The Labor Dispute Mediation and Arbitration Law of the People's Republic of China (the New Law”), as adopted by the Standing Committee of the National People's Congress on Dec. 29, 2007, will take effect on May 1, 2008.
The major purposes of the New Law are to achieve labor settlements fairly and in a timely manner, to lower the burden on employees when safeguarding their legal rights, and to simplify the settlement process for labor disputes.
Until now, labor dispute arbitration and related matters have been governed by the Labor Law of the People's Republic of China (1995), the Civil Procedure Law of the People's Republic of China (1991), and the Interpretation of Several Issues Concerning the Application of the Law in Labor Dispute Cases promulgated by Supreme Court (2006) (collectively, the “Existing Laws”).
Mediation, arbitration and litigation procedures under the New Law
Mediation: Upon the occurrence of any labor dispute within an enterprise, either the employer or the employee may seek mediation assistance.1 Such assistance may be provided by any designated labor dispute mediation committee within the enterprise (the “Internal Mediation Committee”) or by certain governmental or quasi-governmental organizations or groups established at the township or lower level outside of the enterprise (the “External Mediation Committee”).2
The New Law provides that any Internal Mediation Committee of an enterprise must be comprised of member(s) representing the employee side and member(s) representing the employer side.3 The committee member representing the employee side must be either a member of the labor union or a representative elected by employees of the enterprise.4 The committee member representing the employer can be chosen by the officer(s) of the enterprise.5
Any agreement(s) reached as a result of mediation must be documented in writing and signed (or stamped with official seal) by the employer, the corresponding employee and the mediator.6 This signed (or sealed) document (the “Mediation Resolution”) is legally binding upon the parties.7
For labor disputes in connection with failure to pay employees' earned work compensation or other incurred economic loss, or to pay for any damage corresponding to work-related bodily injury or any related loss, if the employer failed to honor or perform its obligations as set forth under the Mediation Resolution, the employee may apply to the People's Court for a warrant (the “Payment Warrant”) to enforce the terms under the aforementioned resolution.8
However, the effectiveness of a Payment Warrant remains questionable in China. According to the Civil Procedure Law, a Payment Warrant is a minor remedy, because once the other party objects, the Payment Warrant automatically terminates. After termination, either party can apply to the corresponding labor dispute arbitration commission (the “Arbitration Commission”) for arbitration.9
Arbitration: Under the New Law, there is no prerequisite to arbitration. In other words, the parties to any labor dispute may choose to seek arbitration directly by bypassing the mediation step entirely.10 Alternatively, a labor dispute may be first dealt with in mediation and then moved to arbitration if:
- The parties failed to reach any Mediation Resolution within 15 days after the receipt of application by the corresponding mediation committee for mediation assistance11
- Any party failed to perform its obligation set forth under a Mediation Resolution12
For two types (the “Expedited Type,” as defined below) of labor disputes, the New Law deems the outcome of arbitration immediately effective and enforceable upon the issuance of the corresponding arbitration decision.13 In other words, the enforcement will not be delayed by any appeal process initiated by the losing party in the arbitration. For labor disputes other than the Expedited Type, on the other hand, the arbitration decision is not effective until the latter of: (i) the end of 15 days after the arbitration decision was rendered, and (ii) the end of the appeal process.14 Thus, any business operator that is initially presumed to possess dominant market status can disapprove the presumption by showing that it in fact does not have the suggested dominance in the relevant market. The Expedited Types of disputes are:
- Labor disputes in connection with the failure to pay the employee's earned work compensation or other incurred economic loss, or to pay for any damage corresponding to the employee's work-related bodily injury or any related loss, provided that the amount of dispute involved is less than or equal to an amount equivalent to the local annual minimum wage15
- Labor disputes in connection with the execution of national standards on work time, break time, vacation or social insurance16
Litigation: In labor disputes other than those of the Expedited Type, any party who disagrees with an arbitration result has 15 days to appeal the result with the People’s Court.17
For disputes of the Expedited Type, employees and employers are subject to different requirements under the New Law.
