Last week, I attended co-blogger Steve Dickinson’s lecture on China labor law. Steve’s lecture was part of a truly superb Doing Business in China seminar put on by Global Nav. The thrust of Steve’s speech was that labor laws in China have changed, they are being enforced against foreigners, and they are very different from U.S. labor laws. In a nutshell, the biggest differences are that written contracts with all employees are required in China and firing an employee generally must be for cause. Neither of these are true in the United States.
Judging from the audience questions (and this was an extremely sophisticated audience), many were surprised by this and many had trouble understanding the full import.
A few days later, Steve and I were talking about this with the Chinese lawyers we work with in Qingdao. In explaining to them some of the cases we have handled for American clients who got themselves into trouble by improperly laying off Chinese employees, it soon became apparent to Steve and me that the Chinese lawyers were not grasping why these American companies were making these mistakes. They would ask questions like, “how could these American companies really believe they could lay off 100 people without first securing their approval and that of the government as well?” When Steve and I told them about US labor laws, the Chinese lawyers found them so bizarre, they actually laughed.
We told them of how there is a saying in the U.S. that one can fire an employee for good reason, bad reason, or no reason at all, just so long as the reason for firing is not one prohibited by law (such as racial or gender discrimination). We talked about how one might fire an employee for wearing a green shirt. We told them of how most employees in the United States do not work under written contracts and how companies generally prefer not to use contracts. It took us at least a half an hour for us to give a basic explanation of employer-employee relations in the U.S. Even then, it was pretty clear that these exceedingly bright lawyers were still nonplussed.
It was a good exercise for Steve and me and it only reinforced why it is that Americans (the labor laws in Europe are not so wildly different from China) in China so often act on Chinese employment law matters based on completely false assumptions as to how things are really done there
For more on China’s Labor Contract Law, check out the following:
- A podcast with Steve over at the China Business Network.
- “China’s New Labor Law As Plague On All Employers’ Houses“
- “China’s New Labor Law And Why Vietnam Is No Big Thing“
- “The Impact Of China’s Labor Contract Law“