Study On The Applicability Of Labor Law On Corporate Managerial Personnel

Currently, corporate managerial personnel, just as other ordinary employees, arefully protected under China's labor law without any differentiation on the applicabilityof labor law. However, ignoring the particularity of their identity in application oflabor law to managerial personnel has resulted in a lot of distorted phenomenon inlabor law practices——high level management can request severance pay amount tomillions when facing discharge, CEO can demand for overtime payment, let alonemiddle level management like personnel manager, whose employee status has rarelybeen questioned. Also, it is quite normal for the representatives of employer in laborunion to perform concurrent duties as the union president, who inherently have theresponsiblity to represent the labor. Even worse, the protection of managerialpersonnel against unlawful dismiss under labor law has placed the corporation in anawkward position. It is lawful to discharge a corporate officer under corporate law,whereas unlawful under labor law, that has tremendously influenced the effectivenessof balancing mechanism within corporate governance. Even though the newlypromulgated "labor contract law" added a cap on the amount of severance pay, whichintended to resolve the problem, cases involving claims of de facto labor relations thattargeting the doubled salary punitive damage under the law not only emerged, but increased dramatically year by year. The dual function of managerial personnel hasmade them both "referees" and "athletes". Among different levels of management,these two hats' proportion are differentiated thus makes them stand on opposite sidesas "powerful" vs."weak" in labor relations, which consequently determines thedegree of protection under the labor law. The application of labor law to corporatemanagerial personnel has lead to a lot unreasonable results, since the legislativepurpose of labor law is to give more legal protection to the "weak" side in laborrelations, while managerial personnel are usually fully or partially belongs to the"powerful" side.Attribute to the dual identity of corporate managerial personnel, this papertherefore purposed on responding to the theme "the degree of labor law protection forthem" through analyzing their position in labor relations. In order to focus on thecorrection of improper application of labor law to those corporate managerialpersonnel not belonging to the "weak" side in labor relations, this paper logicallyargued in three main aspects, the practical needs, the theoretical basis, and theextra-territorial legislative and judicial experiences. On the basis of fully expoundingon the subject, this paper finally rationalized the differential application of labor lawto corporate managerial personnel in China, and made several suggestions onestablishment of relevant legal system.Chapter Ⅰ fully expounds the reason for this study. The fundamental value of thestudy on the applicability of labor law to corporate managerial personnel is to provideideas on resolving the actual conflict caused by equal treatment of corporatemanagerial personnel with other ordinary employees under labor law. According tothe analysis both from the legal system and the realities of judicial practice on theimproper application of labor law, this chapter made it clear that the practicaldemands for China's labor law re-positioning corporate managerial personnel arepretty strong. This chapter first examined the core legal point of contention describedof an extreme case, in which labor law protection applies to the "the richest man in China". In this case, Wahaha fundamentally transformed the legal relationship fromcivil and commercial relation to labor relation, a civil and commercial contract to alabor contract, and finally transformed the case from a civil dispute to a labor dispute.The judiciary support of Wahaha's strategy on the labor dispute contention in China,precisely demonstrated that China's labor legislation has fell far behind theinternational labor legislation on the applicability issue of corporate managerialpersonnel. The paper then concludes that the occurring of this practicing gap, ismainly attribute to China's labor legislation, which only roughly defines theapplicable subject of labor law, without paying enough attention to the particularity ofsome special groups such as corporate managerial personnel. In fact, the Wahaha caseis not a unique in China's judicial practice. After studying on142cases concerningmanagement personnel's request for labor law protection, the paper finds that thedifficulties and contradictions encountered in judicial practices are all attributes toimproper labor legislation. Since China's labor legislation does not make anydistinction between applicability of company managers and ordinary workers, and theseverance pay cap clause of Labor Contract Law is ineffective as well, therefore thepaper concludes that the fundamental way to solve the plight in judicial practice is tomake improvement upon the legislative level.Chapter Ⅱ serves as the theoretical basis of the study. Since the thesis of thispaper has three implied theoretic