Mainland Media

New labor contract law not an 'iron rice bowl'

Below is an article from the Shanghai Daily. It is one of the few rather negative reports on the forthcoming contract law – most domestic reports concentrate on the sweeping changes it is expected to bring. This article looks at the clause relating to non-fixed term contracts (one of the clauses which have led many companies to dismiss huge numbers of workers in advance of the law). It also gives comments form one of the major players behind the new law, Professor from the East China University of Political Science at law who is quoted as; “ "The new law will only enhance the job security of employees at the upper and middle levels, but not the lower level, who actually make up the majority of all workers." The article goes on to conclude that; "The labor contract law would have been more helpful if it had emphasized working conditions and safety - to benefit the vast number of ordinary workers."

New labor contract law not an 'iron rice bowl'
Created: 2007-12-12 2:09:31
Author:Wu Jiayin

THE benefits of the new Labor Contract Law, which takes effect January 1 next year, have been exaggerated.

Many people have the illusion that the new law will entitle all workers to an "iron rice bowl" - a permanent job.

What causes the misunderstanding is the article concerning open-ended employment contracts.

According to Article 14, an employer must sign an open-ended employment contract with employees who have worked for the employer for at least 10 consecutive years or have had their fixed-term employment contract concluded on two consecutive occasions without being proved to be incompetent.

Many people simply interpret the open-ended employment contract as a permanent contract under which employers can no longer fire their employees - this is not true.

The difference between a fixed-term employment contract and an open-ended one is that the latter is a contract for which the employer and the employee have agreed not to stipulate a definite ending date, says legal expert Yang Pengfei to Shanghai Daily. Yang is an associate research fellow of Institute of Law at the Shanghai Academy of Social Sciences.

"Companies still have the right to terminate an open-ended employment contract when they find it necessary," stresses Yang.

Under the new law, however, the company will have to pay economic compensation to terminated employee as long as that worker has neither damaged the company materially nor broken laws and regulations.

"This better protects employees from being fired arbitrarily," says Yang.

Labor Law expert Dong Baohua, however, is quite pessimistic about the effectiveness of the new law.

"The new law will only enhance the job security of employees at the upper and middle levels, but not the lower level, who actually make up the majority of all workers," Dong tells Shanghai Daily. Dong is a professor at East China University of Political Science and Law.

In Dong's view, those at the upper and middle levels are not so vulnerable. He is in the opinion that as long as employees possess the skills and the ability that companies need, they don't have to worry about their job security.

Yet in fact, these employees are sometimes quite vulnerable to arbitrary or political firing.

Timely layoffs

For example, Huawei Technologies Co Ltd recently called on 7,000 staff members who had worked for the company for eight consecutive years to hand in "voluntary resignations" this October, and then compete again for their posts.

The employees are at least lucky in that they have either signed new contracts with the company or received good compensation.

In another case, however, 1,200 employees of Wal-Mart in China were reportedly dismissed without stated reason in October at extremely short notice, and probably without compensation.

But Dong is quite right in saying that owing to the new law, it is likely that lower-level workers, mainly migrant workers and many inexperienced university graduates, will have less job security.

Fewer employers are willing to sign contracts with them now that they must compensate employees who have signed a contract, in order to dismiss them.

In fact, the new law is already causing job insecurity for many employees at lower level.

Large-scale dismissals are to a large extent caused by strict restrictions on dismissals and high economic compensation under the new law, as Dong sees it.

"The legislation of the (labor contract) law should strike a balance between labor and companies, without favoring only one party," says Dong.

The labor contract law would have been more helpful if it had emphasized working conditions and safety - to benefit the vast number of ordinary workers.

Indeed, the latest mine tragedy in Hongtong County, Shanxi Province, in which 105 miners were killed in a coal mine blast, demonstrates that for ordinary laborers, safety and health are more important than a permanent contract.

Published on ShanghaiDaily.com (http://www.shanghaidaily.com/)
http://www.shanghaidaily.com/article/?id=341377