Labor Dispute Resolution in China

In China, if mutual negotiation can’t solve a labor dispute, then related authority’s involvement will be needed for an effective solution.

Unlike in general civil or commercial disputes, the parties can choose the authority to solve the dispute—arbitration or lawsuit, either party to a labor dispute has to apply for a labor arbitration first instead of going to the court directly. The reason for the initial arbitration phase is to try to solve the dispute without getting the court involved, to avoid a waste of judicial resources. However, since the low cost for labor arbitration and lawsuit–either party has to pay just 10 RMB to file for it—sometimes, the party will appeal until the last phase just because they want to hold executing the result. A total waste of judicial resource and the other party’s time.

It’s required that the labor dispute be submitted to a labor arbitration commission in the district where the employer is located. The application to arbitrate must be filed within one year from the date the cause of action arises, and the arbitration panel has 60 days from the date of filing to issue a decision. The decision of the arbitration commission is binding, but a party may bring the dispute to the courts if dissatisfied with the arbitrator’s decision. And like any other civil or commercial disputes, the second instance will be the final one. So a labor dispute could be solved within three months, but it probably would take one and half years, if the whole procedure has to be gone through.

Since 2008, when the Labor Contract law and relevant arbitration laws came into effect, the amount of labor dispute cases has risen. Two main reasons are:

1. Generally, the younger generation have more right-protection awareness and are apt to use judicial resources to settle disputes.

2. The fees involved are limited. Unlike civil or commercial disputes, the majority of the burden of proof is borne by the employer, so most of the employees could do it by themselves as long as they know the related provisions. However, for employers, things are not so simple. Most of the time, they have to hire a lawyer to handle this, unless their HR staff have enough experience to take care of it.

Though most of the labor disputes filed by the employee is to defend their rights, some may be filed by some disgruntled employee hoping to get extra compensation. So the employer has to be very careful when dealing with labor disputes. The reason “the employee did something wrong” is not enough to justify the firing of an employee, the employer has to provide enough evidence to prove that:

1. The employee did something wrong is an objective conclusion instead of a subjective judgement;

2. The employer has done their job in line with the laws, such as warn or notify the employee.

It’s a little tricky, right? This is not an easy job for most HR staff of SMEs. That’s why we provide the service package “HR solution”. Anyone interested may contact us for further info.

Useful link:

Ministry of Human Resources and Social Security of the People’s Republic of China