PRC, Labour Law

(Adopted at the 8th Session of the Standing Committee of the 8th National People's Congress, promulgated on 5 July 1994 and effective from 1 January 1995.)

PART ONE : GENERAL PROVISIONS

Article 1: This Law is formulated in accordance with the Constitution in order to protect the lawful rights and interests of workers, readjust labour relationships, establish and safeguard a labour system that suits the socialist market economy and promote economic development and social advancement.

Article 2: This Law shall apply to enterprises and individual economic organizations (hereafter, "employing units") inside the People's Republic of China, and to workers with whom a labour relationship is created.

State authorities, institutions, social organizations and workers with whom a contractual labour relationship is established shall refer to this Law.

Article 3: A worker shall enjoy equal rights in obtaining employment, choosing occupations, obtaining remuneration for labour, taking rest days and holidays, obtaining safety at work and health protection, receiving training in vocational skills, enjoying social insurance and welfare, submitting labour disputes for resolution as well as other labour rights stipulated by law.

A worker shall complete his labour, enhance his vocational skills, implement safety at work and health regulations and observe labour discipline and professional conduct.

Article 4: An employing unit shall establish and perfect a system of rules and regulations in accordance with the law to ensure that workers enjoy labour rights and perform labour duties.

Article 5: The State shall adopt various measures to promote employment, develop vocational education, formulate labour standards, readjust social income, improve social insurance, coordinate labour relationships and gradually raise the standard of living of workers.

Article 6: The State encourages workers to participate in voluntary social labour, initiate labour competitions and rationalization of proposals, encourages and protects workers in carrying out scientific research, technical innovation, inventions and creations, and commends and rewards model and advanced workers.

Article 7: A worker shall have the right to join and organize a trade union in accordance with the law.

A trade union shall represent and protect the lawful rights and interests of workers, and organize its activities autonomously and independently in accordance with the law.

Article 8: A worker shall participate in democratic management or consult on an equal level basis with his employing unit about the protection of lawful rights and interests for workers through staff meetings, staff representative meetings or other means in accordance with law and regulations.

Article 9: The labour administration department of the State Council shall be in charge of labour work throughout the country.

The labour administration departments of regional people's governments above county level shall be in charge of labour work within their administrative regions.

PART TWO : PROMOTION OF EMPLOYMENT

Article 10: The State shall create employment conditions and increase employment opportunities by promoting economic and social development.

The State encourages enterprises, institutions and social organizations to increase employment by establishing industries or developing business within the scope provided by laws or administrative regulations.

The State shall encourage workers to work together voluntarily or engage in individual business to realize employment.

Article 11: Regional People's Governments at all levels shall take measures to develop various kinds of employment agencies to provide employment services.

Article 12: The employment of workers shall not be subject to discrimination because of nationality, race, sex or religious belief.

Article 13: Women shall enjoy the right of employment equal to that of men. In the recruitment of staff and workers, women may not be refused employment because of their sex and recruitment standards may not be raised for women, except for posts and jobs whose nature has been determined unsuitable for women by the State.

Article 14: Where laws or regulations contain special provisions for the employment of handicapped persons, ethnic minorities or soldiers retired from active service, such provisions shall be observed.

Article 15: An employing unit shall be prohibited from recruiting minors who are under 16 years of age.

Artistic, athletic and special handicraft work units employing minors who are under 16 years of age must handle examination and approval procedures in accordance with relevant State regulations and ensure the rights of minors to receive compulsory education.

PART THREE : LABOUR CONTRACTS AND COLLECTIVE CONTRACTS

Article 16: A labour contract is an agreement between a worker and an employing unit that establishes a labour relationship and defines the rights and obligations of each party.

A labour contract shall be concluded when establishing a labour relationship.

Article 17: The conclusion and amendment of a labour contract shall be made on the basis of the principles of equality, free will and mutual consent, and may not contravene the provisions of laws or administrative regulations.

A labour contract shall become legally binding once it is concluded in accordance with the law. Interested parties must perform their obligations as specified in a labour contract.

Article 18: The following labour contracts shall be invalid:

1. labour contracts that violate laws or administrative regulations; and

2. labour contracts concluded by means of fraud, threat, etc.

An invalid labour contract shall not be legally binding from the time it is concluded. Where a part of a labour contract has been confirmed invalid and if that part does not have an impact on the effectiveness of the remaining part of the contract, the remaining part shall remain valid.

The invalidity of a labour contract shall be confirmed by a labour dispute arbitration commission or a People's Court.

Article 19: A labour contract shall be concluded in writing and shall contain the following clauses:

1. the term of the labour contract;

2. job description;

3. labour protection and work conditions;

4. remuneration;

5. labour discipline;

6. the conditions for termination of the labour contract; and

7. liability for breach of the labour contract.

Interested parties may consult and agree on other items of a labour contract in addition to the compulsory clauses specified in the preceding paragraph.

Article 20: A labour contract shall have a fixed term, an open term or a term determined on a job basis.

Where a worker has been working on a continuous basis for the same employing unit for more than ten years and where both parties agree to extend a labour contract, an open-term labour contract shall be concluded if the worker suggests concluding an open-term contract.

Article 21: A labour contract may stipulate a probation period. A probation period may not exceed six months at the longest.

Article 22: Interested parties to a labour contract may stipulate therein matters concerning the keeping of commercial secrets for an employing unit.

Article 23: A labour contract shall terminate immediately upon expiration of the contract term or when a condition for termination of the contract agreed by interested parties arises.

Article 24: A labour contract may be rescinded if interested parties agree by mutual and unanimous agreement.

