Implementation Regulation for Law of the People's Republic of China on Employment Contracts Launched just in Time

On Sept.18th 2008,China has released the Implementation Regulation for Law of the People's Republic of China on Employment Contracts.The Law of Employment Contracts,which came into effect on Jan 1st 2008 was recognized as a landmark to protect employee's rights and benefits, while questioned by most of the employers as unfair,inflexible and unreasonable cost inevitable.

Ever since the Employment Contracts Law was released in 2007,the disputes have never stopped.There are big manufacturers which closed down their factories in China and moved to Vietnam or other regions where the labor costs are lower than in China;There are big companies which paid their employees that have been working by those companies for over 8 years,asked them to resign and then re-employed them in order to avoid signing open-term contracts with them;And there are many employees who were becoming laid-off before the law had came into effect because the employers had to lower their costs and avoid possible future compensations.The law which aimed to provide employees with more rights and benefits has in fact disappointed both the employers and the employees.

One of the most focal disputes points on the Employment Contracts Law is the stipulation on the open-term contract.In the Employment Contracts Law, it stipulates in Article 14:

"An open-term employment contract is an employment contract for which the employer and the employee have agreed not to stipulate a definite ending date.

An employer and an employee may conclude an open-term employment contract upon reaching a negotiated consensus. If an employee proposes or agrees to renew his employment contract or to conclude an employment contract in any of the following circumstances,an open-term employment contract shall be concluded, unless the employee requests the conclusion of a fixed-term employment contract:

(1) The employee has been working for the employer for a consecutive period of not less than 10 years;
(2) When the employer introduces the employment contract system or the state owned enterprise that employs him re-concludes its employment contracts as a result of restructuring, the employee has been working for the employer for a consecutive period of not less than 10 years and is less than 10 years away from his legal retirement age; or
(3) Prior to the renewal, a fixed-term employment contract was concluded on two consecutive occasions and the employee is not characterized by any of the circumstances set forth in Article 39 and items (1) and (2) of article 40 hereof.

If an employer fails to conclude a written employment contract with an employee within one year from the date on which it starts using the employee, the employer and the employee shall be deemed to have concluded an open-term employment contract."

The promulgation of the implementation regulation is a rational emendation, which has less radical fanaticism and explains the real intent of the Employment Contracts Law. When answering the questions from the journalists on Sept. 19th, Cao, KangTai, the director of the State Council Legislative Affairs Office, pointed out: "After the implementation of the Employment Contracts Law, a number of employers and workers interpreted in this incorrect way that "no fixed term labor contract" is the 'iron rice bowl', 'life tenure'. In order to eliminate misunderstandings, the implementation regulation summarized together the situations under which the two parties of the employment contracts can end their employment relationship. Among these aforesaid situations, fourteen terms are about the cancellation of open-term employment contract. In fact, these terms are already scattered in the Employment Contracts Law, we just make them together for the convenience of the implementation and to get rid of the misunderstandings in our society."

As a matter of the fact, the relevant provisions in the implementation regulation for the Employment Contracts Law are more than enumeration and summarization,it's an in time response to the unfair reality from side of our government.

A proper measure factor is a guiding tool for doing everything. This principle can also be used in the correcting of over-expectation for the open-term employment contracts. It is therefore necessary for us to spend more time to discuss the open-term employment contracts and its relevant problems. According to the provisions of our employment Contracts Law, the open-term employment contract is an employment contract for which the employer and the employee have agreed not to stipulate a definite ending date. But this doesn't mean that this kind of contract can not be canceled. The differences between the normal employment contract and the open-term one are just the uncertain term and the condition of the cancellation. Once the situations stipulated by law occur, the open-term employment contract can also be terminated.

From the legal point of view,the so called open-term employment contract is just one kind of the various contracts, in essence. Any party can cancel this kind employment contract according to article 36 of the Employment Contract Law, which stipulated that an agreement has been reached after one party requests a termination.

Some scholars point out that,the stipulations of conditions under which the open-term employment contract can be canceled in the implementation regulations of the Employment Contracts Law are superfluous. The meaning of oath for the fair values much more than the regulation itself. However,the promulgation of the implementation, in my opinion, has the function in making the Employment contracts more effective,especially that there are so many problems resulting form the misunderstandings as mentioned above. As for the doubt whether the implementation regulations have betrayed the Employment Contracts Law and its original intent, we will not go so far to discuss that to a further extent, because we all know the Employment Contracts has a more effective force according to the law system, where there are conflicts, the Employment Contracts Law shall prevail.

To some extent,the publishment of the Employment Contracts Law is to provide more legal protections to employees, to build a more harmonious society, although the effect of its implementation is not as good as expected. Anyway it doesn't matter whether the implementation regulations are complement or rectification, it is a rational return; it will benefit both parties of the labor relations.