Academic journal article Washington International Law Journal

Article 14 of China's New Labor Contract Law: Using Open-Term Contracts to Appropriately Balance Worker Protection and Employer Flexibility

Academic journal article Washington International Law Journal

Article 14 of China's New Labor Contract Law: Using Open-Term Contracts to Appropriately Balance Worker Protection and Employer Flexibility

Article excerpt


China is experiencing rapid growth while developing into a market economy. Behind the country's economic success, however, lies widespread labor abuse.1 Workers' main recourse in employment disputes is self-help.2 Recruiters often falsely lure migrant workers into abysmal working conditions, where wages are withheld and security guards prevent escape.3 These types of abuses have resulted in domestic and some international pressure on China to reform its labor laws.4 The Chinese government has recognized that it must reconcile economic growth with increased "governability, stability, and democracy."5

In 1994, the Standing Committee of the Eighth National People's Congress ("NPC") of the People's Republic of China adopted the Labor Law of the People's Republic of China ("Labor Law"). China's passage of the Labor Law was a stride towards creating a harmonious work structure in China's changing economy.6 The Labor Law provided comprehensive rules addressing workers' rights, labor contracts, discrimination, and social insurance.7 Workers, however, still found worker protections inadequate.8 The protections of the Labor Law only applied to workers who had a written contract or strong proof of an employment relationship.9 Because many employers did not provide such contracts despite being required to do so by the Labor Law, many workers were left unprotected.10 Often, employers overworked and underpaid their workforce.11 Employers regularly refused to renew contracts.12 Additionally, the government enforced labor laws inconsistently, especially because provinces and local cities created their own regulations.13

On January 1, 2008, China's new Labor Contract Law ("LCL") went into effect.14 The government made improvements to the 1994 Labor Law by changing contractual employment protections and expanding the scope of application.15 The LCL is the first national law in China governing employment contracts.16 For instance, it addresses the formation requirements of an employment contract, whereas the previous labor law did not.17 Under the Labor Law, local tribunals had freedom to implement regulations that reflected their own interpretation of the Labor Law. By contrast, LCL provides guidance to ensure that local regulations will be uniform and consistent with national law.18 Such uniformity should help companies with operations in more than one city ensure compliance.19

The LCL aimed to increase worker protection in response to China's fast-paced and capitalist-style economic growth.20 The law passed after the slave labor scandal in the coal mines of Shanxi and Henan provinces.21 The government realized that violations of workers' rights, not to mention the resulting strikes, negatively affected social stability and economic development.22 The government passed other employment laws in addition to LCL, such as the Employment Promotion Law.23 This legislative overhaul demonstrated China's recognition that it must protect workers to prevent future social unrest.24 In many respects, the LCL sought to bring business practices in China more in line with international standards.25

Some foreign companies and investors are concerned that Article 14 of LCL encourages open-term employment contracts. An open-term employment contract is a contract for which the employer and the employee have agreed not to stipulate a definite ending date.26 Two possibilities raise particular concern: first, that the provision will be enforced unfairly against foreign employers; and second, that the provision will increase costs by reducing the ability of businesses to expand and contract when economically necessary. Generally, employers are concerned with LCL's long-term implications for the workforce.

This Comment asserts that while these are valid concerns, particularly in light of the effect of similar labor laws in South Korea, LCL strikes the appropriate and necessary-although imperfect-balance between protecting workers' rights and allowing employers to retain flexibility, which in turn ensures the productivity and profitability of their businesses. …

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