China's latest Employment Contract Law, which came into effect on January 1 this year has had broad implications for foreign-invested enterprises on the mainland and unintended consequences for the central government, according to legal practitioners in Hong Kong.
The law applies employment standards that are similar to those of the International Labour Organisation and principles that are generally applied or incorporated by European Union legislation. That means much more protection of individual employees' rights and more collective rights with regards to labour unions and associations.
While seeking to protect labour rights and prevent the exploitation of migrant workers was a good starting point, the Employment Contract Law had brought about some unintended consequences, Carson Wen, Of Counsel at law firm Jones Day, said.
'I have heard that lawyers in Guangdong are offering their services pro bono, giving free advice to workers who are suing their employers and taking a contingency out of whatever the workers can recover.
'Unfortunately, this means that - along with the impact of the global financial crisis - companies are closing down factories because employers are having to meet sudden legal burdens that they had not made provision for,' he said. 'So the outcome of the new labour law has become rather different from the law that was passed and from the original intentions of the law, which was to help build a more just society.'
The new law has ushered in several improvements in employment conditions to benefit employees. It requires a written labour contract to be entered into to establish an employment relationship between employee and employer. Employers must sign this written contract within one month of the start of employment. Failure to do so may result in penalties for the employer.