This Chinese commercial law assignment will focus on the current status of the legal system of the China and will evaluate the effectiveness of the new Labor Contract Law of China. This law assignment will focus on the fact that how this law has helped or not helped the labors of China. It is very important to check the effectiveness of any new implemented law in order to make sure that the changes made in the system are doing their work in a proper manner. The essay will also discuss about the amendments that are made in order to improve the condition of the labors in the China market.
Background of the current Chinese Labor law
The history of China tells that in the initial years there was socialist style labor management in China. There was a planned economy system but no self-governing judiciary or legitimate system. There were many faults and confusions in the state due to no proper legal system. Everything as under China Communist Party and hence all the members of the court were more responsible towards the party and towards the people. This is the reason why it is been said that there was lack of impartiality in the legitimate system of China(CHANG & CHENGLI, 2010).
Later in the years since 1979, it is observed that people of China started to disassemble the system of planned economy. In order to narrow the gap between the China’s labor laws and the other countries laws, now in recent years China’s National People Congress (NPC) along with many the supporter took the initiative to restructure the labors laws and guidelines of the country. Now there are three laws governing the labor market of China which are Statuary Laws, Administrative Laws and International Laws (Han et al, 2011). All the three bodies worked together to bring some stability in the labor market of China. There were some rules and regulations which were made in the favor of the labors.
The two most important laws are as The Labor Act of 1994 which sets comparatively great labor standards and covers minimum wage, child labor, working timings, safety of female workers and many other such areas (Labor, 2008).
The other important act under statuary laws is The Trade Union Act of 1994 which allows the labor to go for collective bargaining, they have right to settle their disputes. China today has the leading linkage of trade unions. It is not a compulsion for any labor to be a part of trade union but still there are around 90% of labors who are the members of trade unions. There were also some important considerations given to the labors who are the members of the trade unions. According to the law there is permission of only one union in the organization or the institution. All the trade unions must be the part of All-China Federation of Trade Union (ACFTU).
Some of the administrative law as the time passes become the statuary law. For example there was a law in China for Family planning which continued for almost 2 years with no statuary law to assist it legally (Sun, 2008). Later when Population and Family planning Act were legally adopted, it became a statuary law. The administrative laws were also used as a means of amendment in the statuary laws. For example according to Labor Act the working hours of a labor was 44hrs but the State council amended it and made it to 40 hours in the year 1995. Many of the rules and regulation were conditional and hence can be changed easily.
There is an international body known as International Labor Organization (ILO) which is responsible for verbalizing the international labor standards. Due to the entry of China into World Trade Organization, there was a compulsion on China to comply with the international labor standards. ILO over the period of time has accepted 170 international agreements with the help of which they have made a set of labor standards which consists of freedom of collective bargaining, equal work chance, safety, health work conditions etc. China accepted to join 23 of these agreements and only 20 among them were brought in action (Park &CAI, 2011).
The China’s labor standards were excellent on paper but when comes to reality, either many of the laws are ignored or they have not been followed with strictness. The labor rights of China faced a lot of problems due to improper enforcement of the laws. The main cause of weak enforcement of the labor laws was due to the fact that the local government was afraid of imposing strict laws in order to protect the rights of labors because if they will do so they might loose on the foreign investors (Friedman & Lee, 2010). This is the reason why many f labor laws and rules were never enforced. The other reason of weak enforcement was because of trade unions, the leaders were not able stand and be the voice of all the labors, still there were many organizations in which no unionization was done.
But in recent times China is undergoing major changeover and the codification of labor standards brought in a positive change in this direction.From the previous situation one more thing was clear that the government alone is not capable of enforcing the laws and hence it needed the help of trade unions, media and the court to ensure that the labor structures move in a smooth way (Freeman, 2013).
Comparisons of new Chinese labor law over the old one
When the new labor law came into existence on one hand there was much opposition against it whereas on other hand there were supporter also. Before understanding that what are the positives and negatives of the changes, let us have a look that what are the changes which were made in the new laws in comparison to the previous one. The various changes that were made are as following:
- Change in the meaning of employer: In the new labor contract the employer includes companies, individual economic organizations, private organizations and other institutions whereas in the old laws the private organizations were not included as the employer. This amendment has increased the area and scope of enforcement of laws. Initially sine most of the private companies did not come under the law they were free to exploit the labors as per their wish, but according to new law they cannot do so (Yao & Zhong, 2013).
