Spoke with a reporter last week regarding China's labor laws. The conversation went sorta like this:

Reporter: I want your views on how enforcement of China's labor laws is holding up despite the economic downturn. I am also wondering how representative are the stories we've all heard of one bad-egg employee winning a huge lawsuit against a foreign company that is basically in full compliance with the labor laws, with every other employee running to join in.

My Response: All I can tell you is what we are seeing as one small law firm that represents exclusively foreign companies doing business in China.

1. I am definitely "feeling" a loosening of labor law enforcement by Chinese government officials and even employees. This starting happening when the economy turned and it really has not changed much despite press reports of China's economy holding up well. Having a job seems to be taking greater precedence and, with that, comes a concomitant decrease in labor law enforcement.

2. Those cases of which I am aware that involved relatively large payouts to employees did not involve companies that were in full compliance with China's labor laws. Foreigners (particularly Americans) are always complaining how Chinese law elevates form over substance. Well it's true and if you don't follow China's labor laws to the letter, you are running real risks. Having said this, I am not aware of a single foreign company that has lost a claim despite following the labor contract laws, though I have to admit that I am aware of many companies (including my firm's clients) that have felt it made economic sense to settle such cases).

This whole thing reminds me of the media’s coverage of China trademarks a few years ago. There were a spat of articles on Chinese companies "stealing” US company trademarks, quoting the US company saying their lawyers had told them there was no point in pursuing any legal action in China. I tracked a couple of them down and -- in every single case -- the American company had failed to register its trademark in China. So what we had was not really a case of stealing by the Chinese company, but a case of negligence by the American company, who persisted in believing that its American trademark should cover it all around the world.

The bottom line is that China's labor laws are not so bad (from a legal perspective) and following them will protect you.

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