will also be available. Access to the court could arise under either avenue.

Another example is a work-related injury that may need an assessment by the administrative agencies for labor security (usually the local bureau of labor and social security) of the percent of permanent injury; once that administrative agency determines the percent of injury, the employer may dispute the assessment or the duty to pay the employee.