Chinese Labor Laws Evolve in the Wake of Financial Crises

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Shanghai, China—American law firms are helping implement major changes in employment practices in China.

Paul, Hastings, Janofsky & Walker’s employment practice, opened in Shanghai in 2006, has seen dramatic alterations in the centuries-old country’s outdated labor laws. Last year China introduced three laws that guarantee employees the right to long-term contracts, safe workplaces, non-discriminatory environments. Additionally, Chinese workers are guaranteed redress if these obligations are not met by their employers.

The Labor Contracts Law, which went into effect in 2008, has been a nexus of litigation in China. The measure entitles every worker to a written contract stipulating length of employment, terms of employment, and pay scale. It also addresses issues of overtime pay, pension and insurance programs, and severance pay.

Initially, the law caused companies to rethink their policies and their compliance with those policies, says K. Lesli Ligorner, of Paul, Hastings, Janofsky & Walker, which also has an office in Beijing. Then the U.S. and global financial crises hit. “Starting in September,” says Ligorner, “we started to see a regular flow of inquiries into how to conduct a mass layoff and the procedures to terminate.”

Chinese businesses, like those worldwide, are struggling to maintain both employee rights and economic survival. Companies are looking to any legal means to cut costs, especially when it comes to personnel, and layoffs are a big part of their frugality.

That’s where the U.S.-based law firms come in. There has been a rash of suits brought by Chinese employees against their employers or former employers. Says Ligorner, “More people know their rights, and more foreigners are folded into the workplace now, and those individuals do not hesitate to bring actions.”

The labor laws have created a more equitable environment for employees to bring such actions, including better infrastructure for lawsuits, and the elimination of fees for filing.

China has been praised by the U.S. And other countries for not only the implementation of fairer labor laws, but also for involving the public in policy decisions surrounding labor. The Labor Contract Law was enacted after extensive consultation with the U.S.-China Business Council, as well as solicitation of comments from the Chinese public.

Employment laws in China are still not up to American standards, say lawyers who practice abroad. For example, even though there are sexual harassment laws on the books, such harassment is only acknowledged legally when it is perpetrated by men against women. Yet employee—and human—rights are being more widely embraced by both the Chinese public and its business sector.

 

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