Article 25: An employing unit may rescind a labour contract if a worker:

1. has been proved to have failed to satisfy the recruitment conditions during the probation period;

2. has seriously violated labour discipline or the rules or regulations of the employing unit;

3. has committed an act of serious dereliction of duty or graft, causing substantial harm to the interests of the employing unit; or

4. whose criminal liability has been pursued in accordance with the law.

Article 26: Under any of the following circumstances, an employing unit may rescind a labour contract subject to a written notice to the worker himself 30 days in advance:

1. where the worker has fallen ill or has sustained injuries not from work, and cannot engage in the original work or other work arranged by the employing unit upon the conclusion of medical treatment;

2. where the worker has been incapable to do a job and remains incapable after receiving training or being transferred to another post; or

3. where a major change in the objective circumstances under which the labour contract was being drawn up has rendered such contract incapable of being carried out and the parties have failed to reach an agreement on the amendment of such contract after negotiations.

Article 27: Where an employing unit genuinely needs to reduce the number of its personnel during the period of statutory restructuring on the verge of bankruptcy or when major production or operation problems arise , it shall explain the situation to the trade union or staff and workers 30 days in advance, listen to the opinions of the trade union or the staff and workers, and may reduce the number of its personnel after submitting a report to the labour administration department.

Where an employing unit that has reduced personnel in accordance with this Article recruits personnel within six months, priority shall be given to the recruitment of personnel that were laid off.

Article 28: An employing unit that has rescinded a labour contract in accordance with the provisions of Article 24, 26 or 27 of this Law shall offer economic compensation in accordance with relevant State regulations.

Article 29: An employing unit may not rescind a labour contract in accordance with Article 26 or 27 of this Law under any of the following circumstances:

1. where the worker has suffered from an occupational disease or has sustained injuries from work, and has been confirmed to have lost or partially lost the capacity to work;

2. where the worker is undergoing the required period of medical treatment for an illness or injury;

3. where the woman staff member or worker is pregnant, in confinement or nursing; or

4. other circumstances provided for in laws or administrative regulations.

Article 30: Where a trade union considers the rescission of a labour contract by an employing unit inappropriate, it shall have the right to raise objections. If an employing unit has violated laws, regulations or a labour contract, a trade union shall have the right to have the rescission of the labour contract handled a second time; where a worker applies for arbitration or files a suit, a trade union shall offer support and assistance in accordance with the law.

Article 31: A worker shall give a written notice to an employing unit 30 days in advance when rescinding his labour contract.

Article 32: A worker may notify an employing unit at any time of termination of his labour contract under any of the following circumstances:

1. during the probation period;

2. where the employing unit has coerced the worker into working by means of violence, threats or illegal restriction of personal freedom; or

3. where the employing unit has failed to pay remuneration or provide working conditions as agreed in the labour contract.

Article 33: The staff and workers of an enterprise as a party may enter into a collective contract with the enterprise on matters such as remuneration, working hours, rest days, holidays, safety at work and health, insurance, welfare, etc. A draft of the collective contract shall be submitted to a staff representative meeting or to all staff and workers for discussion and approval.

A collective contract shall be entered into with an enterprise by a trade union on behalf of staff and workers. For enterprises in which no trade unions are established, a collective contract shall be entered into by an enterprise and representatives elected by staff and workers.

Article 34: Collective contracts shall be submitted to the labour administration department after being entered into. Where such department does not raise objections within 15 days of receiving the contracts, the contracts shall become effective immediately.

Article 35: A collective contract that has been entered into in accordance with the law shall be binding upon an enterprise and all the staff and workers of such enterprise. Standards such as for working conditions, remuneration, etc. stipulated in a labour contract entered into between an enterprise and individual staff members or workers may not be lower than those provided in a collective contract.

PART FOUR : WORKING HOURS, REST DAYS AND HOLIDAYS

Article 36: The State shall implement a working hour system under which the daily working hours of a worker shall not exceed eight and the average working hours in a week shall not exceed 44.

Article 37: An employing unit shall reasonably determine the standards for fixing work amounts and paying remuneration for piecework in accordance with the working hour system specified in Article 36 of this Law.

Article 38: An employing unit shall ensure that its workers shall have at least one rest day per week.

Article 39: An enterprise that is unable to implement the provisions of Articles 36 and 38 of this Law because of its production nature may implement other procedures for work and rest upon approval by the labour administration department.

Article 40: An employing unit shall arrange rest days for its workers in accordance with the law for the following festivals:

1. New Year's Day;

2. Spring Festival;

3. International Labour Day;

4. National Day; and

5. other rest-day festivals provided in laws or regulations.

Article 41: Due to production or business requirements, an employing unit may extend working hours after consulting with the trade union and its workers. Such extension shall generally not exceed one hour per day. Where it is necessary to extend working hours for special reasons, the working hours may be extended by no more than three hours per day, up to 36 hours per month, provided that the health of workers is ensured.

Article 42: The extension of working hours shall not be subject to the limitations provided in Article 41 of this Law under any of the following circumstances:

1. in the case of natural disasters, accidents or other reasons which threaten the life, health and property of the workers and where require urgent action;

2. where urgent repairs are required due to malfunctioning of production equipment, communication or transport lines or public facilities affecting production and the public interest; or

3. other circumstances provided in laws or regulations.

Article 43: An employing unit may not extend the working hours of its workers in violation of this Law.

Article 44: An employing unit shall pay its workers remuneration higher than their wages during regular working hours in accordance with the following standards and under any of the following circumstances:

1. where an extension of working hours is arranged for workers, remuneration of no less than 150 per cent of their wages shall be paid;

2. where workers are required to work on a rest day and no compensation leave can be arranged, remuneration of no less than 200 per cent of their wages shall be paid;

3. where workers are required to work on statutory rest days or holidays, remuneration of no less than 300 per cent of their wages shall be paid.