- Employees: The New Law allows employees to appeal any results of arbitration. The only restriction applicable to an employee is that the employee must file for litigation (at the People's Court) within 15 days after receipt of the arbitration results.18
- Employers: The scope of appeal for employers as permitted under the New Law, on the other hand, is quite limited. Under the New Law, an employ er can appeal the results of an arbitration of disputes of the Expedited Type (to the Intermediate People's Court) only on one of the following six bases: (1) wrongful application of codes or regulations; (2) lack of jurisdiction of the Arbitration Commission; (3) violation of legal procedures; (4) false evidence; (5) the prevailed party having concealed evidence which is sufficient to impair the impartiality of the arbitration result; and (6) arbitrator(s) having demanded or accepted bribes, committed graft or perverted the law in making the arbitration award.19
Once the court decides to invalidate the arbitration award, either party may file a lawsuit according to civil procedure law after the receipt of court's invalidation decree.20 Employers must appeal to the Intermediate People's Court, which has jurisdiction over the Arbitration Commission, within 30 days after their receipts of arbitration results.21
In addition to the foregoing, either party can also bring its labor dispute to the People's Court for litigation if: (1) the Arbitration Commission refuses to rule on the dispute, or (2) the ruling of the Arbitration Commission has been delayed and is past due.22
Statute of limitation for arbitration
Under the Existing Laws, the maximum period of time, after a labor dispute actually arises, that arbitration proceedings based on such dispute may be initiated (the “Statute of Limitation Period” or “SOL Period”) is 60 days. The New Law made two changes in connection with the calculation of the SOL Period. First, the New Law extended the SOL Period to one year.23 Second, the New Law clarifies that the SOL Period will not start to count until the party who incurred the loss knows or should have known that his or her labor rights were infringed upon.24 Both changes will likely work in the employees’ favor.
Tolling of the statute of limitation: The statute of limitation clock will be tolled upon the occurrence of any force majeure event or for any other reasons supported by justice, until the interfering event or circumstance no longer exists.25
Complete restart of the statute of limitation: According to Article 27, the statute of limitation clock is to start anew if any of the following occurs: (i) the party who incurred loss starts to negotiate with the other party claiming his/her legal rights , (ii) the party who incurred loss raises claim at the corresponding governmental department or judicial court against the other party, or (iii) the other party agrees to perform its obligation.
Exemption from the statute of limitation: There is an exception to the statute of limitation mentioned above. So long as an employee who incurred loss remains employed with his or her existing employer, the aforementioned statute of limitation does not apply to the employee if his or her dispute is about the employer's failure to pay earned work compensation.26 However, upon the termination of his or her labor relationship, the employee has one year to initiate arbitration proceedings.27
Duration of arbitration proceedings In order to improve the efficiency of arbitration, the New Law stipulates that the arbitration proceeding generally must be completed within 45 days after the date when the Arbitration Commission accepts the arbitration application.28 In complicated cases, this limitation can be prolonged, but for no more than 15 days.29 If the Arbitration Commission exceeds this limitation, the party may file the suit in People's Court directly.30
Burden of providing evidence
Under the general civil procedure rules, the p arty who raises the claim has the burden to provide the necessary evidence to prove his or her claim. However, The New Law provides that if the employer is in possession or control of the evidence in connection with the labor dispute, the employer has the obligation to provide such evidence.31
Requirements for arbitratorsUnder the New Law, in order for a person to become an arbitrator in any labor dispute arbitration, he or she must meet one of the following minimum requirements: (1) have prior experience as a judge; (2) have prior experience as a senior legal researcher or as a senior lecturer of law; (3) have legal knowledge regarding, and more than five years of experience in, human resource (or labor union) management; or (4) have more than three years of experience practicing law.32
1 See Article 10 of the New Law.
2 See id.
3 See id.
4 See id.
5 See id.
6 See Article 14 of the New Law.
7 See id.
8 See Article 16 of the New Law.
9 See Article 5 of the New Law.
10 See Article 5 of the New Law.
11 See Article 15 of the New Law.
12 See Article 5 of the New Law.
13 See Article 47 of the New Law.
14 See Article 50 of the New Law.
15 See Article 47(1) of the New Law.
16 See Article 47(2) of the New Law.
17 See Article 50 of the New Law.
18 See Article 48 of the New Law.
19 See Article 49 of the New Law.
20 See id.
21 See id.
22 See Articles 5 and 29 of the New Law.
23 See Article 27 of the New Law.
24 See id.
25 See id.
26 See id.
27 See id.
28 See Article 43 of the New Law.
29 See id.
30 See id.
31 See Article 6 and Article 39 of the New Law.
32 See Article 20 of the New Law.