12 May, 2016
Three recent cases from the Beijing Haidian District People’s Court help demonstrate what the relationship is between collective contracts and individual employment contracts.
In one case, the company did not sign a written individual employment contract with the employee and instead had that employee and other employees sign a collective contract (this is unusual since under the law, a collective contract should be signed with a union or elected employee representatives). The company argued that collective contracts were binding on both employer and employee in accordance with the company policy and had been signed by both parties. The court took the view that (i) a collective contract cannot replace an individual employment contract; and (ii) the separate signature page does not prove that the employee is aware of the contents of the collective contract. Therefore, the court ruled that the company should pay double salary to the employee for failure to conclude a written employment contract.
In another similar case, the court also ruled against a company which also argued it had signed a collective contract with the employee and therefore should not be subject to the double salary penalty (it seems the collective contract in this case also was signed with individual employees, instead of the union or employee representatives). The court held that the collective contract was not legally binding and effective, as the company had not filed it with the labor bureau (which is a legally required procedural step tfor the collective contract to be effective). Therefore, the company was liable to pay the double salary penalty.
In the final case, the collective contract provided that all employees with more than one year of service with the company were entitled to the 13th month salary at the year end. The employee’s individual employment contract did not have provisions on the 13th month salary. The court ruled that the 13th month salary entitlement should apply to the employee, since according to law, the provisions in the individual employment contract should be not less favourable than the provisions in a collective contract.
Key Take-Away Points:
Companies should enter into individual employment contracts with each employee, even if a collective contract has been signed.
The collective contract can be seen as a framework agreement between an employer and its employees under which all individual employment contracts should be covered. The parties should follow certain statutory procedures (e.g. filing with the labor bureau) in order for a collective contract to be deemed validly entered into and binding on the parties. The standards for working conditions and remuneration in all individual employment contracts should not be less favourable than the standards stipulated in the collective contract.
For further information, please contact:
Jonathan Isaacs, Baker & McKenzie
jonathan.isaacs@bakermckenzie.com
