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China's New Labor Law: Compliance Comes Easy

By Dan Harris and Steve Dickinson

Co-blogger, Steve Dickinson, was in Seattle this week for the holidays. Steve is scheduled to talk at the Beijing Rotary Club on January 8, regarding China's new labor law and we were discussing why so many foreign companies in China seem paralyzed by the new law. We came up with two explanations. The first is the persistent belief that the government will not enforce the new labor laws, just as it has done very little to enforce the old labor laws. Our second explanation is that the laws are so complicated and difficult companies are throwing up their hands out of a belief compliance is either too costly or impossible. Both views are way off the mark. Beijing probably will not enforce the new labor laws any more than it enforces the present labor laws. But, this completely misses the point. The chief risk of failing to comply with the new labor laws lies in the risk of getting sued by your present and/or your former employees, not in governmental enforcement. Compliance is not all that tough. Basically, all a company with employees (or even one employee) need do to comply with the new laws is have a written agreement with its employees and an employee manual. One additional note. The employment agreement cannot call for application of foreign law as such contracts do not constitute a written agreement under the new laws. This means that if you have an employee working in China (whether a Chinese national or not) and your agreement with that employee is under the law of your country (other than China) or some other country (other than China), your employee will be able to sue you in China for statutory damages for failure to comply with the written agreement requirement. Told you it was easy.

Full post as published by China Law Blog on January 03, 2008 (boomark / email).