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back to index backGLOBALtalk May,  2007


China's Onerous New Labor Law

China's new Labor Contract Law (LCL), anticipated to be released in May, aims to protect employees and help maintain good relationships between employers and workers.

But preliminary versions of the law have caused controversy, with some asserting that it will place costly burdens on employers while others praise the legislation for empowering workers. Supervisors are advised not to take lightly the drawing up of employment contracts--the law impacts all foreign and domestic workers in China, and all preexisting employment contracts need to be updated to adhere to the LCL.

Under the new law, canceling fixed-term contracts will become difficult and costly for employers, even if workers are unable to function because of non-work related illness or incompetence. In addition, layoffs of more than 50 individuals require that a reason be provided to the trade union or staff, and during layoffs, those who have worked the longest--including those with long fixed-term contracts--must be retained the longest.

When there is a material misunderstanding between parties to a contract, the parties have the right to present the issue to labor arbitration or court to have the contract cancelled. But LCL fails to define "material misunderstanding," and there is also no definition of what an "obvious unfair term" would be. The draft LCL additionally addresses such areas as non-competition agreements, employee probation periods, and severance pay.

Source: Globality - GAI


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