Article 45: The State shall implement a system of paid annual leave.

A worker who has worked on a continued basis for more than one year shall be entitled to paid annual leave. Specific procedures shall be formulated by the State Council.

PART FIVE : WAGES AND SALARIES

Article 46: Wage and salary distribution shall conform to the principle of distribution on the basis of the amount of work. Equal pay shall be given for equal work.

Wage and salary levels shall be gradually raised in line with economic development. The State shall implement macro controls over the total amount of wages and salaries.

Article 47: An employing unit shall independently determine its own methods of wage and salary distribution and levels of wages and salaries in accordance with the law and in line with its own production and business characteristics and economic position.

Article 48: The State shall implement a system of guaranteed minimum wages and salaries. Specific standards for minimum wages and salaries shall be formulated by the People's Governments of provinces, autonomous regions and centrally-governed municipalities, and submitted to the State Council for the record.

Wages and salaries paid by an employing unit to its workers may not be lower than the local minimum wage and salary standards.

Article 49: Overall reference shall be made to the following factors when minimum wage and salary standards are determined and adjusted:

1. the minimum cost of living of workers themselves and of the average number of dependents of such workers;

2. the average wage and salary levels in society;

3. labour productivity;

4. the overall employment situation; and

5. differences in the level of economic development between regions;

Article 50: Wages and salaries shall be paid in currency to workers themselves on a monthly basis. No parts of the wages and salaries of workers may be embezzled or no delays in the payment of such wages and salaries may be made without reason.

Article 51: An employing unit shall pay wages and salaries to its workers in accordance with the law on statutory rest days, holidays, wedding and funeral leave as well as during periods when workers take part in social activities in accordance with the law.

PART SIX : LABOUR SAFETY AND HEALTH

Article 52: An employing unit must establish and perfect a system for labour safety and health, strictly comply with the State's labour safety and health procedures and standards, educate workers in labour safety and health, prevent accidents in the course of work and reduce occupational hazards.

Article 53: Labour safety and health facilities must conform with the standards set by the State.

Labour safety and health facilities for new construction, renovation or extension projects must be designed, built and put into production and use at the same time as those for the main project.

Article 54: An employing unit must provide its workers with labour safety and health conditions as well as necessary safety at work items that conform with State regulations. An employing unit shall conduct physical examinations on a regular basis for workers engaged in operations with occupational hazards.

Article 55: Workers engaged in specialized operations must undergo special training and obtain qualifications for such specialized operations.

Article 56: In the course of their work, workers must strictly abide by the safety procedures.

Workers shall have the right to refuse dangerous operations they are illegally instructed or ordered to perform by the managerial personnel of an employing unit, and to criticize, report and complain about acts hazardous to life and health.

Article 57: The State shall establish a system for reporting statistics on and handling occupational diseases and accidents involving deaths or injuries. The labour administration departments of People's Governments above the county level, relevant departments and employing units shall, in accordance with the law, compile statistics on, report and handle accidents involving deaths or injuries and occupational diseases of workers that happen or are contracted in the course of their work.

PART SEVEN : SPECIAL PROTECTION FOR FEMALE STAFF AND WORKERS AS WELL AS UNDERAGE WORKERS

Article 58: The State shall implement special labour protection for female staff and workers as well as underage workers.

The term "underage workers" shall refer to workers who have reached their sixteenth year of age but have not yet reached their eighteenth year of age.

Article 59: It shall be prohibited to assign female staff and workers to work in mines and wells and engage in physical labour work of the fourth grade of intensity as specified by the State and in work that should be avoided.

Article 60: During their menstrual periods, female staff and workers may not be assigned to work in operations involving heights, low temperatures, contact with cold water or requiring physical labour of the third grade of intensity as specified by the State.

Article 61: During pregnancy, female staff and workers shall not be assigned to work requiring physical labour of the third grade of intensity as specified by the State or other work that should be avoided during pregnancy. Female staff and workers who are more than seven months pregnant may not have their working hours extended and may not be assigned to night-shift labour.

Article 62: Female staff and workers shall be entitled to no less than 90 days of maternity leave for bearing children.

Article 63: Female staff and workers that are nursing babies who have not reached their first year of age may not be assigned to work requiring physical labour of the third grade of intensity as specified by the State or other work that should be avoided during the nursing period. They may not have their working hours extended and may not be assigned to night-shift labour.

Article 64: Underage workers may not be assigned to work in mines and wells, work involving danger of injury or poisoning, requiring physical labour of the fourth grade of intensity as specified by the State or other work that should be avoided.

Article 65: An employing unit shall conduct physical examinations for underage workers on a regular basis.

PART EIGHT: VOCATIONAL TRAINING

Article 66: Through various channels, the State shall take a number of measures to develop vocational training and the vocational skills of workers, increase the quality of workers and strengthen the working and employment capabilities of workers.

Article 67: People's Governments at all levels shall include the development of vocational training in their social and economic development plans, and encourage and support qualified enterprises, institutions, social organizations and individuals in carrying out vocational training in various forms.

Article 68: Employing units shall establish a system of vocational training, obtain and utilize vocational training funds in accordance with State regulations and carry out planned vocational training for their workers in line with the actual circumstances of their own work units.

Workers that engage in technical jobs must have undergone training before taking up their posts.

Article 69: The State shall determine the categories of occupations and formulate vocational skill standards for special occupations for the implementation of an occupational qualification certificate scheme. Examination and appraisal authorities approved by the government shall be responsible for examining and appraising the vocational skills of workers.

PART NINE : SOCIAL INSURANCE AND WELFARE

Article 70: The State shall develop social insurance and establish a social insurance system and a social insurance fund so that workers may obtain assistance and compensation when they get old, fall sick, suffer from industrial injuries, become unemployed, give birth and so on.

Article 71: The level of social insurance shall be commensurate with the level of economic development and the capability of society for the scheme.

Article 72: The sources of the social insurance fund shall be determined in line with the types of insurance, with the gradual evolution of a comprehensive social plan to be coordinated by society. Employing units and workers must participate in social insurance and pay social insurance premiums in accordance with the law.

Article 73: A worker shall be entitled to enjoy social insurance in accordance with the law under the following circumstances:

1. retirement;

2. illness or injury;

3. physical incapability arising from work or contraction of an occupational disease;

4. unemployment; and

5. giving birth.

Upon the death of a worker, his dependents shall be entitled to a dependent's allowance in accordance with the law.

The conditions and standards pursuant to which a worker may enjoy social insurance shall be determined in laws or regulations.

Social insurance payments that a worker is entitled to shall be paid in full and in a timely manner.

Article 74: The authorities in charge of managing the social insurance fund shall collect, make payments into and out of, administer and operate the fund in accordance with the law, and shall be responsible for maintaining and increasing the value of the fund.

The authorities in charge of supervising the social insurance fund shall exercise supervision over the collection and making of payments as well as the administration and operation of the fund in accordance with the law.

The establishment and functions of the authorities in charge of managing the social insurance fund and the authorities in charge of supervising the fund shall be governed by law.

No organizations or individuals may embezzle funds in the social insurance fund.

Article 75: The State shall encourage employing units to establish supplementary insurance for their workers in line with their own actual situation.

The State shall encourage individual workers to take up savings-type insurance.

Article 76: The State shall develop social welfare by constructing public welfare facilities to provide workers with the conditions for taking rest, recuperation and convalescence.

Employing units shall create conditions for the improvement of collective welfare and enhancement of welfare benefits for their workers.

PART TEN : LABOUR DISPUTES

Article 77: For labour disputes arising between an employing unit and a worker, the parties may apply for mediation or arbitration, institute legal proceedings in accordance with the law or negotiate for a settlement.

The principles of mediation shall apply to arbitration and judicial proceedings.

Article 78: Labour disputes shall be settled in accordance with the principles of legality, fairness and timely handling. The lawful rights and interests of interested parties to labour disputes shall be protected in accordance with the law.

Article 79: After a labour dispute has arisen, interested parties may apply for mediation to the labour dispute mediation commission of their work unit. Where such mediation fails and either party requests arbitration, the party may apply for arbitration to a labour dispute arbitration commission and may also apply directly for arbitration to a labour dispute arbitration commission. Where one party refuses to accept an arbitration award, he may file a suit with a People's Court.

Article 80: A labour dispute mediation commission may be established in an employing unit. A labour dispute mediation commission shall be composed of representatives of staff and workers, the employing unit and a trade union. A representative of the trade union shall act as chairman of the labour dispute mediation commission.

Where an agreement is reached on a labour dispute through mediation, it shall be implemented by the parties.

Article 81: A labour dispute arbitration commission shall be composed of representatives of the labour administration department, a trade union at the same level and an employing unit. A representative of the labour administration department shall act as supervisor of the labour dispute arbitration commission.

Article 82: The party that has requested arbitration shall submit a written application to a labour dispute arbitration commission within 60 days from when a labour dispute arose. An arbitral award shall normally be made within 60 days of receiving an application for arbitration. Interested parties must implement the award if they have no objections to it.

Article 83: Where a party to a labour dispute refuses to accept an arbitral award, he may file a suit with a People's Court within 15 days of receiving a written award. Where a party fails to file a suit within the statutory period or implement an arbitral award, the other interested party may apply to a People's Court for enforcement.

Article 84: Where a dispute occurs in connection with the drawing up of a collective contract and where interested parties fail to solve the dispute through negotiations, the labour administration department of the local People's Government may arrange and co-ordinate relevant parties to handle the dispute.

Where a dispute occurs in connection with the execution of a collective contract and where interested parties fail to solve the dispute through negotiations, an application for arbitration may be submitted to a labour dispute arbitration commission. Where a party refuses to accept an arbitral award, he may file a suit with a People's Court within 15 days of receiving a written award.

PART ELEVEN : SUPERVISION AND INSPECTION

Article 85: The labour administration departments of People's Governments above the county level shall, in accordance with the law, supervise and inspect employing units in observing labour laws or regulations, and shall have the right to stop, and to order rectification of, acts in violation of labour laws or regulations.

Article 86: The labour administration departments of People's Governments above the county level shall supervise and inspect personnel in carrying out their official duties, and shall have the right to enter the premises of employing units to find out how labour laws or regulations are implemented, examine necessary information and inspect work places.

When carrying out their official duties, supervisors and inspectors of the labour administration departments of People's Governments above the county level must produce identification documents, implement the law impartially and abide by relevant regulations.

Article 87: Relevant departments of People's Governments above the county level shall, within the scope of their own duties, supervise employing units in observing labour laws or regulations.

Article 88: Trade unions at all levels shall protect the lawful rights and interests of workers in accordance with the law and supervise employing units in observing labour laws or regulations.

Any organization or individual shall have the right to report and complain to the authorities concerning acts in violation of labour laws or regulations.

PART TWELVE : LEGAL LIABILITY

Article 89: Where labour rules and regulations formulated by an employing unit are against laws or regulations, the labour administration department shall issue a warning and order rectification of the situation. Where harm is caused to workers, liability for compensation shall be borne.

Article 90: Where an employing unit extends working hours for workers in violation of this Law, the labour administration department shall issue a warning and order rectification of the situation and may impose a fine.

