Measures increase company responsibility for labour unrest

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On 25 July 2016, the Ministry of Human Resources and Social Security issued the Measures for the Rating of Enterprises’ Labour Security Compliance. Under these measures, the labour authorities will rate each company every year on its compliance with labour/employment law requirements.

measures-increase-company-responsibility-for-labour-unrestRatings will be A, B and C, with A being the highest rating. To assign a rating, the labour authorities will gather information about a company’s compliance status through routine on-site inspections, document reviews, labour complaints, etc., to determine whether a company complies with labour dispatch rules, contributes to the social insurance fund, etc.

The measures specifically provide that a company will receive a C rating if it has created labour conditions that give rise to collective unrest or other serious or negative consequences for society. After receiving the C rating, a company can expect to face more frequent inspections, and senior management can expect to receive visits from the labour authorities seeking guarantees of future compliance.

The ratings will be kept in the government’s labour inspection compliance files for at least three years. Furthermore, the measures specify that the labour authorities should establish an information-sharing mechanism with union and other government departments to share the company’s compliance information (which may include the ratings). By having access to this information, other government departments such as administrations of industry and commerce bureaus, finance bureaus, housing and construction bureaus, and tax bureaus, can take further action (including joint action) against companies for non-compliance with labour regulations.

The measures do not specify any fines or other specific monetary penalties for receiving a C rating, or otherwise creating conditions that lead to labour unrest. However, such companies may expect increased attention and scrutiny from the government.

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com

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