11 May, 2016
On February 29, 2016, the head of the Ministry of Human Resources and Social Security (“MOHRSS”), Mr. Weimin Yin, addressed some publicly expressed concerns that the Employment Contract Law (“ECL”) imposes too high a burden on companies and makes the labor market too rigid. He stated that although the ECL has had a positive impact on regulating employers’ activities, safeguarding the employers’ and employees’ legal rights, and establishing harmonious labor relations, it also may have created a less flexible labor market, increased labor costs for companies, and may not be adaptable to the changing labor situation.
Given these concerns, according to Minister Yin, MOHRSS is open to comments from various channels and will consider the pros and cons for the potential amendment of the ECL. The minister did not specify which exact rules in the ECL would be subject to consideration for amendment, though when deciding how to make the law (and the labor market) more flexible, the restrictions on termination or the imposition of openterm employment contracts on companies would likely be key points of discussion.
Shortly before the head of MOHRSS made these comments, the Finance Minister, Mr. Jiwei Lou, also shared his views that the ECL fails to provide protection for companies, and that rigid rules which potentially have an adverse impact on the flexible labor market should be removed. Furthermore, during China’s annual National People’s Congress and Chinese People’s Political Consultative Conference meetings, several representatives also expressed concerns regarding the lack of balance in the protections afforded to the employers and employees under the ECL, leading to increased liability and costs for companies. As a result, according to these representatives, companies may be more cautious about their hiring decisions, which may indirectly harm the interests of employees.
The State Council is also reportedly reviewing and researching the possible amendment of the ECL to make it more flexible.
Key Take-Away Points:
The above comments reflect the fact that, as China’s economy is slowing, multiple voices in the government are taking a more company friendly approach to labor relations, which is in line with President Xi Jinping’s remarks about the need for supply-side reform. Any amendments to the ECL to make termination easier would inevitably change the dynamics of labor relations in China. Further, such amendments would likely encounter at least some resistance from others inside and outside the government, so the legislative process for any such amendments may be contentious and lengthy.
For further information, please contact:
Jonathan Isaacs, Baker & McKenzie
jonathan.isaacs@bakermckenzie.com