aspects, the special attributes of labor law, theparticularities of corporate managerial personnel, and the relationship between thespecial attributes of labor law and the particularities of corporate managerialpersonnel. This chapter analyzes these three aspects along this logical line. Firstly,social law is the area of law that origins from commingling of public law and privatelaw, however, it differentiates from both of them and features the community needs.Labor law is a subarea of social law, makes which has characteristics of social law.Therefore the fundamental value orientation of Labor law should be consistent withsocial law. Labor law purposes to serve the interests of the community, hence emphasizes on employees' rights to subsistence. Also, labor law directly faces theobjective differences between employer and employee as "powerful" vs."weak", andtherefore locking the "weak" employees as legislative protected object. Accordingly,in order to rebalancing the actual inequality of the two sides, labor law specially givestilted legislative protection to those "weak" employees. Based on the aboveconsiderations, labor law has developed a special mode of stratification adjustments inthe macro, meso and micro levels. Obviously, the basis of justice that labor laweffectively served is depended on the definition of the "weak" employee, in otherwords, the standard on the "level of weak" so that law has to interfere in."Weak"should be protected, and "powerful" should be constrained, the strength of theboundaries must be clear, this is the theoretical basis to explore the applicability oflabor law on corporate managerial personnel. Under this premise, the paper onconducted a comprehensive analysis on the particularity of corporate managerialpersonnel. From the view of management science, managerial personnel have threecore functions, policy-making, leadership and control. The understanding ofmanagement has experienced three dramatically evolution stages. The first stage is theMarx's time, when the duality of management has just been understood. The secondstage is the development of modern management which made management separatedfrom capitalists and became a profession. And in the third stage, the modernmanagement of labor became highly complex, hierarchical, and functions of differentlevels of management are positively correlated to the height of the level. Therefore, aconclusion can be drawn from a historical dimension of view, that the differentiateapplication of labor law is fundamentally origins from the differences betweenmanagerial personnel and ordinary employees, and also from the differences amongdifferent levels of managerial personnel. Two-fold difference is served as theoreticalbasis of the differentiate treatment that labor law should provide, to managerialpersonnel and ordinary employees, and to different levels of management accordingto the function differentiation. Chapter Ⅲ analyzes the application of law to the labor supply relations betweencorporate managerial personnel and the company from macro-level. In view of thespecial nature of labor law and corporate managerial personnel, which showsobviously that the regulation of labor supply relationship between managerialpersonnel and the company can not only rely on labor law, labor law does not fit, norable to assume the burden to regulate all managerial personnel's labor supplyrelationship. There are no more than three scenarios of differentiation treatment on theapplication issue here——full exclusion, full protection, as well as partial exclusionof some protection. When labor law applies to the full exclusion scenario, the problemof application of law to the excluded labor supply relation will emerge. Apparently,redefine the scope of application of labor law is a systematic project; it not only has todemarcate the applicable boundaries of labor law, but to draw the legal framework ingeneral as well. Therefore this chapter focuses on task arrangement between civil andcommercial law division and labor law division on the regulation of the labor supplyrelationship of company and managerial personnel. Through the extraterritorialcomparison on the types of labor supply relations and the framework of application oflaw, the paper then summarizes that between civil&commercial law and labor law,there always exists a pattern which indicates that once the labor supply relation satisfyas labor relation, it falls in the jurisdiction of labor law, otherwise, it remains in thejurisdiction of civil and commercial law.For management personnel, the basis of theirlabor supply relation is the principal-agent relationship, and consequently based onthis special kind of relation, extraterritorial Company Law has not only developed twodifferent theories namely, the appointment relation theory and employment relationtheory, but also provided special rules on labor supply contract of managementpersonnel. This paper argues that regardless of the difference between both theories, itcan be concluded that as the subarea of commercial law, the regulation of companylaw on certain labor supply relationship indicates that labor law should withdraw fromthe same territory to avoid overlay regulation. In