Washington International Law Journal


Jovita T. Wang


China’s economy rapidly developed as it shifted from a planned economy to a market economy. Cheap labor encouraged foreign companies to conduct business in China, but that business came at the expense of labor protection. Workers who had previously enjoyed lifetime employment suddenly faced rampant layoffs, labor abuse, and unemployment. Despite China’s implementation of the Labor Law in 1994, labor abuse continued, especially by employers refusing to follow written contract requests to define the employment relationship. Many workers were left unprotected. In response to these problems, China passed the Labor Contract Law in 2007 to clarify requirements of employment contracts and to inform both employers and workers of their rights and obligations. The law was intended to promote better employment relationships. Article 14 of the Labor Contract Law worked to accomplish this end by allowing the use of open-term employment contracts. Foreign companies and investors, however, have voiced concern that the Labor Contract Law’s encouragement of open-term contracts will negatively affect their business in China and make it nearly impossible to dismiss workers. Some of these fears have been realized in South Korea under similar employment laws. While open-term contracts will inevitably increase some business costs, the benefits of the new Chinese Labor Contract Law outweigh such costs. Because workers will be more invested in business operations, open-term employment contracts will improve employment relationships and make businesses more profitable. Additionally, in contrast to South Korea’s employment laws, Article 14 of the Labor Contract Law includes sufficient regulations and flexible requirements to prevent open-term employment contracts from becoming a ticket to lifetime employment. Open-term employment contracts can advance China’s economic development.

First Page