So just where does this put us and what does this mean for foreign companies and their Human Resources professionals working in China?

A disclosure: When I first came to China in 1995, my then-employer was quite conscientious about legal compliance processes, particularly regarding HR matters.  The company wanted more business in China and earning a reputation that we were anything other than a preferred employer would not have been well-received back at headquarters.  And so I became well-acquainted with the labor law then in effect.  (Having a ‘new’ labor law does imply there was an ‘old’ labor law!)

The ‘old’ labor law also required written contracts, overtime payments, notification to or working with the local labor bureau or labor union when certain employment actions such as major layoffs or shift work issues were involved, provisions for court proceedings or arbitration regarding labor contract disputes, and labor unions.   There certainly are differences between the two laws that shouldn’t be minimized.  The new law and regulations are far clearer on penalties for noncompliance where the old law was primarily aspirational.  The new law is certainly more detailed than the old law.  (To the lawyers in our midst:  You are correct; the new law certainly has many areas of ambiguity.  As do most laws.  Which is why there are lawyers to argue about them.)  And the new law is stronger on labor union issues than the old law.

But for a company that wasn’t focused on the penalties but was focused on creating an image as a preferred employer, in fact, we jumped through many of the same hoops then that some companies are only discovering now after the new law.  So I’m always a bit flummoxed when hearing complaints about the new labor law.

(Quick digression:  One of my fondest memories was my first negotiation session years ago with the local labor bureau head.  We needed to get permission to alter some shift work schedules and had been told by his department that what we were trying to do was illegal.  The session lasted about 60 seconds.  His staff had already briefed him and so he wanted me to explain our goal.  I did.  He turned to his staff, waved his hand and said “I understand his point.  It’s correct.  Do it.” Then he got up, walked out, and left the rest of us sitting there with mouths agape.  Session finished.  Turned out the director had done a stint abroad for the foreign ministry, understood the international context in which I was talking, recognized that although new to China, the mechanism benefitted both the company and the workers, and ka-boom.  Fin.)

So where does this leave us?  Well, I think it gets back to some of those same themes we’ve talked about before.  Companies doing business in China are going to have to emphasize human resources and employee issues far more in the future than they’ve done in the past, not just from a tactical, legal compliance perspective but from a broader strategic context involving company branding, motivation, and understanding how culture affects employee perceptions and behaviors.  Every manager, even the technical operational types, needs to view him/herself as a human resources manager. 

A foreign company I’ve worked with here just had a legal imbroglio with an employee who was fired for theft of company secrets.  Despite all the warnings suggesting the legal deck is stacked against foreign employers, the company won.  Of course, they’d done their homework. Management matters.