Article 91: Where an employing unit infringes upon the lawful rights and interests of workers in any of the following ways, the labour administration department shall order payment of wages and economic compensation to workers and may order the payment of compensation:

1. where part of wages and salaries of workers is embezzled or delays in the payment of wages and salaries are made without reason;

2. where workers are refused wage remuneration for extended working hours;

3. where wages and salaries lower than the local minimum wage standards are paid to workers; or

4. where economic compensation is not paid to workers in accordance with this Law after a labour contract is rescinded.

Article 92: Where an employing unit provides safety facilities or health conditions that do not comply with State regulations or fails to provide its workers with the necessary safety items and facilities, the labour administration department or the relevant authorities shall order rectification and may impose a fine. Where the circumstances are serious, they shall request a People's Government above county level to decide to order suspension of production for rectification. Where loss of lives or property is caused to workers due to a major accident as a result of failure to adopt measures against a latent danger, criminal liability of the persons responsible shall be pursued with reference to the provisions of Article 187 of the Criminal Law.

Article 93: Where serious consequences arise due to a major accident involving deaths or injuries as a result of workers being forced to perform dangerous operations by an employing unit in violation of rules and regulations, criminal liability of the persons responsible shall be pursued in accordance with the law.

Article 94: Where an employing unit illegally recruits minors who have not reached the sixteenth year of age, the labour administration department shall order rectification and impose a fine. Where the circumstances are serious, the administration for industry and commerce shall revoke its business license.

Article 95: Where an employing unit violates the provisions of this Law for the protection of female staff and workers as well as underage workers by infringing upon their lawful rights and interests, the labour administration department shall order rectification and impose a fine. Where harm has been caused to female staff and workers or underage workers, the employing unit shall be liable for compensation.

Article 96: For any of the following acts performed by an employing unit, the public security authorities shall detain the persons responsible for up to 15 days or shall impose a fine on or issue a warning to such persons; where the acts constitute a criminal offense, criminal liability of the persons responsible shall be pursued in accordance with the law:

1. workers are coerced into working by means of violence, threats or illegal restriction of personal freedom; or

2. workers are insulted, physically punished, beaten, illegally searched or detained.

Article 97: Where harm is caused to workers due to the conclusion of an invalid contract for reasons attributable to the employing unit, the employing unit shall be liable for compensation.

Article 98: Where an employing unit violates the conditions provided in this Law by rescinding a labour contract or wilfully delaying the drawing up of a labour contract, the labour administration department shall order rectification. Where damage has been caused to workers, the employing unit shall be liable for compensation.

Article 99: Where an employing unit recruits a worker whose labour contract has not yet been rescinded, thereby causing the former employing unit to suffer economic losses, it shall bear joint and several liability for compensation in accordance with the law.

Article 100: Where an employing unit fails to pay social insurance premiums without reason, the labour administration department shall order it to pay within a specific period. Where premiums are not paid within such period, an additional late-payment fine may be imposed.

Article 101: Where an employing unit unreasonably obstructs the labour administration department, relevant authorities and their personnel from exercising their right of supervision and inspection, or where an employing unit retaliates against personnel who report the employing unit to the authorities, the labour administration department or relevant authorities shall impose a fine. Where the obstruction or retaliation constitutes a criminal offense, criminal liability of the persons responsible shall be pursued in accordance with the law.

Article 102: Where a worker violates the conditions provided in this Law by rescinding a labour contract or where a worker breaches the confidentiality provisions of his labour contract, thereby causing the employing unit to suffer economic losses, he shall be liable for compensation in accordance with the law.

Article 103: Where the personnel of a labour administration department or relevant authorities abuse their power or commit acts of dereliction of duty or graft, constituting a criminal offense, their criminal liability shall be pursued in accordance with the law. Where a criminal offense is not constituted, administrative penalties shall be imposed.

Article 104: Where personnel of the State or of the authorities in charge of managing social insurance funds embezzle such funds, constituting a criminal offense, their criminal liability shall be pursued in accordance with the law.

Article 105: Where other laws or administrative regulations have stipulated penalties for infringement of the lawful rights and interests of workers in violation of this Law, penalties shall be imposed in accordance with the provisions of such laws or administrative regulations.

PART THIRTEEN : SUPPLEMENTARY

Article 106: The People's Governments of provinces, autonomous regions and centrally-governed municipalities shall, in accordance with this Law and the actual situation of their own regions, determine the implementation measures for the labour contract system, and report to the State Council for the record.

Article 107: This Law shall be effective as of 1 January 1995.

PRC, Labour Law

Introduction
The PRC, Labour Law ("the Labour Law") heralds a new era in China labour matters. The result of 15 years' work and 30 drafts, the Labour Law is a broad blueprint to shape labour relations to the contours of China's burgeoning self-styled market economy, and forms a foundation for further reform of the State-owned enterprise system. The law addresses every important aspect of the employment relationship and the workplace-including, most notably, workers' rights, labour contracts, wages, race and gender discrimination and a bold new plan for a national social insurance system.

Effective from 1 January 1995, the Labour Law takes precedence over all previous laws and regulations in the labour area, and aims to unify legal treatment for foreign-invested and domestic enterprises. Its greatest impact will be on the State sector, which will be brought closer in line with current practice in the foreign-invested sector. To fill out the rather spartan provisions of the new law, at least 24 new laws and implementing regulations will eventually be issued at the national level.

An important objective of the Labour Law is to shore up and clarify protection of employees, particularly those working in Foreign Investment Enterprises (FIEs). The new law also sets the stage for the long-awaited restructuring of the state sector by putting in place the framework for a new comprehensive system of social benefits. If implemented, this system would relieve State-owned enterprises of part of the crushing burden of providing social benefits for employees and provide a social safety net for employees dismissed from hopelessly bloated-or even bankrupt-State-owned enterprises.

