Labour Contract System

There is no explicit stipulation that whether default fine can be agreed on or not in a labor contract in labor law of China. While, as the advent of development of market economy and the diversity of employment, as well as the increased-width, depth and extent of laborer migration, the phenomena such as the fact that people throw their jobs and take on another emerge in an endless stream. In light of this change, the Labor Ministry issued Notice on Several Questions of Employee Mobilization in Employing Units in 1996, explicitly stipulating that default fine can be agreed on in labor contracts by employing units and employees. Ordinance on Labor Contract of Shanghai Municipality (2001, 10) and Regulations on Labor Contract of Beijing Municipality (2001, 12), the local legislations, made a noticeable distinction between limited legislation of Hal group and arbitrary legislation of Jing group concerned with Default Fine System of Labor Contract. The first and the second revised draft of Labor Contract Law (draft) followed Shanghai model on principles.In process of negotiation between an employee and an employing unit, especially in the course of dissolution of contract, default fine tends to be a blood sucker of employing unit, the employee is imposed to pay a large sum of default fine, which severely infringes upon their lawful rights, violating the principle of justice and fairness advocated in Labor Law. The fact that Labor Law is oriented as a social law exerts profound impacts on default fine system of labor contract, with the requirement of constructing a binary principle of default fine of labor contracts based on identities. The default fine in labor contracts performs system functions of preventing and stopping contract violation, punishing contract violation as well as efficient breach, which determines that compensatory default fine is the main part of default fine in labor contracts, that punishment default fine is the exceptional one in labor contract violation, that the scope of compensation for damage distinguishes between the two parties, namely, the employing unit shall compensate for all the actual damage to the employee caused by contract violation, and the employee shall compensate for the direct damage to the employing unit caused by contract violation. The coordination between default fine of labor contract, employees' rights to resign system and the system of period of validity of contract, and psychological contract theory and loyalty theory should be taken into account when designing default fine system of labor contract. This thesis intends to find the balance point between the side-lopped protection of employees and the consideration of employing units' benefit.The Labor Coontract Law (draft) stipulates that the employee shall pay default fine, on the condition that the employee violated the serving period and the agreement of limited to work in specific industry, which has effectively protected laborer's lawful rights. The limitation on default fine is an effective way to protect lawful rights, which is easy to be put into practice, while, there are still some shortcomings existing in Labor Contract Law, for example, the basic defect of designing the system of period of validity of contract has not been overcome, the principle that the responsibility for compensation shall be different in terms of different subjects has not been determined, the fact that employees enjoying special treatment have the right to negotiate a serving period has not been provided, the proposed amount of default fine has not taken the employee's ability to pay into consideration, the relationship between default fine and compensatory payment has not been specified, the rule of serving period has not been prescribed, the employing unit's right and obligation to give training has not been distinguishedProposals are given as follows: First, to establish a system of period of validity of contract mainly concerned with labor contract with unfixed period, and to limit labor contract with-fixed period into particular situation; Second, different default fine system shall be applied to employees and employing units on the basis of the actual situation of signing contract. Third, the legislature specifies the fact that the applying scope of compensatory default fine and compensatory payment shall not be crossed. Fourth, the legislature determines the direct ratio relation between the enjoyment of special treatment in training period and serving period.