- Unfair Practices: initially in order to have a full control on the employees the employers used to keep important certificates, ID cards or property papers at the time of recruitment. The employers used to this so that they ask the labors to do whatever they want and if they deny to do so, they used to blackmail them by saying that they will not return the important papers. But under new contract law if any of the employers asks for any such document then they are guilty and will be punished. The penalty for the violation of these laws is decided as 500RMB to 200RMB per individual. This law prevented the exploitation of the labors a lot.
- Probation Time: Probation Period is used as a tool for most of the companies to exploit the labors. Companies hire the labors on long probation period and then as soon as the work is done they fire them with some reason (Brown, 2010). This happens very frequently in the manufacturing industries, managers will hire the labors in large number on probation for long period contract in the peak working season and then when the works gets over in few months, they will find a good reason to fire the employee, they can do this very easily as the employee was on probation period. But in the new labor laws there is properly mentioned that if a labor is hired for less than 1 year contract but more than 3 months then the probation period will be for 1 month only. If the contract tenure is for less than 3 years and more than 1 year then the probation period will not exceed 3months. The new contract law also mentions about the pay of the labors, according to it in the probation time the company cannot pay less than 80% of the salary fixed for that post and also cannot pay less than the minimum salary which is decided for the post.
- Contract of the Labor: Previously the labors were made to sign the short term contracts with the employers. Sometimes the situation comes when the labors used to sign 4 separate labor contracts in the period of a year. The new labor law states that the employee can only sign two consecutive contracts after that they have to be made the employees of the organization.The new labor law also states some of the situations in which the if employee ask to renovate or conclude the labor contract, it should be done immediately without asking for any time, the time can only be granted it the employee is ready (Wang et al, 2013). The situations are like if the labor has worked for 10 years in a particular company, if the employee has served for 10 years in the company and he is at the age which is less than 110years up to statuary retirement age etc. There are similarly some more situations under which the employee can ask to renew the contract.Many employees do not sign any contracts with the labors; this act is also punishable under the new contract law. The new labor law states that as a penalty for not signing the contract the employee has to pay the double amount of salary to the labor.
- Welfare of the labors: According to the new law, the labors can release the contract if the employer is not able to pay the security amount to them. Security amount is their right and they must get it.
- Provisions of Non full time labor: The new law covers the employees who are not the full time workers with the organization whereas the old law did not speak anything about it.
- There were many other amendments which are made in new labor law like an act of non-discrimination, immigrations laws for all the worker who are coming from other countries to work in China, there are social insurance schemes included in this law which have five kind of funds like basic medical funds, old age pension fund, accident during work insurance, maternity insurance, unemployment insurance (Yao & Zhong, 2013).
The new laws brought a tremendous change in the labor market of China. Now the labors are more aware about their rights. The trade unions have now a higher voice and they have got full right to talk on behalf of the labors. Now employers need to be more cautious while dealing with the labors as there are strict penalties if they are found guilty under any law.
Along with so many positive changes there were some issues which left out in the new labor contract too. Some of them are as following:
- Dispute Handling: There is no section involved which will be helpful in settling down the disputes. There are various ways by which the disputes can be settled down like consultation, mediation, arbitration, court proceedings. But in China there are no provisions to handle the disputes (Sun, 2008).
- The new law made involves many of the governing bodies and hence there is no one particular institution which takes the responsibility of proper enforcement of the laws. Hence there is lack of supervision in the new labor law.
Cases of difference between labor laws and real working conditions
There is a vast difference between the actual labor laws and the real working conditions in factories in China. For example in the company known as Foxconn, a recent survey revealed that the workers have been doing overtime since long time and the overtime is not being compensated in their salaries. This is the condition of a company which provides labor for the US giants like Apple Inc. Apart from long working hours, there have been cases of cancelling the lunch breaks of the workers if the schedule is not met, the workers are only allowed to go to meet their family only once a year and they are not allowed to speak about the company in open public (Park & Cai, 2011). The Chinese labor law however states that a fixed working hour should be maintained and workers should be allowed proper breaks during their day working shifts as well as holidays for going to their native place to meet their families.
Even Samsung factories in China are facing same issues. The labor laws are not being followed and the workers have to go through inhumane conditions in factories. This has made the mobile giant company to audit the enforcement of Labor laws in their Chinese based factories and make sure that the workers are given proper return for their services.