Legislation Prior to the Labour Law
Prior to the Labour Law, labour relations in China were subject to a confusing and often contradictory morass of laws, regulations, notices and directives numbering in the thousands. Some of these provisions were issued in the late 1970s and early 1980s, prior to much of the tremendous economic and social change of the reform period, and do not reflect the current situation or the intent of China's policymakers. Ministry of Labour officials hope the new law will clear up the confusion by establishing a uniform body of labour rules that will govern virtually all employers and employees in China in an equitable manner.

Prior labour law for the most part draws a fundamental distinction between State-owned enterprises and FIEs. FIE labour law is designed to provide foreign investors with access to Chinese employees under semi-market conditions while preserving the social benefits of the State-owned system to the maximum extent possible. Labour law applicable to FIEs is comprised of laws and regulations issued at both the national and local levels. Key national FIE legislation includes the Sino-Foreign Equity Joint Venture Labour Management Provisions (1980), and the accompanying Implementing Procedures (1984). Both the PRC, Joint Venture Law (1979) and its accompanying Implementing Regulations (1983) also contain provisions on labour matters. In addition, FIE labour regulations have been promulgated in many localities, including all five Special Economic Zones, most of the Open Coastal Cities, and several other provinces and cities. Existing FIE labour legislation will continue to apply to the extent that the Labour Law and its progeny are silent on particular issues.

Labour laws governing State-owned enterprises, in contrast, began as a codification of socialist labour principles: guaranteed lifetime job security, mandatory job assignments, and cradle-to-grave welfare benefits. The laws do not address many of the issues that customarily arise under free-market conditions; this is largely because, in pre-reform China, management and workers were traditionally assumed to share the same interests.

Over the past 15 years, however, as China has reformed its centrally-planned economy, labour law governing State-owned enterprises has progressed somewhat. In 1986, the labour contract system was introduced giving these enterprises greater autonomy to recruit employees, rather than forcing enterprises to accept the lifetime employees assigned by State planners. Nevertheless, as of 1993 only approximately 25% of workers in State-owned enterprises had entered into labour contracts. An important achievement of the new law is to require all employees in the State sector to enter into labour contracts.

Applicability
The new law applies to all companies, including FIEs, State-owned enterprises and private domestic enterprises. In contrast to earlier labour legislation, the law describes employees as laodongzhe, or "those who labours." In Chinese parlance this means workers, management personnel, government cadres-and even expatriates.

Unfortunately, the new law offers no relief for foreign representative offices from the Byzantine foreign service company employment system. Representative offices must continue to obtain Chinese employees through service contracts with State-owned enterprises such as the Foreign Enterprise Service Company (FESCO). There continues to be no formal employment relationship between representative offices and their Chinese employees. As a result, strictly speaking, companies like FESCO are subject to the obligations of the new law, but representative offices are not. Nevertheless, both employers like FESCO and Chinese employees undoubtedly will expect representative offices to fulfil some of the legal obligations of employers under the new law, such as paying overtime wages and limiting work hours. It is therefore important for foreign firms with representative offices to be familiar with the new law.

Worker's Rights
The new law memorializes the basic rights of all workers in the "socialist market economy". Labourers in all types of enterprises are to enjoy "equal rights" in obtaining employment, selecting occupations, rest and holidays, safety at work and health protection, vocational training, health insurance and welfare, and other rights stipulated elsewhere in Chinese law. Many of these rights have appeared in earlier laws, although the rights to obtain employment and select occupations represent a significant departure from the old fenpei, or mandatory, job assignment system. Lofty principles aside, the law is generally short on specifics to help employees realize their new rights. And as quickly as these rights are granted they apparently may be taken away when they conflict with other legal rules: for example, shortly after ratification of the Labour Law the Beijing Municipality announced rules requiring employers to pay stiff penalties for hiring workers without the right of residence in the capital.

Labour Unions
The new law does not expand the role of labour unions from previous legislation. While labourers in all enterprises are once again given the right to organize and participate in labour unions, the law does not mandate the establishment of unions. When unions are set up, they must be organized "in accordance with law"1, meaning that only government-sanctioned unions are to be permitted. The law also clarifies the role of unions in labour disputes. In the event the labour union believes the termination of an employment contract is "inappropriate", the union is given the right to express an "opinion". Where dismissals are "against the law", labour unions may request that employers revisit the issue; they also may "support and assist" employees in the resolution of labour disputes. The Labour Law offers no guidance as to how these vague terms are to be interpreted; this task is apparently left to the unions themselves.

Beyond basic rights, the Labour Law addresses specific labour issues that have emerged as China moves toward a society characterized by employment relationships subject to market forces. At the same time, China's lawmakers, in common with their counterparts in most Western developed nations, are not completely comfortable with the market's ability to create a healthy employment system on its own. As a result, the Chinese Government has tempered its largely free-market approach with a healthy dose of generally benign regulation.

Recruitment
For the first time, employers may now be liable for "economic damages" to the previous employers of newly recruited employees, where those employees have time remaining on their original labour contracts and have not properly terminated those contracts. This may be a response to the perceived poaching by FIEs and representative offices of State-owned enterprise employees. Many of these employees are forced by State employers to enter into labour contracts that demand exorbitant fines in the event the employee leaves the job prior to the end of the employment term. The new provision seems to raise the stakes for foreign firms seeking to recruit Chinese employees for FIEs or representative offices as firms may be required to assume these fines. It also emphasizes the need for foreign firms to confirm that employees recruited from State-owned firms have reached agreements with their employers on the termination of their labour contracts prior to hiring such employees.

