A new labor contract law; so what? - the WTO column

(Later also at Chinabiz)
On January 1, 2008 a new labor contract law will be in place and alarmist messages from the legal front keep on appearing on my radar screen. If I believe those messages, after the turn of the year the Armageddon will come over us, or at least those who employ people in China. So, I took a deep breath and listened to the arguments of those who want us to prepare for the worst. What happens next year?

Employees in China cannot work longer than forty hours per week and if they make overtime, the employer has to pay.
Employees cannot be sacked at a will, but only for well defined reasons.
Employees can no longer be forced to sign non-competitive agreements, unless they belong to the senior management.
Employees can sue you, if you break the law as an employer.
Shocking isn't it?

If you were used to do all these nasty things, January might be a month to mark in your agenda for a move to Cambodia. Of course, some employers got used to the fact that employees had hardly a chance to defend themselves in court and if that is the society you want, you might have a problem. But have Western companies not always claimed they would do better than average? That their presence in China is would be beneficial for the Chinese workers, that they would do things differently from many Taiwanese or Hong Kong companies?

Pardon me, if I look at this situation with European eyes, but the largest problem seems to be the enforcement of the law, not the law itself. The old labor law was only marginally enforced, because economic growth was key under the Jiang Zemin regime. As long as you contributed to that growth, you could get away with a lot. Decent companies that still wanted to comply with the law were in a disadvantaged position. Now, if the upcoming law is going to be better enforced, also with the new powers given to the employees to secure their rights, that would be in the interest of all the better companies, isn't it?

In one way or the other, the coming months are going to be interesting. The new law is one of the flagships, introduced under the banner of a harmonious society. Some elements of it might cause, when the new systems come into place, some less harmonious feelings. One of the rumors was, for example, that Chinese law firms were already rounding up large numbers of disgruntled employees to start an avalanche of law suits early next year. While employers who have followed the law in the past would have nothing to fear, I'm sure that some extra-legal control mechanisms of the government would also prevent massive disruption of the production process.
The local labor bureau's will be very careful in handling new cases, since no bureaucracy likes to get in the forefront as long as is unclear how the execution of the law will work out. Private lawyers might think of making a handsome profit on labor-related cases first, but they are also part of the licensing system of the ministry of justice, that will use its power when individual lawyers try to disrupt this harmonious society.

So, perhaps the end is near, but not because of the upcoming labor contract law.

Fons Tuinstra