China's New Labor Law: Compliance Comes Easy
Co-blogger, Steve Dickinson, was in Seattle this week for the holidays. Steve is scheduled to talk at the Beijing Rotary Club on January 8, regarding China's new labor law and we were discussing why so many foreign companies in China seem paralyzed by the new law.
We came up with two explanations. The first is the persistent belief that the government will not enforce the new labor laws, just as it has done very little to enforce the old labor laws. Our second explanation is that the laws are so complicated and difficult companies are throwing up their hands out of a belief compliance is either too costly or impossible. Both views are way off the mark.
Beijing probably will not enforce the new labor laws any more than it enforces the present labor laws. But, this completely misses the point. The chief risk of failing to comply with the new labor laws lies in the risk of getting sued by your present and/or your former employees, not in governmental enforcement.
Compliance is not all that tough. Basically, all a company with employees (or even one employee) need do to comply with the new laws is have a written agreement with its employees and an employee manual.
One additional note. The employment agreement cannot call for application of foreign law as such contracts do not constitute a written agreement under the new laws. This means that if you have an employee working in China (whether a Chinese national or not) and your agreement with that employee is under the law of your country (other than China) or some other country (other than China), your employee will be able to sue you in China for statutory damages for failure to comply with the written agreement requirement.
Told you it was easy.
Comments
Dan - I'm getting fed up reading (not on this site) about all this compliance problems. We're not exactly a large company (about 100 people in China as part of a 3600 global group) but we've had no problem becoming compliant. In fact, we consider ourselves to be a responsible employer and we were probably 95% compliant BEFORE they even released the new laws for discussion.
It's not that difficult once you accept the concept that employers can no longer treat employees as a disposable resource and that there needs to be some long term security and guarantees for everyone.
Forget whether enforcement will be an issue and get in line with law. Forget even thinking about whether or not Chinese companies will become compliant and stick to the law - what they do is of little concern to you. Treat your employees with some respect and you won't have a problem.
If you have a proper employee handbook in place, reviewed and agree with the union (if you have one) and you follow it - then life will be sweet.
Are you going to come across problems? Damn sure you will, but they will always be a lot smaller problems than you'll get back in the west. Employers big and small have had it too easy for to long. It's time to start investing in people for the long term.
Large and even SME's should have capable HR departments that can sort all this out quite easily. However, the biggest complains I've heard are from 'small' companies with only a few employees. I tell them - "then it should be easier for you. Every employee deserves security and respect. Sort it out now while yours still small - it'll make life a lot easier if you ever get bigger."
The colonial days of stripping out resources and moving on are gone. Time to pay back - do it right and get a better ROI.
Just my long drawn out tuppence worth.
Posted by: PiPi | January 4, 2008 12:19 AM
Pardon me but that's BS. If if a company follows this "compliance" they can easily get messed up by this partial regulation. Many small companies would be facing the reality of paying unjust compensation or spending funds on going to court.
Posted by: Jonathan | January 4, 2008 2:23 AM
Jonathan - instead of just saying what I wrote is BS, feel free to give examples of how those "small companies would be facing the reality of paying unjust compensation or spending funds on going to court".
I've been a GM here for 7 years and I've never yet had to deal with unjust compensation or going to court, and I can't see the new laws making that any more likely. You think being an employer in the US or Europe is any easier and less regulated?
Posted by: PiPi | January 4, 2008 8:14 PM
PiPi,
You are absolultely right. Those of our clients who operate above the law are pretty much coasting on this one. In fact, many of them have told me they love the new law because they see it as forcing their competitors to start flying right.
"Treat your employees with some respect and you won't have a problem." Again, you are right. Too often, we Westerners (particularly we lawyers) think that the law has all the answers, when in reality, it oftentimes should be the last resort.
"If you have a proper employee handbook in place, reviewed and agree with the union (if you have one) and you follow it - then life will be sweet." Again, I agree.
"Sort it out now while you're still small - it'll make life a lot easier if you ever get bigger." Again, I agree, but in this case, they really have no choice.
I have had clients complain to me about the new law as though I can do something about it. All I can do is just listen and then start talking about what they need to do to comply.
Posted by: China Law Blog | January 7, 2008 4:56 PM
Jonathan,
Any examples, because I am not seeing it?
Posted by: China Law Blog | January 7, 2008 4:57 PM
PiPi,
I just asked the same question. Jonathan gives no examples.
It is fair to complain about the law, but it is way too early to complain about how the Chinese courts will enforce it because there have been no rulings on it yet.
Posted by: China Law Blog | January 7, 2008 4:59 PM