In December 2007, the Standing Committee of China’s National People’s Congress passed a new law on how workers’ grievances move through the system. The Labor Dispute Mediation and Arbitration Law (中华人民共和国劳动争议调解仲裁法) was adopted on December 29, 2007 at the 31st meeting of the Standing Committee of the 10th NPC, promulgated in Presidential Order No. 80 signed by President Hu Jintao, and took effect on May 1, 2008. On paper it tilted the dispute-resolution system toward workers: arbitration became free, the filing window stretched from 60 days to a year, employers bore more of the evidentiary burden, and small claims could end at arbitration rather than dragging through the courts. Within months of taking effect, officially reported arbitration cases nearly doubled, and courts were overwhelmed. Whether that surge was a success story — workers finally able to assert rights — or a cautionary tale about reform overwhelming institutions, is a question contemporaries debated and never fully settled.
Background: the 2007 package of labor legislation
The mediation-arbitration law did not arrive alone. It was one of three major employment laws passed in 2007–08: the Labor Contract Law (adopted June 29, 2007, in force January 1, 2008), the Employment Promotion Law (adopted August 30, 2007, in force January 1, 2008), and this law — the procedural mechanism that would handle the disputes the other two generated. The U.S. Congressional-Executive Commission on China described 2007–08 as a landmark legislative burst, with 2009 becoming “a year for local implementation and experimentation.”
The law replaced the State Council’s 1993 Regulations on Settlement of Labor Disputes in Enterprises (Decree No. 117), along with a 1993 Ministry of Labor interpretation and Article 82 of the 1994 Labor Law, which had governed the old system. Mary Gallagher of the University of Michigan later characterized 2007 as the “year of social legislation,” noting that this law “lowered fees significantly for workers in bringing a suit” — though she also noted that the precise legislative history of this particular law (number of deliberations, drafting committee composition, whether a public comment period was held) has not been firmly documented in available sources. The contrast with the Labor Contract Law, which went through four readings and drew over 191,000 public comments, is a reminder of how much of this law’s drafting remains opaque.
The policy: key provisions
The law’s stated purpose, in the official English translation, is “to resolve labor disputes in an impartial and timely manner, protect the lawful rights and interests of the parties and promote harmonious and stable labor relations.” Its governing principles are 合法、公正、及时、着重调解 — legality, fairness, timeliness, and an emphasis on mediation.
The dispute ladder (Articles 4–5). Disputes are to be resolved through consultation (协商), then mediation, then arbitration, then litigation. Arbitration is the mandatory gateway to court in nearly all cases.
Coverage (Article 2). Six categories of disputes fall under the law: confirmation of labor relations; conclusion, performance, alteration, or termination of contracts; dismissal and resignation; working hours, leave, social insurance, welfare, training, and labor protection; wages, work-injury medical expenses, and compensation; and any others covered by law.
Burden of proof (Article 6). Each party must prove its claim, but evidence held by the employer must be produced by the employer — and the employer faces adverse consequences for failing to produce it. This burden-shift was one of the features legal analysts said favored employees.
Collective disputes (Article 7). Where 10 or more workers (十人以上) share a common claim, they may elect representatives to participate in mediation, arbitration, or litigation. Scholarship notes this redefined the threshold for collective disputes — pre-2008 practice reportedly treated groups of three or more as collective — which complicates comparisons of collective-case statistics before and after the law.
Mediation channels (Article 10). Three channels were established: enterprise labor-dispute mediation commissions, grassroots people’s mediation organizations, and township and neighborhood （乡镇、街道） mediation organizations with labor-dispute functions.
Faster, longer, free (Articles 27, 43, 53). The limitations period for filing was extended from 60 days to one year, with tolling rules and an exception for wage arrears during an ongoing contract. Arbitration was required to conclude within 45 days of acceptance (extendable by 15), tightened from the old 60-day rule. And in the law’s most consequential line: “Arbitration of labor disputes is free of charge. Funding for labor-dispute arbitration commissions shall be guaranteed by the government.”
