(By Albert Chen) The dispute over employment termination is quite common in labor conflicts, and whether the employer shall send a notice to the trade union before the termination is commonly seen in such disputes. What then, are the regulations regarding this aspect in China?

I. What is the function of trade union in China?

The role of the trade union is specified in Article 2 of Trade Union Law of PRC (the “Trade Union Law”):

“Trade unions are mass organizations formed by the working classes of their own free will.

The All-China Federation of Trade Unions and all of its trade union organizations shall represent the interests of the employees and protect the legal rights and interests of the employees.”

And in the same law, it further provides in Article 6 that:

“Trade unions shall coordinate the labor relations and safeguard the labor rights and interests of the enterprise employees through equal negotiation and the collective contract system.”

Therefore, it can be concluded that the trade union’s function is in promoting and maintaining the interests of employers, rather than supervision over the relationship between the employee and the employer. The trade union by law has no power to interfere with the labor relationship; neither does it have the power to approve the creation, maintenance or termination of it. The trade union can only participate in the dispute before it occurs by means of a group contract, acting as a means of prevention, or in acting for the purpose the equal negotiation when a dispute breaks out.

II. Regulations on the unilateral termination of employment

It has also come to our attention that as stipulated in Article 30 of the Labor Law of PRC (the “Labor Law”), the trade union has the right to put forward its opinions on an employer’s plan to terminate employment. Even in Article 21 of Trade Union Law we see that the reasons of the dismissal shall also be sent first to the trade union.

Yet in the later promulgated Employment Contract Law of PRC (the “Employment Law”), the above regulations were amended. Among the revisions, we can see Article 39 saying that the employer may terminate the employment when the laborer is at fault. Furthermore, Article 40 provides that when employment cannot continue objectively, the employer may unilaterally end the employment relationship. After undertaking a study of these articles, it can be concluded that the notice to the trade union is not a precondition to the termination of employment.

However, the Employment Contract Law does have articles involving the trade union in Article 41:

“If any of the following circumstances makes it necessary to reduce the workforce by 20 persons or more or by a number of persons that is less than 20 but accounts for 10 percent or more of the total number of the enterprise’s employees, the Employer may reduce the workforce after it has explained the circumstances to its Trade union or to all of its employees 30 days in advance, has considered the opinions of the Trade union or the employees and has subsequently reported the workforce reduction plan to the labor administration department:

(1) Restructuring pursuant to the Enterprise Bankruptcy Law;

(2) Serious difficulties in production and/or business operations;

(3) The enterprise switches production, introduces a major technological innovation or revises its business method, and, after amendment of employment contracts, still needs to reduce its workforce; or

(4) Another major change in the objective economic circumstances relied upon at the time of conclusion of the employment contracts, rendering them unperformable.”

Although we can see in this article that the notice to the trade union is a necessary procedure before official termination of the employment relationship, due to no veto right being granted to the trade union, nor any liability for failure to notice, we have found the regulation currently has not been thoroughly fulfilled or even followed in form.

For this reason, we can say that, based on the existing regulations, notice is not a precondition for a lay-off, and trade unions have no right of veto or any ability to stop it.

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