As the Labour Contract Law is about to come into force, Guangzhou has issued an emergency circular to prevent companies from rushing to lay off workers ahead of the implementation of the law. The emergency circular stipulates that any incident of terminating the employment of more than 20 workers has to be reported to the labour authorities, even if the termination is due to expiry of contract.
.The Guangzhou labour and social security bureau points out that many labour contracts signed between employing units and their employees will expire on 31 December. The emergency circular serves to prevent employing units from circumventing the new law by terminating such employment contracts as they expire at the end of the year.
.According to the Circular on Strengthening the Administration of Massive Layoffs by Employing Units issued by the Guangzhou municipal government, any enterprises, individual economic organisations, private enterprises, government organs, government enterprises and social bodies at or below city level laying off their employees on a large scale by means of dismissal, suggesting to the workers that they should resign or change the nature of employment (e.g. change to secondment or contract-based employment), or altering the terms of the labour contract, will be subject to ‘‘special administration’’ as from 31 December, no matter whether the laid-off workers will be re-employed or sign a new labour contract with a new employment unit.
The circular states that employing units can only carry out lawful massive layoffs under two conditions: first, the enterprise is on the brink of bankruptcy and has been ordered by the people’‘s court to undergo reorganisation; second, the enterprise has run into great difficulties as regards production or operation and falls under the ‘‘enterprises in difficulty’’ category confirmed by the municipal government. Other than these, employing units must continue to honour the labour contracts and may not dissolve the employer-labour relationship.
It is understood that currently many enterprises try to circumvent the Labour Contract Law by two ways. One is they would not renew the labour contract with their employees upon expiry in order to avoid signing non-fixed term contracts with those workers who would have worked for the company for 10 years in the following year. The other one is they would change the nature of employment to secondment basis.
According to the Guangzhou labour and social security bureau, as labour contracts are normally made on a calendar year basis, many of them will expire by the end of the year. Under the circular, any employing unit terminating the service of over 20 workers or more than 10% of its staff approaching the end of their labour contract has to submit a written report
Within 15 days upon receipt of the report, the labour and social security department should give written comments to those enterprises found not meeting the conditions for making massive layoffs. A copy of the comments will be sent to the social security authorities, which will refuse to handle the application for stopping payment of social security contributions by the enterprise concerned. This move of not allowing non-compliant enterprises to stop making social security contributions testifies to the fact that stringent measures are adopted by the labour authorities to curb unlawful massive layoffs by employing units.
For the full text of the Circular on Strengthening the Administration of Massive Layoffs by Employing Units in Chinese, please visit: