Highlights of the Guangdong Provincial Regulation on Collective Bargaining and Collective Contracts (Draft)

The Standing Committee of the People's Congress of Guangdong province has issued a Draft Regulation on Collective Bargaining and Collective Contracts 《广东省企业集体协商和集体合同条例（修订草案征求意见稿）》(hereinafter the "Draft Regulation") on 11th October, 2013 to seek opinions from the public. It is intended to set down a mechanism for employers and employees to negotiate and reach agreement on some sensitive issues mainly on employee protection as well as welfare and benefits.

A Summary of the Draft Regulation
The Draft Regulation consists of 6 chapters and 63 articles. Salient features of the Draft Regulation are highlighted below:

What is Collective Bargaining?
Collective bargaining refers to the process of fair negotiations between employees and employers in relation to employment matters such as remuneration, working hours, rest and vocation, welfare benefits, training, social security, occupational health and safety etc. Collective bargaining can take place at the level of a particular enterprise, a particular industry sector or a particular region respectively. The agreement reached is then reduced to written form, which is termed the collective contract.

Collective Wage Bargaining
Wage negotiation is the fundamental aspect of collective bargaining and shall generally occur once every year. Both parties can negotiate on matters including the wage allocation system, wage standard, wage payment methods and allocation of allowances and bonuses. During wage negotiations, factors such as labour productivity, economic performance of the enterprise, local minimum wage, average wage of the industry and the Consumer Price Index etc. shall be taken into account.

Collective Bargaining Representatives
Each party shall have 3 to 9 representatives one of whom shall be the chief representative. The chief representative of an enterprise shall be the legal representative or a representative authorised by the legal representative in writing and the remaining representatives shall be determined by the legal representative. For enterprises with an existing trade union, the chief representative for the employees shall be the chairperson of the trade union or a representative authorised by him/her in writing and the remaining representatives can either be selected by the trade union or democratically elected in the workers' conference. Both parties are allowed to appoint outside professionals as their representatives but the number shall not exceed 1/3 of the representatives on its side.

Protection of the Employee Representatives
The Draft Regulation offers protection to employee representatives during the collective bargaining process. For instance, without the consent of the employee representatives, the enterprise must not adjust, demote or remove them from their existing positions, or deduct their wages during the period when they are performing their duties. In particular, the enterprise must not terminate the employee representatives' employment contract while they are performing their negotiation duties, except under the circumstances for summary dismissal specified in Article 39 of the Labour Contract Law of the People's Republic of China.

Collective Bargaining Procedures
Both employees and the enterprise have the right to request for collective bargaining. If this is requested by more than 1/3 of the workers, the trade union shall issue an offer of negotiations to the enterprise. When a written request is issued, the receiving party must address the issues raised one by one by providing a written response within 20 days. If the enterprise violates this article, which consequently results in employee strikes or slow-downs, the enterprise cannot terminate the employee's labour contract by reason of employees' serious violation of the enterprise's rules and regulations.

Confidential Information
Each party is entitled to request the other side to provide information relating to the subject of the negotiations, e.g. registration information, articles of association, financial statements, wage payment status, payment status of tax and social security etc. except information involving State secrets and technical secrets of an enterprise. Any commercial secrets obtained during the collective bargaining process shall be kept confidential by the representatives.

Regulation of Conduct during the Collective Bargaining Process

Enterprise

The enterprises are restricted from certain acts during the collective bargaining process. Examples include unreasonably delaying the collective bargaining process and restricting or interfering with the selection of employee representatives etc.

Employees

During the collective bargaining process, the employees are restricted from engaging in conducts including without limitation refusing to participate in collective bargaining by way of work strikes or slow-downs, destroying the enterprise's equipment or tools or violently interfering with the ordinary course of operation. If the enterprise or the employees violate the above restrictions, they may be held liable under the criminal law or under the public security management regulations.

How to Resolve Collective Bargaining and Collective Contract Disputes?

If disputes occur during the process of collective bargaining, both parties can, among others, agree to apply for mediation or conciliation by submitting a written application to the local Human Resource and Social Security authorities.

Comments

This Draft Regulation is relatively controversial and has raised some concerns from the employers' perspective. Whilst it has attempted to set down a relatively comprehensive mechanism for collective bargaining and emphasized certain restrictions during the process of collective bargaining e.g. strikes, slow-downs, destruction of employers' properties etc. in order to ensure that collective bargaining will be conducted in a peaceful manner, certain requirements appear to be quite sensitive and employers may have hesitation to comply with them from a commercial perspective, e.g. the provision of confidential information relating to its business operation. Although the public consultation period has expired and it is uncertain when the Draft Regulation will be formally promulgated, it is important to pay attention to the legislative development and get prepared for the collective bargaining mechanism to be implemented.