China to Further Regulate Labor Dispute Mediation

December 7, 2011 Posted by China Briefing Reading Time: 3 minutes

Dec. 7 – China is tightening its regulations on labor dispute mediation so that employees can find ways to better protect their labor rights, and so that employers treat labor disputes more seriously. In a recent document, China’s Ministry of Human Resources and Social Security (MHRSS) has required large and medium-sized enterprises to establish labor dispute committees to ensure an effective communication and dialogue mechanism exists between employers and employees.

The “Regulations on Enterprise Labor Dispute Negotiation and Mediation (MHRSS Decree No.17),” issued on November 30, detail negotiation and mediation procedures when labor disputes take place, and emphasize enterprises’ obligations to put an operative mediation mechanism in place. The new regulations will take effect from January 1, 2012.

Negotiation on labor issues
Where there is a labor dispute, one involved party may negotiate a resolution with the other involved party by scheduling a meeting. An employee may also require the enterprise’s labor union to participate or assist in the negotiations.

Where one involved party raises a request for negotiation but the other involved party fails to respond within five days after the request is made, it can be regarded that the other party is not willing to negotiate and the party requesting negotiation may therefore turn to related organizations to ask for mediation or arbitration.

Where the negotiating parties reach an agreement, a written settlement accord shall be signed and used to enforce both parties’ future implementation of the resolution.

Mediation of labor disputes
A large/medium-sized enterprise shall establish a labor dispute mediation committee and hire (a) full-time or part-time mediator(s).

A branch of the large/medium sized enterprise may establish a mediation committee based on its actual needs.

A small/micro sized enterprise may establish a mediation committee, or appoint (an) employee(s) as the mediator(s), based on election/recommendation by both the employer and employees.

An enterprise shall provide office space and necessary working expenses to support the work of its mediation committee.

A company’s mediation committee is responsible for:

Publicizing laws, regulations and policies related to labor right protection
Mediating the labor disputes within the enterprise:
1) The mediation shall be started within three working days after an application for mediation is submitted and both involved parties have agreed to settle disputes by mediation
2) The mediation shall be closed within 15 days after it is started, unless both involved parties agree to extend the mediation period
Overseeing the implementation of settlement agreements
Employing, dismissing and managing mediators (a mediator’s employment duration shall last no less than one year)
Coordinating the implementation of labor contracts, collective contracts and corporate labor regulations
Participating in studies on programs relevant to the essential interest of employees
Assisting in establishing an early-warning mechanism to prevent labor disputes in the enterprise

Labor dispute arbitration
Within 15 days after the settlement agreement takes effect, the involved parties may apply for an arbitration review by a labor dispute arbitration committee.

Involved parties may refer a labor dispute to arbitration in cases where:

Involved parties are not willing to settle disputes by mediation
Involved parties fail to reach an agreement during mediation
One involved party refuses to implement the settlement agreement within the stipulated time limit

Time limits for arbitration can be restarted in cases where:

One involved party refuses to settle disputes by negotiation/mediation or fails to respond to the other involved party’s request for negotiation
One involved party or both involved parties refuse to continue negotiation/mediation within the stipulated time limit
Involved parties fail to reach an agreement after the negotiation/mediation within the stipulated time limit
One involved party refuses to implement the settlement agreement within the stipulated time limit

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information or clarification on China’s labor policies, please email china@dezshira.com.

This article is also available on Dezan Shira & Associates’ online business resource library. To view the article, and other regulatory updates, please click here.

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