Third Interpretation regarding the Applicable Law of Labor Dispute Cases

The 3rd Interpretation regarding the Applicable Law of Labor Dispute Cases (the “Interpretation”) was issued by the Supreme Court on 13rd September, 2010 and was effective since 14th September, 2010.

The Interpretation intends to solve some urgent and ambiguous problems that normally occur during the process of arbitration or litigation of a labor dispute.

The following are the basic principles set out by the Interpretation:

1. The courts shall accept a legal complaint filed by the employee in the following situations:

  • An enterprise has not processed the social insurance payment for its employee and as a result the employee cannot enjoy the benefits of social insurance.
  • An enterprise restructuring triggers the dispute.
  • An employee requests his/her employer to pay additional compensation due to: the employer failure to pay the full wage or the wage for overtime work or; the employer pays wages below the minimum wage standard or; the employer fails to pay the compensation according to the laws and regulations.
  • The arbitration committee of labor dispute fails to accept an employee’s complaint in time or fails to make an arbitral decision within the applicable period.

2. Relevant parties shall be identified as follows:

  • In case of disputes between an employee and his/her employer who has no business license, whose business license was revoked or whose business period has expired, the employer or the investor shall be identified as the relevant party.
  • In case the above-mentioned employer borrows other’s business license to do the business, if there is a dispute between the employer and its employee, the employer and the lender of the business license shall be identified as the relevant party.
  • In case after examination the court finds that one party, who should be the party, has not participated the arbitration, the court shall add it as the party of the case.

3. The relationship between an enterprise and its employee who has already begun to enjoy the old-age insurance benefits or draw a pension shall be identified as the labor service relationship.

4. The relationship between the following kinds of persons and their new employers shall be identified as the labor relationship:

  • The person whose position in the former company is retained with his/her salary suspended;
  • The early retired person whose age has not reached the retirement age;
  • The person who is laid off; or
  • The person who is having a long holiday because of an operational stop of production.

5. In case an employee claims the wage for overtime working, he/she shall take the burden of proving the overtime working. However, if the employee has proof to show that his/her employer holds the proof of the fact of his/her overtime working, but the employer does not provide the proof, the employer shall bear the adverse consequence.

6. The agreement between an employee and his/her employer regarding the cancellation or termination of their labor contract shall be deemed valid as long as this agreement meets the following requirements:

  • No violation of the mandatory regulations of laws and administrative rules; and
  • No fraud, threat or taking advantage of other’s difficulties during the process of reaching this agreement.

In conclusion, the Interpretation does not cover all the problems which a rise during the procession of the labor arbitration and litigation. However, it is quite relevant and practical and it clarifies some confusion and doubts in the judicial practice.