fact, because of management personnel's special status, the relationship between them and the corporation does notforward exist, so that the nature of the relationship dissatisfies "powerful" vs."weak"signature of labor relations.The management of company law sets up series ofmechanism as special restraint mechanism, appointment qualifications and dismissalpractices etc. in order to establish the checks and balances system in governance ofcorporate management. Therefore it is reasonable for company law to occupy thevacancy labor law leaves behind as well.Chapter Ⅳ to VI is the horizontal and longitudinal comparison of extraterritoriallabor legislations and judicial practices on differentiate application of labor law oncorporate managerial personnel. This paper argues that the demarcation patterns ofextraterritorial labor law on the issue of managerial personnel are mainly two types,which can be summarized as positive definition model and negative exclusion model.This chapter only discusses on the positive definition model. Positive definition modelis actually the general path of labor law to demarcate the covered employers andemployees with uncovered ones. Extraterritorial labor law follows this path to clarifythe defining criteria of employer and employee, and by applying this standard in casesconcerning the applicability on managerial personnel, extraterritorial labor law willgive protection to employees satisfied the criteria, and exclude those dissatisfied fromprotection of the law. Therefore, the core issue of positive definition model is toclarify the criteria of defining labor relations. This chapter first enumerates thedefinition of labor contract, employer and employee in extraterritorial labor law.Based on the analysis, it can be concluded that the general criteria for defining laborrelationship and also the subject of the relationship is subordination test.Subordination test reveals the fundamental nature of labor relationship—the power ofemployer to control, which translated into a specific standard in practice, namely thepersonal subordination test in civil law system, or referring as control test in commonlaw system. Subsequently, the paper compares the personal subordination test appliedin Germany, Japan, Taiwan, United Kingdom, France and the United States, which fully indicates the importance of personal subordination test in defining laborrelationship. Since the flexibility of employment relations in labor market, thepersonal subordination test has developed into a comprehensive review test. Althoughthe new test could better serve the legislative purpose of labor law and affords moreprotection to employee, it also results in the decrease of correspondence in theemployer vs. employee scenario, and therefore reduces the effectiveness of personalsubordination test on reviewing the actual role of them. Finally, as a typical exampleof Positive definition model, this chapter analyzes Taiwan's legislative and judicialopinion on defining managerial personnel by applying this model. The limitations ofpositive definition model served an important basis for the emergence anddevelopment of negative exclusion model.Chapter Ⅴ emphasizes on comparison study on negative exclusion model ofextraterritorial labor law. Because of the limitations on positive definition modelextraterritorial labor law not only defines labor relation through positive way, but alsodefines it a negative manner, to exclude certain subject that falls in the coverage oflabor law, nevertheless does not fit the profile of labor law. Negative exclusion modelis commonly adopted by extraterritorial labor in the exclusion of corporate managerialpersonnel. The study on negative exclusion model is both the key point and the maininnovation of this paper. This chapter focuses on two major aspects of negativeexclusion model applied in extraterritorial labor law. First of all, through thecomparison the legal norms and definition of managerial personnel used in theextraterritorial labor legislation, this paper points out that although the norm used indifferent regions and countries are generally highly differentiated, the relationshipbetween characteristics of level of management reflected and the degree of protectionis generally considered as important element in extraterritorial labor legislation. Thesenior management tends to be general excluded, and the exclusion on the middle andeven low-level management personnel are varied widely. Second, the papersummarizes the scope of exclusion of extraterritorial labor law. Commonly the exclusion applies to the working hours Act, collective labor law, law concerningprotection against dismissal, however the actual scope of exclusion is different amongcountries, some perform a more thorough way while others are relatively conservative.Finally, the paper analyzes another core issue over the exclusion criteria of negativeexclusion model in extraterritorial labor law. Horizontal comparison study of negativeexclusion model provides rich experiences for China, especially the commonpractices, and points out the better path we should adopt when developing theexclusion model.In response to the horizontal comparison of Chapter