The First Intermediate Court of Beijing recently issued a landmark decision under the new Labor Mediation and Arbitration Law (effective May 1, 2008). Under the new law, only employees can appeal certain arbitration decisions, while the employer is only able to request the court to vacate arbitration decisions on certain narrow grounds.


Wu Jing, Attorney, Labor & Employment


In this recent case, the court vacated a previous labor arbitration decision on the grounds that the Labor Contract Law (effective Jan. 1, 2008) did not apply retroactively to the case at hand. The plaintiff in this case started to work for a Beijing medical technology company in Nov. 2007 with a probation period that lasted until Jan. 2008. In Feb. 2008, he was terminated for incompetence. He filed for a labor arbitration and was awarded RMB 3600 compensation under the Labor Contract Law. The company requested the court vacate the decision. Upon review, the court determined that the arbitrator retroactively applied the Labor Contract Law on severance calculation and vacated the arbitrator’s decision on that ground.


This is the first reported case of a court vacating a previous labor arbitration award. Once vacated, the case could not be submitted to arbitration for a second time and the only recourse is now to seek judicial remedies before the courts.


In light of recent labor employment legislation, this decision will become persuasive authority for similar employment disputes. Unlike other countries in terms of costs and processing time, to arbitrate an employment dispute in China requires no filing fee and a final decision will be obtained within a couple of months. Labor arbitration filings have tripled since the promulgation of the new Labor Contract Law. Previously, either party could appeal the arbitration decision to the court to have a completely new trial of both factual disputes and legal issues. Under the new Labor Mediation and Arbitration Law, as illustrated by this case, arbitration decisions will now have certain limitations as to judicial appeal/review. In the short term, it will effectively reduce the court’s case load. In the long term, it will teach the public to have a more rational view of employment litigation. For practitioners, the amount in controversy now becomes an important factor in evaluating the overall procedural strategy, since certain small claims of employment disputes will have limited grounds to appeal arbitration decisions.