The Supreme People’s Court Several Issues Regarding the Application of Laws to the Hearing of Labour Dispute Cases Interpretation (III) came into effect on 14 September, setting forth detailed provisions that deal with the legislative changes and certain practical issues that have arisen as a result of the introduction of the PRC Labour Contract Law and the PRC Labour Dispute Mediation and Arbitration Law in 2008.
Scope of special dispute cases
Disputes over social insurance: disputes relating to social insurance are labour disputes according to the Labour Dispute Mediation and Arbitration Law. Interpretation III only states that “if an employee demands that his or her employer pay for a loss incurred because the employer has failed to complete social insurance formalities on his or her behalf, and the social insurance agency is not able to complete the follow-up formalities so that he or she loses his or her entitlement to social insurance benefits, this kind of dispute falls within the jurisdiction of a court. However, Interpretation III does not mention whether a court should accept other kinds of disputes over social insurance.
Disputes over the restructuring of enterprises: it is clearly specified in Interpretation III that any disputes arising from restructuring voluntarily carried out by enterprises themselves must be accepted by a people’s court. However, disputes arising from government-led corporate restructuring are not yet included in the scope of labour disputes.
Disputes over additional compensation: an employer should pay additional compensation to an employee if it commits an offence by paying the employee remuneration, overtime money or financial compensation in arrears as described in article 85 of the Labour Contract Law. Interpretation III acknowledges that if an employee demands that an employer pay additional compensation, this case will fall within the jurisdiction of a court. However, as explained by a spokesperson for the Supreme People’s Court, a court will only accept the case if the employee has first complained to the labour administrative department about the employer’s offence, and the employer has failed to pay make the payment before a deadline after being ordered to do so by the labour administrative department.
Litigation over illegal employment
Interpretation III provide employees with remedies in the event that employers attempt to evade responsibility by claiming that they are not qualified to carry out business operations lawfully. First, the employee may elect either the employer or its investor(s) as the litigant; second, if the employer operates its business as an affiliation or otherwise by borrowing a business licence from others, the employer and the lender of the business licence should be jointly elected as litigants.
Interpretation III also provides that if a litigant is not satisfied with a labour arbitral award and institutes legal proceedings at a court according to law, and if the court finds that parties that must jointly participate in the arbitration are missed out in the arbitral award, the court is not required to return to re-arbitration, but it should directly include the missing parties. If the missing parties are found to be liable, the court should conduct mediation or reach a verdict of its own.
Legal nature of two employment relationships
The relationship between an employer and an employee hired by the employer who is already entitled to pension insurance benefits or receiving a retirement pension in accordance with law is to be handled as a labour relationship. The employment relationship of an employee with a new employer, in which the employee retains the job with wages suspended, retires earlier but has not reached the statutory retirement age, is laid-off and waiting for a job assignment or is on long vacation due to discontinued business operations, is to be handled as a labour relationship. Interpretation III has responded to the controversies over these two long-standing issues that exist both in theory and in practice.
Burden of proof in overtime pay disputes
Interpretation III follows the principle of allocation of the burden of proof established in article 6 of the Labour Dispute Mediation and Arbitration Law for labour disputes by stipulating that if an employee claims overtime pay, he or she should bear the burden of proof in relation to the existence of the overtime work; however if he or she has evidence substantiating that his or her employer has evidence relating to the existence of the overtime work but the employer refuses to provide such evidence, the employer has to bear adverse consequences. This provision has, to some extent, lessened the burden of proof on employees.
Agreements between employers and employees to terminate labour contracts
The autonomy of will of employees and employers is fully respected in Interpretation III, which provides that an employer and an employee may agree as they wish on various matters concerning the dissolution or termination of a labour contract, such as the completion of relevant procedures and the payment of wages, overtime money, financial compensation or compensation money, provided that these matters are not contrary to the compulsory provisions of laws or administrative regulations, and are not fraudulent, coercive or exploitative. In addition, if such an agreement contains material misunderstanding or is unconscionable, the parties may ask a court to revoke it.
Connection of mediation and arbitration with litigation
To ensure labour mediation and arbitration procedures are operating during the resolution of labour disputes, and to minimize labour litigation, Interpretation III sets out the following two requirements: first, after a mediation made by the Dispute Arbitration Committee of Labour and Personnel has taken legal effect, if one party regrets filing a suit, the court should not accept the case; if the case is accepted, the court should rule that the suit be overruled. Second, where the Dispute Arbitration Committee of Labour and Personnel has not made a decision on the acceptance of a case or delivered an arbitral award before a deadline, there are six legitimate reasons for the referral of jurisdiction as described under article 12 of Interpretation III, and the parties cannot directly institute legal proceedings before a court.
Criteria for certifying final awards
Under item 1 of article 47 of the Labour Dispute Mediation and Arbitration Law, if a labour arbitration organization delivers an award on a dispute over the “claim of wages, medical expenses, financial compensation or compensation money due to an industrial injury of no more than the total wage amount for 12 months according to the local monthly minimum wage standards, the award should be final”. Interpretation III contains more details on this clause: “if an arbitral award involves several items, the amount determined under each item should be no more than the total amount for 12 months according to the local monthly minimum wage standards, and this case should be handled on the basis of the final award. In addition, if the same final arbitral award involves both matters in a final award and in a non-final award, the case should be handled on the basis of the non-final award.
Interpretation III also provides details on how to handle the conflict “where as an employee is instituting legal proceedings before a basic court of justice after a final arbitral award is delivered, an employer is applying to an intermediate people’s court for the revocation of the arbitral award”, and on some procedural issues such as employees’ application for an order of payment. It is believed the Supreme People’s Court will also study the enactment of Interpretation IV on relevant substantive issues in the Labour Contract Law.
Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at baochen@haiwen-law.com. Readers should not act on this information without seeking professional legal advice.