V, Chapter VI conducts avertical comparison based on the evolution and development of exclusion criteria ofcorporate managerial personnel in the United States labor law. Unlike the unifiedmodel of labor legislation in China, the U.S. labor legislation imposes a "separated"legislative model. The exclusion standards of managerial personnel in the U.S. aremainly provided in the following two important legislative materials, the NationalLabor Relations Act (NLRA) and Fair Labor Standards Act (FLSA), in both of which,the exclusion provisions are extremely important. NLRA regulates collective laborrelations, while FLSA provides for the labor standards in labor relations. NLRA andFLSA provide completely different exclusion paths on exclusion of managerialpersonnel, such as terms of the managerial personnel, exclusion criteria, practical testson defining the excluded personnel, etc. Due to completely different pathsaccomplished by the two acts on exclusion system, this chapter therefore describes theevolving of exclusion legal standards respectively. First, the NLRA's managerialexclusion criteria are mostly reflected in the history of case law. Through study on thehistory of NLRA's exclusion criteria, it fully shows how the statute and case lawevolved from the interaction of the spiral process of continuous improvement. Theexperiences on NLRA's exclusion criteria suggest the importance of carefully designof exclusion criteria. Second, differing from NLRA, the FLSA's exclusion criteria aremainly statutory regulations promulgated by Department of Labor, in the compilation of the Code of Federal Regulations (CFR)541. Accordingly, the paper focuses on thestatutory exclusion criteria of the FLSA. After reviewing of legislative background ofFLSA and the legislative path it chosen to demarcate the excluded groups, the paperemphasizes on the comparison of FLSA's old regulation (before2004) and newregulation (after2004). The comparative study analyzes that problems arising inpractice when applying the old regulations, the improving suggestions broughtforward by different social groups, as well as measures the new regulations takes toimprove the existing problems. The study on evolution of the U.S. exclusion criteriafrom a historical view serves a very important reference for China to establish itsexclusion criteria.Chapter VII is based on the comprehensive analysis in the first six chapters andis the soul of the paper. Upon thoroughly comparison, the paper finally rationalizesthe differentiate application of China's labor law on corporate managerial personneland makes some suggestions thereon. The paper points out that China should firstclear the general idea of the labor legislation. The currently legislative idea adoptedby the Labor Contract Law as to emphasizing on the opposite of labor andmanagement, has to be abandoned, and substituted with the new legislative idea ofemployee stratified. Only by adopting the idea of employee stratification, can wecorrect the improper application of China's labor law. Under the new path, in order tomake the object of protection to meet the legislative goal of labor law and achievesubstantive justice thereof, China's labor law has to redefines the protected subjectthrough narrowing down the upper level subject and expanding the lower levelemployees. The ideal of employee stratification has three dimensions theoretical basis,sociology, management science and Labor Law. By applying this idea, the papergenerally demarcates corporate managerial personnel in accordance with differentlevels of management. In principle, the paper suggests the differentiated applicationof China's Labor Law based on the functional differentiation of the different levels ofmanagement, which indicates that senior management should exclude the protection of labor law, low-level management personnel should apply to the protection of laborlaw, while middle-level management personnel should only get partially protection ifthey meet certain requirement. On the basis of the principle positioning, this papercompares the positive definition model with the negative exclusion model, then pointsout that the drawbacks and limitations on adopting the Taiwan model. The positivedefinition model has already caused practicing difficulties in Taiwan's judicialpractice, which indicates the application of positive definition model on positioningmanagerial personnel has less feasibility in China. The paper suggests China's laborlaw to apply the positive definition model on defining ordinary employees, whileapply the negative exclusion model on defining corporate managerial personnel. Thepaper then gives several proposals on establishing the negative exclusion model inChina's labor law. On the issue of exclusion scope, the article points out that ourcountry should choose to exclude the Labor Standards Law concerning wages andworking hours law, collective labor law, and law concerning protection againstdismissal. On the formulation of substantial exclusion criteria, the paper suggests tomainly apply compensation test, supplemented by duty test. Under this path, the paperthen finalized with several proposals on the establishment of compensation and dutytest.