VZCZCXRO6140
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0414/01 1960855
ZNR UUUUU ZZH
R 140855Z JUL 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 7408
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 3856
RUEHHI/AMEMBASSY HANOI 0500
RUEHJA/AMEMBASSY JAKARTA 0229
RUEHHM/AMCONSUL HO CHI MINH CITY 0241
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHC/DEPT OF LABOR WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000414 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS USTR CHINA OFFICE 
 
E.O. 12958: N/A 
TAGS: ETRD EIND ELAB ECON PGOV CH
SUBJECT: Guangdong Releases Labor Contract Law Implementation 
Guidelines 
 
REF: A) GUANGZHOU 228; B) GUANGZHOU 121 
 
GUANGZHOU 00000414  001.2 OF 002 
 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
¶1. (SBU) Summary: Since it went into effect on January 1, Guangdong 
businesspeople, domestic and foreign, have struggled to be in 
compliance in the absence of implementing guidelines.  No more.  Or 
to be more precise, some, if not all of the ambiguity, was removed 
on July 7 when the Guangdong High Court and the Guangdong Labor 
Dispute Arbitration Commission jointly published implementation 
regulations.  Highlights of the new guidelines include stipulation 
that it is illegal to force employees to resign and then rehire them 
under new contracts, a practice that many firms were accused of 
using in the weeks before the Labor Contract Law came into force. 
In addition, the guidelines give employees the power to request that 
their employers' assets be frozen under certain conditions during 
labor disputes.  Through June 30, nearly 40,000 labor dispute cases 
have gone to trial in Guangdong, a 157% increase from a year ago. 
This is the first in a series of cables that will look at the new 
labor laws, with an eye in particular toward their impact on U.S. 
business.  End Summary. 
 
¶2. (U) The Guangdong High Court and the Guangdong Labor Dispute 
Arbitration Commission July 7 issued the first guidelines on how the 
Labor Contract Law and Labor Arbitration Law would be implemented. 
A dramatic rise in labor disputes had increased the urgency for 
clearer guidelines.  During the first half of the year, 40,000 labor 
disputes in Guangdong have gone to trial in district, municipal and 
province-level courts, a 157% increase in cases over the same period 
last year.  The sharp increase is largely due the elimination of the 
arbitration fee for filing a labor dispute.  In the past, parties 
were required to pay a fee of several hundred RMB to the Guangdong 
Labor Arbitration Commission before filing, a disincentive for 
poorer applicants to go forward with a claim. 
 
¶3. (SBU) In general, U.S. businesses operating in south China 
believe they are already in compliance with the new labor 
legislations.  However, U.S. and other firms have repeatedly 
expressed to us their concerns about the lack of clarity of the new 
labor legislation.  Many have consulted closely with local labor 
authorities to ensure that their interpretation of the new laws 
meets the government's expectations.  They have stated that even 
labor officials admit that implementation procedures have not been 
clear.  However, in the week since the guidelines were released, 
human resources executives of U.S. firms have not yet had time to 
thoroughly study them and do not yet know if they fully address 
their concerns. 
 
¶4. (U) The new implementation guidelines cover 31 different 
articles.  Of these, the local media has focused on 9 articles in 
their reporting which stipulate the following: 
 
--It is illegal for an employer to force workers to resign, and then 
re-hire them and have them sign new labor contracts.  (Media reports 
indicated that this practice was used many by companies in the Pearl 
River Delta in the weeks before the Labor Contract Law came into 
force.  The practice was widely criticized.) 
 
-- It is also illegal for an employer to register two company names 
and sign consecutive labor contracts with employees under different 
names (two years using one name and two years using another name). 
 
 
--During labor arbitration, if the employer attempts to transfer 
company assets in order to avoid paying compensation, the worker can 
apply to the court to freeze the assets of the employer. 
 
--Foreigners and Hong Kong/Macau/Taiwan residents' labor contracts 
with mainland employers shall be deemed invalid if they do not have 
a Foreigners Employment Permit or a Hong Kong/Macau/Taiwan Residents 
Employment Permit.  However, the employer must still pay them in 
accordance with their labor contracts for the time they have 
worked. 
 
--If an employee claims that he has worked overtime and the employer 
denies it, it is the employer's responsibility to provide evidence 
 
GUANGZHOU 00000414  002.2 OF 002 
 
 
that the employee did not work overtime.  The employee does not have 
to provide evidence that he worked overtime, unless the work 
occurred more than 2 years ago. 
 
--An employer does not need to pay compensation to workers if the 
employer terminates the employment relationship within one month. 
 
--Disputes over housing funds shall not be regarded as labor 
disputes; the Labor Arbitration Law is not applicable in this 
instance. 
 
--The term "days" in the Labor Arbitration Law means "working days." 
 
 
--In construction projects where disputes arise between a 
construction worker and a contractor who illegally hires the 
construction worker, the company that hires the contractor can be 
listed as a secondary defendant in a litigation case. 
 
--In labor arbitration cases, arbitration commissions shall follow 
the principles of equal protection of the legal interests and rights 
of workers and employers. 
 
GOLDBERG