Discrimination
Taking a page from many Western legal systems, with the Labour Law Chinese law now provides that employers may not discriminate against job seekers or employees on the basis of nationality, race, gender or religious belief. Though it is a positive step to codify these laudable principles, neither the Labour Law nor its companion legislation to date have given this provision much teeth-penalties for offending employers are not spelled out.

The new law also restates provisions from various national and local regulations limiting the work assignments of women during menstruation, pregnancy and nursing. Maternity leave must be at least 90 days, and employers are prohibited from hiring minors under the age of 16. Moreover, workers between the ages of 16 and 18 and female workers are not permitted to undertake certain high-risk tasks.

Labour Contracts
Part 3 of the new law is devoted entirely to labour contracts, but does not fundamentally alter the labour contract system provided by earlier FIE legislation. Employees of all types of enterprises are now required to enter into individual written labour contracts. As noted above, this is more significant for the employees of State-owned enterprises, where most employees still work without contracts. There is no requirement in the new law that individual labour contracts be approved by local labour departments, although approval apparently is still mandated by existing national and local FIE regulations.

The option to execute collective labour contracts is also reaffirmed. Labour unions are charged with negotiating collective contracts, where such unions exist. Collective contracts, in contrast to individual contracts, must be submitted to the local labour bureau for approval according to the new law. It is important to note that collective contracts are not mandatory; the FIE trend over the last several years has been to rely on individual contracts alone.

The new law offers little guidance-or for that matter interference-regarding the contents of labour contracts, other than a laundry list of standard topics that must be addressed. Most of these items have already been included in most FIE labour contracts for years, and include contract term, job description, working conditions, compensation, and conditions and liability for termination. For new hires, probation periods are limited to no longer than six months by the new law, restating the position of many existing local regulations. One exception to the generally laissez-faire approach to contracts is for employees that have worked in an enterprise for more than 10 years. In a throwback to the "iron rice bowl", provided that both employer and employee wish to extend the employment relationship, those long-term employees that request contracts with unlimited terms must be given such contracts. This concession is not as generous as it seems however, as employers still retain the same broad rights of termination as under standard labour contracts.

Unprecedented in Chinese labour legislation, the Labour Law expressly permits employers to include confidentiality provisions in labour contracts, and the prospect of claiming damages from employees that violate such provisions. Many FIEs in fact have included confidentiality clauses in labour contracts for some time.

Termination of Contracts and Dismissal
Employers are now required in most circumstances to provide 30 days' notice prior to dismissing employees or terminating labour contracts. This requirement appeared previously in certain local labour regulations, including those in Shanghai. To dismiss an employee under the Labour Law, an employer need only show that an employee is "incapable of performing a job and remains incapable after receiving training or being transferred to another position". An employer may also dismiss an employee if the employee is suffering from a non-work related injury and is unable to return to work after medical treatment, or where "major changes" render a labour contract incapable of being implemented and the parties are unable to agree on revisions. The Labour Law is vague as to what would constitute "major changes", although an official commentary on the law issued by the Ministry of Labour cites as one example technological improvements resulting in the elimination of the employee's position.

No notice is required to dismiss employees during the probation period, or if an employer may demonstrate that the employee has "seriously" violated company rules, engaged in graft or is charged with a crime. Employers may not dismiss, on the other hand, employees suffering from occupational diseases or work-related injuries, or female employees who are six months pregnant or nursing.

When it is the employee that seeks to sever the employment relationship, following earlier FIE labour law they generally must give 30 days' notice prior to leaving. No reason for leaving is required. Moreover, neither a reason nor notice is required for termination by an employee in the following circumstances: where the employer has "coerced the worker through violence, threats or illegal restriction of personal freedom"; where the employer fails to pay remuneration or to provide working conditions as agreed in the labour contract; and any time during the probation period. And although employees are given the right to terminate labour contracts, the law does not expressly protect them from the often exorbitant penalties demanded by State-owned enterprises or government employers for early termination.

A thorny issue that often arises at the end of an employment relationship-severance pay-is not addressed in the Labour Law. FIE employers are left to previous FIE labour provisions, which provide generally that one month's wages must be paid to a departing employee for each complete year the employee has worked. Yet previous law is disappointingly murky on two important points: It is unclear whether severance pay must be paid regardless of the circumstances surrounding the departure of the employee, and it does not clarify how "one month's wage" is to be calculated. Some guidance is offered however, by the new The Economic Compensation for the Breach and Termination of Labour Contracts Provisions (the Provisions), issued since the promulgation of the Labour Law. The Provisions stipulate that employers must pay severance even in cases where an employee is dismissed for unsatisfactory work performance. The Provisions also limit severance pay in these circumstances to 12 months' wages.

The Labour Law also clarifies and confirms rules governing working hours, wage levels and other issues relating to safety and training.

Work Hours / Leave
The labour law codifies the 8 hour day, 44 hour work week ordered by the State Council early in 1994. The working week has since been further reduced to five 8 hour days pursuant to new State Council rules, effective May 1995. Work may exceed 8 hours per day only with the approval of the employee and the labour union. Overtime generally may not exceed one hour per day, or three hours in "special" circumstances that are not defined. Over the course of one month overtime is not to exceed 36 hours in the aggregate. Local labour bureaus are authorized to issue warnings to offending employers and levy fines of up to Rmb 100 per hour worked.

Generally, overtime pay is to be 150 per cent of the normal base wage, 200 per cent for work on non-holiday rest days when substitute rest cannot be arranged, and 300% for work on public holidays. Paid annual leave is mandated for employees after one year of continuous employment, pursuant to a new system to be implemented by the State Council in the near future.

Wages
The law reaffirms the fundamental freedom of State-owned enterprises and FIEs to set wages. A guaranteed minimum wage system is also promised, to be formulated by individual localities. Yet in the near term mandated minimum wages are unlikely to result in significant added costs for foreign companies. To illustrate, the minimum wage recently set by Jiangsu Province ranges from Rmb 140 to 210 . The law also mandates that wages be paid in "currency" on a monthly basis, an apparent attempt to eliminate the practice in cash-strapped State-owned units of paying workers in kind or in promissory notes.

The law empowers the central government to implement "macro controls" over the total amount of wages and salaries. The door is thus left open for the government to implement wage freezes as an inflation-fighting measure; some localities have reportedly been considering maximum wage rules.

On a more ominous note for foreign investors, the Labour Law resurrects the phrase tonggong tongchou or "equal pay for equal work". This worthy ideal has been the bane of joint venture negotiators for years, as it is often invoked by Chinese joint venture partners to insist on comparable pay between Chinese and expatriate managers. Whether this restatement will strengthen the resolve of Chinese negotiators on this issue remains to be seen. Notably, the phrase is not repeated in new national rules on wages issued subsequent to the Labour Law.

Vocational Training
Employers are now expected to establish and fund systems for vocational training of their workers. There is also a promise that the State will standardize job categories and evaluate the vocational skills of workers. The new law offers virtually no guidance as to how this will take place; most of the detailed work will likely be left to local labour departments. Implementing regulations issued by the Ministry of Labour provide that training centres will be established by local labour bureaus. Funding is to be drawn from local governments, social insurance funds and enterprises; presumably on a compulsory basis.

Labour Safety and Health
Press reports on industrial accidents and unsafe working conditions in recent years have focused China's policymakers on improving worker safety. Under the Labour Law, employees now enjoy the express right to refuse to perform dangerous operations, and may criticize and even bring legal action against offending employers. The new law also promises that the State will establish a system for reporting statistics and acting on occupational diseases and accidents. Employees are also required to compile statistics and report industrial accidents to local labour bureaus. Yet the law offers no guidance as to when and how these systems will be implemented.

Social Insurance
In an unprecedented development, the new law calls for the establishment of a national social insurance system. FIEs prior to the new law have been required by local regulations to arrange pension, medical and unemployment insurance, while State-owned enterprises provide employees with social benefits directly. The new law sets out principles for creating a unified social insurance system that will apply to all employers and employees and eventually supplant the local programs. A draft of a detailed national law specifying how the system will be established and maintained was submitted to the State Council in late 1994, and will be issued in 1995, at the earliest. In the meantime, many local labour bureaus have issued piecemeal regulations addressing parts of the envisioned system.

According to the Ministry of Labour, the social insurance system will eventually be comprised of five separate funds: pension, unemployment, work-related accident and disability, medical, and maternity. Employers and employees, including expatriates, will be required to contribute to the funds. Managed by government-designated agencies, the system is to separate the provision of benefits from individual companies, so that employees will accrue benefits regardless of whether their employer is an FIE or domestic enterprise. The system will also provide a safety net for employees of State-owned enterprises, in the event Beijing's long-delayed plans to allow ailing enterprises to go bankrupt are ever implemented.

Dispute Resolution
The new law restates a variety of methods for workers to obtain relief for grievances and adds new provisions on management responsibility.

As with previous legislation, the new law provides for mediation and arbitration to settle labour disputes. If mediation is selected, a representative from the labour union is to serve as chairman of the panel. If arbitration is preferred, a written request for arbitration must be submitted to the local labour arbitration commission within 60 days from when the dispute arose ?a decrease from the previous six month period. Curiously, a party that is dissatisfied with an arbitration decision for apparently any reason may appeal the decision to the local people's court. This right to appeal eviscerates the traditional rationale behind arbitration as a method to resolve disputes: avoiding the court system.

Administrative penalties
In another first, the new law contains a laundry list of penalties for employers that violate the Labour Law or labour contracts. Possible violations include illegally extending working hours, failing to follow wage regulations, or providing unsafe working conditions. In an attempt to put muscle behind the law, local labour bureaus are empowered to fine, assess damages or terminate operations depending on the nature of the violation; they may even pursue criminal charges where "major accidents" result from the failure to rectify dangerous conditions in the workplace.

Looking to the Future
Since the promulgation of the Labour Law, the Ministry of Labour has issued 17 separate regulations to beef up and clarify the spartan provisions of the Labour Law. Plans over the next year call for promulgation of seven more national laws or regulations. The new legislation includes separate sets of rules on labour contracts, social insurance, the minimum wage, labour disputes, vocational training, employment, and safety in the workplace. Moreover, the Ministry of Labour and local labour bureaus are reportedly well into the process of culling through all current labour laws and regulations. All rules that are found to be inconsistent with the letter or the spirit of the Labour Law are to be abolished. In the meantime, conflicts between earlier laws and the new labour rules should be resolved in favour of the new rules.

As with prior labour laws, the new law delegates most of the responsibility for implementation to local labour bureaus. Localities are authorized to issue implementing regulations, and many-including Beijing-have begun the process. Others, such as Shanghai and Guangzhou, already have regulations on the books that contain many of the provisions of the new law. These localities will await further new laws and eventually revise their provisions to ensure they are consistent with the new law.

Whether the Labour Law realizes its promise of a new world of unified, clear and consistent labour rules will largely depend on the housecleaning and implementation work of the local labour bureaus. Whether the law is ever enforced in a meaningful way will depend on these bureaus as well. The stakes are high, as the law is an important ingredient for the successful reform of the State-owned enterprise system. With the Labour Law and its companion legislation, China is off to an encouraging start.

Douglas C. Markel,
Freshfields,
Hongkong

(Source: China Law & Practice [1994] issue 7)(Editor's notes pending updating.)