“One arbitration, final” (Articles 47–49). For small claims — wage, work-injury, and severance claims no greater than 12 months of the local minimum wage, plus disputes over labor standards such as hours, leave, and social insurance — the arbitration award is final. The employee may still go to court if dissatisfied, but the employer may only petition an intermediate court to cancel the award on six narrow grounds: wrong application of law, lack of jurisdiction, procedural violation, forged evidence, concealed evidence, or arbitrator bribery or misconduct. The law also introduced pre-judgment advance awards （先予执行） and allowed workers holding mediation agreements on wage arrears or work-injury compensation to seek a court payment order (支付令）.
Contemporaneous responses: welcome, warnings, and overload
Legal practitioners saw a pro-worker tilt. In an August 2008 analysis, King & Wood’s Linda Liang concluded the law “favors employees in labor arbitration procedures” — through fee cancellation, burden-shifting, simplified procedures, the extended limitations period, advance payouts, and finality in small claims — and that it “will encourage employees to settle labor disputes via arbitration.” The analysis predicted that “the number of labor disputes will increase significantly.” Rights scholar Li Lan, writing in the Asian-Pacific Law & Policy Journal in 2009, noted that the law “greatly simplifies the labor dispute resolution procedure,” though workers “still cannot directly sue in the court,” and that Article 47 “for the first time makes the arbitration commission’s rulings in routine cases legally binding and gives a great procedure advantage to aggrieved workers.” Li also flagged an unresolved ambiguity in the collective-dispute rule: it “seems to provide the possibility for a class action, but class action procedures are usually not encouraged in China. So, it is still unclear how this provision will work.”
Then came the surge. The official statistics tell a stark story. Labor-dispute arbitration cases rose from roughly 350,000 in 2007 to about 693,000 in 2008 — nearly double. A 2009 article in the Columbia Journal of Asian Law reported that the elimination of fees “opened the door to a flood of ‘micro’ claims, some as low as RMB 60 (less than USD 10),” and that workers were encouraged “to sue immediately before even attempting a negotiation with their employer.” Some labor lawyers told the journal their clients were demanding “higher, and even inflated, claims now that fees tied to claim size are eliminated.” Geographic concentration was extreme: Guangdong’s arbitration commissions, holding just 7 percent of the country’s full-time arbitration personnel, historically handled a quarter of all disputes — and Guangdong and coastal courts saw labor cases rise by nearly 300 percent in 2008, pushing the national court total to 286,221 (some press citations give 295,000; the figures appear to reflect different counting dates and sources). The journal reported arbitration commissions “completely unable to meet the firm sixtyday deadline, pushing cases onto local courts,” and called for separate labor courts.
Official U.S. observers recorded strain and pushback. The CECC’s 2009 Annual Report noted “the central government continued to promote the laws despite complaints from some local governments and employers that the new laws were too harsh,” and described “a lack of consensus about the effects of the new labor legislation.” In July 2009, the Supreme People’s Court issued a guiding opinion urging courts to weigh both worker and enterprise interests alongside “social stability” during the economic crisis — which the CECC described as “a reaction to the unprecedented pressure on courts to resolve a very large number of disputes even as disputes have grown more complicated and contentious.”
The establishment debate was about the package, not just this law. At a 2011 Brookings panel, Gallagher recalled that entrepreneur Zhang Yin （张茵， Nine Dragons Paper) had publicly criticized the 2007 labor legislation and was then herself criticized in the media. The transcript does not clearly identify which statute Zhang’s remarks targeted — they appear to have addressed the 2007 labor legislation broadly — and no contemporaneous debate between scholars Chang Kai and Dong Baohua on this specific law has been documented; their well-known exchange concerned the Labor Contract Law and should not be imported here.
Competing viewpoints
The pro-worker reading. Fee elimination, the one-year filing window, burden-shifting onto employers, and finality in small claims lowered barriers and gave aggrieved workers real procedural advantages — and filing surged accordingly. This is the reading of King & Wood’s contemporaneous analysis and of Gallagher’s later scholarship.
The institutional-overload critique. The same reforms flooded arbitration commissions and courts with micro-claims and inflated claims, missed deadlines pushed cases onto the judiciary, and the costs fell on institutions rather than the state. This is the Columbia Journal of Asian Law’s contemporaneous assessment, echoed in later scholarship.
The “channeling” interpretation. A line of academic analysis holds that the law’s deeper purpose was less about reducing grievances than redirecting collective workplace grievances into individualized mediation, arbitration, and litigation channels — defusing collective protest by processing it one case at a time. Gallagher and colleagues have argued that the surge “raised questions about the relative costliness of the government’s strategy for managing employment relations” — a line of analysis preserved in the research record; the exact journal wording should be verified against the published text.
