European Chamber submits comments to the NPC on the draft Labour Contract Law Go back »
2006-05-07 | Beijing
European Chamber submits comments on draft Labour Contract Law to NPC
The draft of the Labour Contract Law of the People's Republic of China passed a first reading in the Standing Committee of the National People's Congress (NPC) in December 2005. In March it 2006 it was made public for comments on the NPC's website for one month.
The European Chamber organized seminars in both Beijing and Shanghai where PRC labour law experts explained the details of the draft to its members. The comments and recommendations voiced at these seminars as well as those submitted directly to the Chamber were compiled in a letter addressed to the Legal Affairs Committee of NPC. This letter reflects the concerns of European industry regarding the potential impact of the law on human resources management in China. The Chamber also invited the relevant Chinese authorities involved in the legislative process to engage in constructive dialogue so as to improve certain areas of the draft.
The declared objective of this new legislation is to protect employees and create harmony between employer and employees. Such objectives are indeed commendable and deserve further attention from both government and industry. Nevertheless, in order to ensure that these aims are met, some issues in the draft law need further consideration and clarification.
The European Chamber eagerly anticipates more concrete guidelines for the implementation of this legislation. A number of articles in the draft are written in a rather vague manner making interpretation ambiguous, and implementation difficult to achieve. As labour contracts establish a long term relationship between the parties involved, clarity would encourage a more harmonious development of this relationship. Clear termination rules for contracts would encourage employers to give a larger number of potential employees a chance to prove their abilities without running the risk of being unable to terminate the contracts.
In certain areas the draft tends to over regulate the employment relationships. Based on our members' experience from various European and non-European countries however, we know that such legislation, in order to be efficient, needs to be flexible enough to apply to various business situations. Very detailed and rigid rules and regulations may potentially lead to unavoidable conflicts between the parties.
In its letter to the NPC, the European Chamber provided specific comments on the strengthened role of labour unions, the creation and interpretation of employment relationships, probation periods, company rules, non-compete clauses, training and service return agreements as well as the strict regulations for the termination of labour contracts by employers.
The European Chamber will continue to closely monitor the legislative process and channel the concerns of its members to the Chinese and European authorities.