The Government of Guangdong Province has recently put forward and is currently seeking public opinions on a series of draft labour law related regulations, namely, the Provisions of the Implementation of the Labour Contract Law of the People's Republic of China in Guangdong Province ( «广东省实施 〈中华人民共和国劳动合同法〉若干规定») the Regulations on Administration of Employment of Chinese Employee by the Representative Office of Foreign Company in Guangdong Province ( «广东省外国企业常驻代表机构聘用中国雇员管理规定») and the Regulations on Administration of Labour Dispatch Relationship in Guangdong Province («广东省劳务派遣管理规定»).
The public consultation period for the draft regulations will end on 2 March 2012 whereupon the draft regulations will be subject to further revision and deliberation by the Legislative Affairs Office of the Guangdong Provincial Government before submitting to the competent legislative authorities for approval.
Although these regulations have yet to be finalised, they do provide an idea on how the relevant labour regulations are likely to be interpreted, implemented and developed in the near future in China in particular in the Guangdong area. Here are some of the salient points which may be of interest to foreign investors:
Provisions of the Implementation of the Labour Contract Law of the People's Republic of China in Guangdong Province («广东省实施 〈中华人民共和国劳动合同法〉若干规定»)
A similar draft in relation to the implementation of the Labour Contract Law was once released in 2009. The draft released this time has been shortened and contains fewer provisions as compared with the draft in 2009. Among others, the following issues which are not clearly specified in the Labour Contract Law or other existing labour related laws and regulations are being clarified:
- Article 4 provides that a labour contract shall be written in Chinese. Where another language version exists, in the event there is any discrepancy between that language version and the Chinese version, the Chinese version shall prevail.
- Article 5 clarifies that in the event that the term of a labour contract which should have been expired is extended due to any of the events as stipulated in Article 42(1), (3) and (4) of the Labour Contract law (e.g. an employee currently within the medical treatment period or an employee currently in the pregnancy, confinement or nursing period) such that, after such extension, the employee concerned has continuously worked with the employer for ten years, an open term labour contract shall be entered into at the employee's request.
- It has long been debated as to whether an employer has the right to terminate an employment relationship at the end of the second fixed term labour contract. Article 6 provides that after the second fixed term of the Labour Contract, if the employee is not under any of the circumstances as stipulated in Article 39 or Article 40(1) – (2) (i.e. circumstances under which the employer is entitled to terminate the employment unilaterally), an open term labour contract shall be entered into at the employee's request.
- Where an employer fails to pay the economic compensation for non-compete as agreed by the parties, Article 11 allows an ex-employee subject to non-compete obligations to request the employer to settle such outstanding economic compensation in one lump sum within 30 days after such breach. The ex-employee may choose to notify the employer to terminate the noncompetence obligations if he chooses not to request for the one off payment within the said 30-day period.
Regulations on Administration of Employment of Chinese Employee by the Representative Office of Foreign Company in Guangdong Province («广东省外国企业常驻代表机构聘用中国雇员管理规定»)
The draft regulation mainly regulates the establishment, obligations, and activities of foreign labour services enterprises (e.g. FESCO). However, representative offices of the foreign company (“RO”) should also be aware of its content, in particular:
- Article 4 provides that a RO must engage a lawfully established foreign labour services enterprise to engage PRC national staff and is prohibited from recruiting such staff itself or through other entities or individuals.
- Article 9 states that a foreign labour services enterprise shall enter into a written contract with a RO to govern their respective rights and obligations under the labour dispatch relationship. Among others, it requires a RO to deposit RMB20,000 per staff engaged through the labour dispatch arrangement into a designated account for the purpose of covering the losses of such staff as caused by the RO. This may increase the labour costs of a RO.
- Article 19 provides that in the event a RO recruits PRC staff directly or through entities or individuals other than a foreign labour services enterprise, a penalty ranging from RMB1,000 to 5,000 per month per PRC staff up to a maximum of RMB30,000 may be imposed.
Regulations on Administration of Labour Dispatch Relationship in Guangdong Province («广东省劳务派遣管理规定»)
The draft regulation regulates the general labour dispatch relationship among the labour dispatch entity, the host entity and the dispatched employee. In addition to restating the relevant provisions concerning the labour dispatch relationship as stipulated in the Labour Contract Law and the Regulation for Implementation of the Labour Contract Law, the following provisions are worth to note:
- Article 12 imposes a filing obligation with the relevant labour administrative authority on the host entity in the event that the number of dispatched employees is more than 20 and which accounts for over 10% of the host entity's total workforce. Further, the dispatched employees shall not exceed 30% of the host entity's total workforce.
- Article 22 states that the labour dispatch entity or the host entity shall be jointly and severally liable to the dispatched employees where damage is caused to the dispatched employees.
- Article 26 provides that where the percentage of the dispatched employees exceeds 30% of the total workforce of the host entity, a penalty ranging from RMB100 to 300 per month per dispatched employee exceeding such threshold may be imposed.
- The Labour Contract Law provides that labour dispatch shall generally apply to “temporary position”, “ancillary position” and “substitute position” without providing any definition for such positions. Article 31 now clarifies that (i) “temporary position” refers to position the term of which does not exceed 6 months; (ii) “ancillary position” refers to position which provides services to the host entity's main business; and (iii) “substitute position” refers to position which is required temporarily because the original employee is not in a position to provide labour services due to sick leave, maternity leave, training, military service etc.
- Article 32 provides that where a host entity uses dispatch employees in positions other than temporary position, ancillary position or substitute position, the host entity will be deemed as having established an employment relationship with the dispatched employees from the commencement date of service.
The draft regulations are still pending for further revision. It is uncertain when they will be formally promulgated. However, it is advisable to keep a close eye on their future development as they may have an impact on the structure of the employment relationship and the potential costs that may be involved.