The employers-and-local-governments complaint. Some local governments and employers told the CECC the new laws were too harsh for China’s economic climate — but the central government kept promoting them regardless.
A further line of later Chinese-language scholarship criticizes the underlying “one arbitration, two trials” (一裁两审） framework for inconsistent standards between arbitration and litigation, proposing “arbitration or adjudication of choice… respective finality” on the commercial-arbitration model. This is post-2012 scholarship, not a contemporaneous position, and no Chinese scholar has been documented arguing against fee-free arbitration specifically in 2007–09.
Implementation and aftermath, 2008–2012
The surge did not evaporate after 2008. In 2009, some 689,714 mediation and arbitration cases were settled — up 10.7 percent over 2008 — while 684,000 cases were accepted for arbitration (note: “settled” and “accepted” are different measures), involving about 1.017 million workers. In 2010, 634,041 cases were settled, down 8.5 percent. The New York Times reported in September 2010 that national arbitrations had “leveled off” while court labor cases continued rising — about 317,000 in 2009, up sharply from the roughly 147,000 in 2007 implied by the near-doubling.
Geographically, the burden stayed coastal. Shenzhen’s arbitration filings reportedly rose 232 percent in early 2008; Guangdong’s filings tripled in May–June 2008. On the judicial side, the Supreme People’s Court followed up with Interpretation III on labor disputes in September 2010, addressing overtime burden-of-proof and other gaps left by the law.
One caution runs through the evidence: the 2008 surge cannot be attributed to the arbitration law alone. It arrived alongside the Labor Contract Law — whose new protections triggered both rights-awareness and employer evasion (the widely discussed resign-and-rehire wave) — and the global financial crisis. How much of the surge belongs to fee elimination, how much to new substantive rights, and how much to the economic shock is unresolved. What is clear is that the law did what its proponents said it would do: it made arbitration free and accessible. Whether institutions could absorb the result was the question contemporaries were left holding.
No contemporaneous Free China Movement response to this law is on record in the sources reviewed.
Sources
- Law of the People’s Republic of China on Labor-dispute Mediation and Arbitration — official English translation (gov.cn; npc.gov.cn), Presidential Order No. 80, adopted December 29, 2007, effective May 1, 2008. Chinese text via ohmi.net.cn PDF and Asia Society lawinfochina scan.
- King & Wood / Linda Liang, China Law Insight, August 2008 (contemporaneous professional analysis of the law’s employee-favoring tilt and predicted dispute increase).
- Columbia Journal of Asian Law, “From Contracts to Compliance,” 2009 (micro-claims, inflated claims, Guangdong/coastal court surge, 286,221 national court cases in 2008).
- Li Lan, “The Law on Labor Dispute Mediation and Arbitration…,” Asian-Pacific Law & Policy Journal vol. 10.2, 2009 (procedural simplification; Article 47 finality; Article 7 ambiguity).
- Congressional-Executive Commission on China, 2009 Annual Report (three-laws legislative burst; local-government/employer complaints; Supreme People’s Court July 2009 guiding opinion).
- Mary E. Gallagher, Brookings Institution transcript, May 9, 2011 (2007 as “year of social legislation”; Zhang Yin criticism of labor legislation).
- Ronald C. Brown, “Defusion of Labor Disputes in China,” 2013 (2007 baseline ~340,000 cases; 2009: 689,714 settled; 2010: 634,041 settled; official statistics via China Labour Net and NBS).
- Cambridge Asian Journal of Law & Society (350,182 arbitration cases in 2007, 693,465 in 2008; collective-threshold change from ≥3 to ≥10 workers) — via the HPDR companion research record on the Labor Contract Law family.
- Gallagher, Song & Trieu, Berkeley Law/BCLBE paper, ~2013 (limitations 60 days → 1 year; arbitration free where it had previously cost workers a few hundred RMB on average).
- Supreme People’s Court Interpretation III on labor disputes, September 13, 2010 (via Lexology).
- New York Times, Edward Wong, September 16, 2010 (2010 arbitrations “leveled off” while court labor cases kept rising).