Basics of Applicable Labor and Employment Laws in Shanghai China

The basic framework of labor law applicable in Shanghai (in descending order of authority):

-          The Constitution of the PRC (labor-related articles)

-          National Labor Laws enacted by the National Peoples Congress (NPC) and its Standing Committee.

-          Labor Administrative Regulations enacted by the State Council

-          Judicial Interpretation of the Supreme People’s Court of PRC

-          Local Labor Decrees promulgated by People’s Congresses of Shanghai Municipality

-          Administrative and Shanghai Labor Rules issued by Administrative Department under the State Council or by Shanghai government

-          The Higher People's Court of Shanghai Municipality

Main labor laws, regulations and interpretations in applicable in Shanghai:

Labor Law (1994)

Labor Contract Law (2007)

Law on Employment Promotion (2007)

Law on Mediation and Arbitration of Labor Dispute (2007)

Regulation on the Implementation of the Employment Contract Law of the People’s Republic of China (2008)

Interpretation of Applying the Law in Labor Controversies and Their Remedies of the Supreme People’s Court (2001)

Shanghai Municipality Labour Contract Regulations (2001)

The Circular on Certain Issues Concerning the Implementation of Labour Contract Regulations of Shanghai Municipality (2009)

The Labor Law (1994) covers such matters as workers' rights, labor contract, collective contracts, hiring and firing, wages and salaries, working hours and overtime, rest and vacations, the settlement of labor disputes, the role of trade unions, labor administration, and social insurance.

-It legalizes labor contract, collective bargaining and collective contracts, social insurance, the minimum wage, labor dispute resolution, and factory inspection.

-The Law also establishes the labor standards in China, including the eight-hour workday and forty-four hour workweek (shortened to forty hours in March 1995 by the State Council), limits on overtime work, and occupational safety and workplace hygiene.

The Labor Contract Law (2007) is expected to more effectively protect workers' interests and rights and regulate labor relations.

-          Labor law requires employers to sign written contracts with employees within one month of starting work. An employer failing to do so within that one month will be penalized depending on how long it took before the employee contract was formalized. Over a month but less than a year will have to pay double the salary of the employee, while a delay of more than a year would mean that the employer has finished the non-fixed labor contract.

-          The law has pegged salary levels to not less than the minimum level for the municipality and not less than the lowest salary of a similar position in the company. Employees on probation need to be paid at least 80 percent of their contractual salaries.

-          Labor Contract Law encourages long-term contracts to minimize compensation risks that come with signing two-fixed contracts then moving on to a non-fixed contract.

-          When the company chooses to terminate an employee or discontinue an employment contract, it is required to compensate the employee based on the length of employment and average salary for the last 12 months. A rule of thumb would be one month salary for every year of employment served.

-          Although, the labor law sets a limit to the amount of compensation an employee can receive at no more than three times the average monthly payment for employees as specified by the local municipality.

-          According to Article 39, the Labor Contract Law, a worker may be fired if he/she:

(1)does not satisfy the recruitment requirements during the probation period;

(2) is in serious violation of the bylaws of the employer;

(3) causes any severe damage to the employer due to his/her grave negligence to his/her duties or seeking private benefits;

(4) establishes a labor relationship with other employers at the same time and may seriously influence his/her  completion of the works in this entity, or refuses to make a correction even though the employer has pointed it out;

(5) is subject to criminal liabilities according to law.

-          According to Article 41, the Labor Contract Law, in the case of difficulties in production and business operation, the employer needs to cut down above 20 workers, or if it needs to cut down less than 20 workers but which accounts for 10 percent or above of the total number of the workers, the employer shall make an explanation to the labor union or to all workers 30 days in advance.

-          The law also says that a company will need to consult with its labor union or employee representatives before enforcing any rule that will directly affect its employees. These include regulations concerning work hours, vacation leave, salary, and safety. A company is required to provide an employment manual written in the local language that outlines company rules. For example, in Shanghai, a wholly foreign-owned enterprise or joint-venture would be asked to establish a labor union or in the absence of one, organize employee representatives. In the instance that company rules violate the labor law, the labor union has the right to request for the company to change said rules.

On the whole, the essentials of Chinese labor law are as follows:

-          Labor Contract System (employment relation must base on a written labor contract)

-          Collective negotiation and Collective Contract System (highlight the role of trade unions)

-          Minimum wage system (determined by provincial government)

-          Labor Disputes Resolution System (mediation, arbitration and litigation )

-          Employment-based social insurance system (pension, unemployment, health care, maternity and injuries)

-          Maximum working hours system (8 hours per day, 40 hours per week)

-          Tripartite structure (employers’ society, trade unions and government)