Recent Legal Developments in China Labor Law

11 July 2013

Grace Chen, Cecilia He

Following the Amendment to the PRC Labor Contract Law issued on 28 December 2012 with effect from 1 July 2013 (the “Amendment”) which focused primarily on labor dispatch arrangements, the PRC Ministry of Human Resources and Social Security (“MOHRSS”) further published on 19 April 2013 a draft of the Measures on Management of Labor Dispatch Administrative Licenses (the “Draft Measures”) for public comment until 19 May 2013. The Draft Measures focused primarily on the requisite qualifications of a labor dispatch entity, the process of applying for a license, government supervision and inspection of labour dispatch entities on an ongoing basis.

The Amendment stipulate that labor dispatch arrangements are supplementary arrangements that may only be used only for temporary positions (six months or less), ancillary positions (non-core role that provides services to the core business) or substitutive positions (intended for temporary replacement of a permanent employee who is not able to report to duty for a certain period for reasons such as study leave, or other leaves, etc.), and calls for companies to ensure that individuals employed under labor dispatch arrangements to not exceed a certain percentage of the total number of employees. As foreign company representative offices are required to hire all domestic employees through labor dispatch arrangements, they would not be able to comply with these specific restrictions, which is why we had expected that MOHRSS would provide guidance in a subsequent notice or regulation. It is surprising that this issue has not been addressed in the Draft Measures.

On April 25, 2013, MOHRSS issued the Opinions on Several Issues Concerning the Implementation of Work Injury Insurance Regulations (the “Opinion), which was circulated in draft form on 24 January 2013 for public comment until 20 February 2013. The Opinion provides interpretation and guidance for the Work Injury Insurance Regulations, which was revised on 20 December 2010 with effect from 1 January 2011, and is the most recent of a series of notices, opinions, rules and regulations relating to the Work Injury Insurance Regulations issued by MOHRSS, its predecessor entity the Ministry of Labor and Social Security, as well as the various People’s Governments at the provincial level.