The number of labor disputes have been growing in China in recent years in response both to the global economic downturn and to efforts by the Chinese government to make workers more aware of their rights. In June of this year, the Supreme People’s Court of the People’s Republic of China released a draft for comment of the Interpretation (IV) of Several Issues on the Application of Law in the Trial of Labor Dispute Cases addressing several procedural and substantive employment-related issues and further strengthening employees’ rights.
Article 6 clarifies that if an employee is transferred by his/her employer to another employing unit and is not paid compensation at the time of transfer, in the event the new employer later terminates the transferred employee, it must include time worked for the first employer in calculating severance and other compensation.
Article 7 states that company rules and regulations will only be accepted by the court in labor dispute cases if they have been issued according to the “democratic procedures” in Article 4 of the Employment Contract Law. Since such rules often form the basis for dismissing employees for cause, it is of key importance to ensure that legally-mandated procedures are met in drafting and issuing company rules.