New Formalities for Casual Labor: Addressing Unintended Consequences of China\u27s Labor Contract Law

China’s Labor Contract Law (“LCL”) came into force on January 1, 2008. The first major piece of labor legislation since the 1994 Labor Law, the Labor Contract Law expanded legal protection for workers by mandating that labor contracts be in writing and delivered to all workers. Employers, predicting that the law would effectively raise the cost of employing full-time, long-term workers, sought methods of “creative compliance” with the law. One avenue for creative compliance emerged through the loophole in the LCL for so-called “dispatch workers.” Dispatch workers are formally employed by third-party dispatch service agencies and thus not covered by employment contracts with the firms where they perform their job (“accepting entities”). In the first five years following the LCL’s enactment, dispatch workers grew from a negligible share of China’s labor force into a pervasive phenomenon. The dispatch worker exception began to swallow the rule, eroding the intended labor protections of the LCL. In response, the Standing Committee of the National People’s Congress amended the LCL, effective July 1, 2013. These amendments drastically reduced the permissible scale and purpose of dispatch labor and augured tighter regulation for the dispatch industry. Following a period of public comment, the Ministry of Human Resources and Social Services provided specific departmental rules regarding the licensing of dispatch agencies and standard industry-wide practices, effective March 1, 2014. The new regulations restricted enterprises from hiring more than ten percent of their workers as dispatch workers and clarified the obligations of dispatching agencies as employers. With reports of abuse of dispatch workers continuing to surface, the effects of the amendments and the provisions on labor remain unclear. This comment addresses China’s effort to intervene in employment arrangements via legislation. It first surveys the background of labor legislation in China from the Mao era, through reform, and into the twenty-first century. It then examines the interaction of the labor market and labor legislation, as employers respond to changes in China’s labor regime through the introduction of Amendments to the LCL. Finally, this comment suggests that reform in labor legislation based on individual contract should be secondary to expanding collective labor rights