New labor law aims to cap damages - UW Faculty Web Server



New labor law aims to cap damages

By Zhu Zhe (China Daily)

Updated: 2007-04-25 07:10

Workers whose contracts have been broken by their employers will be paid no more than 12 months' salary as compensation, under a new draft law proposed Tuesday.

But the compensation cap will not apply if employees have been fired for serious workplace breaches or disciplinary action, or if the employer can prove they have serious economic problems.

Legislators yesterday started to read the third draft of the controversial labor contract law, which for the first time details the standard for compensation for contract termination.

The draft, discussed at the 27th meeting of the Standing Committee of the 10th National People's Congress (NPC), the top legislature, states that if employers want to end contracts, they should pay employees the equivalent of one month's salary for every year of service, capped at 12 months.

The calculations will be based on the employee's average monthly salary over a 12-month period, prior to the end of the contract.

However, high earners will be paid compensation no more than three times the local monthly average salary, according to the draft.

Li Yuan, director of the administrative law division of NPC Standing Committee's legislative affairs commission, said the average monthly salary in Beijing last year was about 3,000 yuan ($388).

Under the new draft law, if a person who has worked at a company in Beijing for 15 years and received 20,000 yuan ($2,590) a month was to receive compensation, he will be paid 108,000 yuan ($13,989) instead of 300,000 yuan.

Hu Guangbao, deputy director of the NPC Law Committee, said such stipulations are made in response to public suggestions.

The existing Labor Law spells out the need for economic compensation, but does not demonstrate how through uniform guidelines.

The previous draft of the labor contract law did not detail the issue either, leaving it to be set by State Council regulations.

Li said many overseas enterprises and organizations, including the American Chamber of Commerce in Shanghai (AmCham Shanghai) and the Hong Kong Chamber of Commerce, have also suggested setting the standard by law so that employers were able to calculate costs.

The AmCham Shanghai said in a letter to China Daily it applauds the Chinese government for its initiative.

"The stipulation on compensation is a major change in the latest draft, and it directly affects the interests of employers and employees," Li said.

"We would like to hear more comments from the public."

But Li said that because the labor contract issue is very complicated, the draft law needs further discussion.

Official figures show that the NPC received about 192,000 public responses in the month after the draft was published last March for consultation. Only the Constitution, in 1954, received more.

Labor law: 'No giving in to pressure'

By Guan Xiaofeng and Andrew London (China Daily)

Updated: 2007-06-12 06:57

China's top trade union body has warned that the country would not kowtow to pressure from foreign businesses to water down a new law designed to offer greater protection to hundreds of millions of workers.

Voting on the law is expected this month.

The government received more than 200,000 public comments on the draft law, some suggesting that foreign businesses may be inclined to shift production elsewhere because the proposed law is "too strict", and operating costs could increase.

However, Xie Liangmin, a senior official with the law department of the All-China Federation of Trade Unions, said it had succeeded in safeguarding workers' rights in the current draft.

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"We'll never submit to any pressure in protecting Chinese workers' rights and interests," Xie said.

"We welcome foreign companies that respect Chinese laws and look after their workers. Those relying on cheap labor and making profits by violating workers' rights will finally be ousted."

The draft law requires all employers to submit proposed workplace rules or changes for discussion to the worker's congress - concerning pay, work allotment, hours, insurance, safety, holidays and training.

Employers and trade unions will then jointly decide on workplace agreements.

The proposed law also stipulates trade unions have the right to sign collective contracts with employers on behalf of workers.

It strongly discourages fixed-term contracts through various measures; and requires that severance be paid if a fixed-term contract expires and is not renewed.

"The new law is not designed to replace the current Labor Law; rather, it attempts to further standardize the labor contract in favor of employees," Xie said.

"It will provide a more solid legal ground for trade unions to protect workers' rights or to settle labor disputes."

Both the European Union Chamber of Commerce in China and the American Chamber of Commerce in Shanghai made submissions to the National People's Congress, China's legislature, on the proposed changes to the labor law.

In a position paper released in April this year, AmCham Shanghai said it had never lobbied against the draft law, adding: "Most of the provisions in the proposed law merely restate existing law. The problem is, therefore, not a lack of laws, but the enforcement of existing requirements."

Last December, the European Union Chamber of Commerce in China said it applauded moves to improve labor conditions, but was concerned that "current levels of compliance and implementation of existing legislation are inadequate".

However, in a letter to the NPC last year, Serge Janssens de Varebeke - then-president of the European Union chamber - warned the "strict" regulations could force foreign companies to "reconsider new investments or continuing their activities in China" because of possible increase in production costs.

The International Labor Organization office in Beijing, which provided technical advice on some of the draft's provisions, said it "doubted the truth of any such threats", and did not consider the draft law "overly protectionist".

"We would doubt that the law in its current form would warrant such drastic action as many other countries have similar provisions," Constance Thomas, director of the International Labor Office for China and Mongolia, said.

"China will remain an attractive place to invest and workers will be better protected from labor exploitation."

She stressed the need for education about the law, and that it should be properly put into practice through "encouragement" and "enforcement".

Zhu Bin, another official with the All-China Federation of Trade Unions, said Change to Win, one of two major national trade union organizations in the US, last month expressed its full support for Chinese trade unions' stand on protecting workers' rights.

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