New Rules for Employment and Personal Disputes Arbitration Becomes Effective in China
On July 1, 2017, the latest “Rules for Handling Arbitration Cases about Employment and Personnel Disputes” (“Rules”) issued by the Ministry of Human Resources and Social Security (“MOHRSS”) formally became effective.
In accordance with Article 79 of the PRC Labor Law (2009), where a labor dispute takes place, the parties involved may apply to the labor dispute mediation committee of their unit for mediation. If the mediation fails and either party requests for arbitration, that party may apply to the labor dispute arbitration committee for arbitration. Either party may also directly apply to the labor dispute arbitration committee for arbitration. If either party is not satisfied with the adjudication of arbitration, the party may bring the case to the people’s court.
Accordingly, in labor dispute arising between an employee and employer, either party may initiate legal procedures in order as follows:
1. Applying for mediation to the labor dispute mediation committee of its work unit (optional);
2. Applying for arbitration to the local labor dispute arbitration committee (mandatory);
3. Litigation in case of dissatisfying with the arbitration award, and the court’s second instance judgment will be final.
Nevertheless, in accordance with Article 47 of the Labor Dispute Mediation and Arbitration Law of the People's Republic of China, in respect of the following labor disputes, the arbitral award shall be the final award and the statement of award shall have legal effect from the date of making unless otherwise stated hereof:1) disputes in relation to the claim of labor remunerations, work-related injury medical expenses, economic compensation or damages which do not exceed the local monthly wage standard for an amount of 12 months;2) disputes arising from working hours, rest days and leave days and social insurance in the implementation of state labor standards.
In other words, arbitral awards involving labor disputes mentioned above will be final and will not be accepted by a court for review, unless 1) the issued arbitral award also contains arbitral matters that are not specified in Article 47; or 2) the employer has evidence to prove that the issued arbitral award falls into the categories that should be revoked as stipulated in Article 49 of the Labor Dispute Mediation and Arbitration Law. The Article 49 stipulates that where the employer has evidence to prove that the arbitral award prescribed in Article 47 hereof is under any of the following circumstances, it may apply for revocation of award to the intermediate people's court at the place where the labor dispute arbitration commission locates within 30 days of the receipt of the statement of award: 1. the applicable laws and regulations are in error;2. the labor dispute arbitration commission has no jurisdiction;3. the statutory proceedings are violated;4. the evidence on which the award is based is forged;5. the other party has concealed evidence that is sufficient to affect a fair award;6. the arbitrator accepts bribe, practices graft, and perverts the law….
According to an online interview with a MOHRSS official concerning the Rules held on July 13, 2017, the most important parts of the latest amendments to the Rules that should be noted are as follows:
1. Specifying the scope of final arbitral award
As mentioned above, Article 47 of the Labor Dispute Mediation and Arbitration Law stipulates several situations that apply the final award which aims to lessen the burden of parties concerned and save judicial resources. However, the regulation in the said Article was not specific enough - for instance, the definition of economic compensation or damages needs to be specified for the purpose of clarity. Thus, in accordance with Article 50 of the Rules, the said economic compensation is now known to include compensation given during the non-compete period provided in the Labor Contract Law, compensation for dismissal or termination of the labor contract and so on; whereas the said damages includes the extra one-month salary for not signing a written labor contract in accordance with the Labor Contract Law, damages for illegal probation period, illegal dismissal or termination of the labor contract. Furthermore, it also sets up the amount of single arbitration that applies to the final award, which is no more than the amount of 12 months local minimum salary.
2. Adding simple handling procedures
The Rules add a whole new chapter titled as Simple Handling to deal with cases that fulfill one of the circumstances as follows: 1) facts and rights/obligations are clear, without much controversy; 2) amount of money involved does not exceed the last year average salary of the local province/automatic administrative area/municipality directly governed by the central government; 3) both parties agree to apply the simple handling procedure. In case of the simple handling procedure, there will be only one arbitrator for the case. Upon agreement from the applied-for party, the arbitral tribunal may shorten or eliminate replying period. In addition, the arbitral tribunal may also deliver relevant arbitration documents by telephone, SMS message, fax, email and so on; it may also determine matters, such as evidence deadline, arbitration procedure, document making etc., more flexible depending on the circumstances of the case.
3. Adding collective labor dispute handling procedures
According to the Rules, it can apply to the collective labor dispute handling procedure, in case of a dispute with more than ten employees having the same request or dispute that arise from the performance of collective labor. It also provides that such case will be filed and tried in priority. In addition, such case may also apply to the simple handling procedure, provided that it fulfills one of the circumstances mentioned above.
In China, a party must go through the arbitration for a labor dispute first before such party could bring the dispute to the court in case of dissatisfaction with the arbitral award. The aim of such system design is meant to solve most disputes in the arbitration phase so that it could time and cost for the concerning parties. However, in practice, many parties of labor dispute who dissatisfy with the arbitral award choose to go through both the arbitration and the two instance court trials, which could become very time-consuming and grueling for both the employee and the employer. Nevertheless, it is a positive progress that the Rules incorporates these new changes (e.g. adding the simply handling procedure) in order to enhance the efficiency of labor dispute procedure and balance the rights and interest between both the employee and the employer.
ABOUT THE AUTHOR: Fei Dang
Fei Dang is an Associate in the MMLC Group.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.