When does a collective employment contract take effect?

A collective employment contract is a written agreement concluded by an employer and employees through collective negotiation on labor-related matters in accordance with the law. Since a collective employment contract does not require individual consent from each employee but applies to all employees, its conclusion and entry into force are subject to certain restrictions.

According to relevant provisions, the procedures for the conclusion and entry into force of a collective employment contract are as follows:

(1) Drafting Stage: Representatives of the employer and the employees reach a consensus through negotiation to formulate the draft.

(2) Voting Stage: The draft shall be submitted to the employee representative congress or all employees for discussion. The discussion shall be attended by more than two-thirds of employee representatives or employees, and the draft shall be adopted only with the consent of more than half of all employee representatives or all employees.

To be noted that, although the “Labor Contract Law” does not restrict the voting method, Article 20 of the “Provisions on Democratic Management of Enterprises” (Zong Gong Fa [2012] No.12) stipulates: “The election and voting on relevant matters at the employee representative congress must follow the principle of the minority submitting to the majority and be adopted by more than half of all employee representatives. Voting on important matters shall be conducted by secret ballot on an item-by-item basis.” Accordingly, some provinces and cities have imposed restrictions on the voting methods. For instance, Article 11 of the “Regulations of Shanghai Municipality on Employee Representative Congresses” prescribes: “The following matters shall be reported to the employee representative congress for deliberation and adoption: (1) Draft collective employment contracts involving labor remuneration, working hours, rest and vacation, insurance and welfare benefits, and other matters…” Meanwhile, Article 31 of the same Regulations states: “Matters deliberated and adopted by the employee representative congress shall be voted on by secret ballot and shall pass only with affirmative votes from more than half of all employee representatives.” Therefore, in Shanghai, it is recommended that such draft involving labor remuneration be adopted by secret ballot. Otherwise, the labor administrative authority may reject such draft at the review stage.

(3) Signing Stage: Upon adoption by voting, the draft shall be signed by the chief representatives of the employer and the employees respectively.

(4) Review Stage: Within 10 days from the date of signing the collective employment contract, three copies thereof shall be submitted to the labor administrative authority for review. The labor administrative authority shall complete the review within 15 days from the date of receiving the document. If any objection is raised, a Review Opinion Letter shall be delivered to the employer and employee representatives. If no objection is raised within the aforesaid time limit, the collective employment contract shall take effect automatically. In judicial practice, if a collective employment contract is not reviewed by the labor administrative authority, the court shall rule that it has no legal effect, such as (2025) Er 05 Min Zhong No.2364 and (2020) Jin 07 Min Zhong No.556.

(5) Publication Stage: The collective employment contract shall be promptly publicized to all employees in an appropriate manner from the date it takes effect.

What if the draft fails to pass the voting stage? For example, due to an economic downturn, a company intends to cut some benefits stipulated in the collective employment contract, while most employee representatives disagree. Article 49 of the “Provisions on Collective Employment Contracts” stipulates that if a dispute arises during the negotiation process, either party may apply to the labor administrative authority for negotiated settlement; even without such an application, the labor administrative authority may take the initiative to coordinate and settle the dispute when it deems necessary. This essentially transforms bilateral negotiation into tripartite negotiation and coordination. Nevertheless, the intervention of the labor administrative authority has its limitations. Its role is limited to coordination and mediation, which does not guarantee a negotiated settlement or the issuance of other binding administrative measures.

What if the term of the existing collective employment contract expires and the new one fails to pass the vote? Hainan province has explicitly stipulated that the relevant terms of the expired collective employment contract shall continue to apply. Although other provinces and cities have not issued similar regulations, they generally follow the same judicial and practical practice as Hainan province.

For employers, when formulating the terms of a collective employment contract, it shall be taken into account that most welfare benefits can generally only be raised rather than reduced. Hence, it would be a good choice to set conditional clauses on welfare benefits, such as, if the company’s revenue drops by X% or the company incurs losses, some welfare benefits may be adjusted or cancelled accordingly.