These are few of the examples and cases which show that there is vast gap between the labors laws and their practices in China market.
New Contract Law and Migrant workers
In china in current time period there are around 200 million migrant labors. From various surveys and studies it is clear that the migrant workers face tough situations while working in China. The main issues which they encounter are like low wages, over time work with insufficient payment, safety issues, no payments etc. China today cannot ignore the fact that the migrant labors have become an important part of the Chinese work force so in order to safeguard their industrial development it has become very important for China to understand the importance of migrant labors and safeguard their rights (Chen & Funke, 2009).
China government realized this soon and since 2000, they started to take some steps in order to improve the working conditions of the migrant labors. It was the time when migrant labors were given special attention and the Chinese government was showing special concern towards these labors. The labors also got lots of hype, attention and sympathy. The media was involved and they were showing the condition of migrant workers on their channels.
In continuation with various steps finally the first Labor Contract law was passed in 2007. Due to involvement of media this law was able to draw lot of responsiveness from the general public. Many of the issues and points were debated when the law was first shown in the public (Freeman, 2013). There were people who thought that this law will bring the tremendous change in the lives of the migrant workers, their situation will be much better than before but there were some who got a different thinking and according to them there lots of inadequacies in the law to be practical.
The new labor contract handled all the open issues of the old contract. It touched upon the critical issues and insufficiencies in the old contract law which was not in favor of the labors.The basic problems which were taken care in the new contract law were non-use of labor contract laws, small contract period, probation duration, wage amount overdue,compensation upon contract closure and labor dispatch etc. These are basic issues which causes many problems in the life of the migrant labors (Batson, 2007). As discussed before, there are solutions given to these problems in the new contract law which helped in the betterment of the migrant labors.
The other major amendments that were done in the old contract laws were like higher beginning for the labor agencies. Due to this alteration there was increase in the rate of establishment of the labor agencies. The new necessities included to have at least the listed capital of about 2 million RMB, in the older law contract it was 500,000RMB. The next requirement was to have a permanent space for the business; the company must have proper inner dispatch guidelines which must in amenability of the legal laws and regulations and the last one says that the company must have governmental permit in order to get involved in labor dispatch business.
The next alteration says that there must be equal pay for the equal work. This means that the dispatch labors must be treated in a similar ways as the permanent employees of the company (Sun, 2008). The contracted or dispatched employees also work the same amount of work as per the contracted employees so they must be also given the equal pay and respect as them. There should be no discrimination among them.
The alteration was regarding the penalties. In the new law the penalties are tougher than the previous one if someone is found guilty. These tougher penalties are applicable for both the employers and the dispatching agencies. The penalty for a dispatching agency if found guilty and does not rectify their mistake by the permissible time period is ranging between 5000RMB to 10,000RMB per dispatched employee. According to the old law it was about 1000RMB to 5000RMB. Along with the fine and penalty, the permit of the company can also be cancelled in certain cases (Park &CAI, 2011).
There is no doubt in the fact that there are various amendments done in the old labor law in order to improve the condition of the migrant labors in the China, but until and unless those laws are enforced properly there will no use of it. So the government of China should take serious steps for the effective implementation of the new laws. The effectiveness of any system will be shown only if proper implementation of it will be done. In China due to foreign investors the implementation of the policies was not very much possible as due to foreign investors the economic and industrial development happens at a fast rate.
In essay there was a complete discussion of the condition of labors in the China market. Initially the condition of the labors was not very good. They were being exploited by the employers at every stage. There were various methods used by the employers to exploit the labors. Since due to cheap labor the foreign investors were showing lot of interest in Chinese market and hence the laws were not enforced properly. The economic condition of China was good as there were many business men who were showing interest in the China market due to economical labor (Chen & Funke, 2009). After a certain period of time the China government realized that there is need to make amendments in the contract law of labor in order to match the international labor laws.
The new law came into existence on January 1, 2008 with lots of changes in it. The new laws were taking more care of the labors. The labors now have a better lifestyle. They are aware of their rights and hence can fight back to the employers for their rights. The amendments were made in order to improve every aspect of the labor starting from the health, probation period, contract duration etc. But the new law will also will effective only when they are enforced properly and are not considered as just for sake of making the laws. For any country to develop it is important that they consider their labor force as their asset and take care of them properly.
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