DRAFTING INTERNAL LABOR REGULATIONS: CONDITIONS, PROCEDURE, AND PENALTIES BUSINESSES NEED TO KNOW

Internal labor regulations represent a mandatory internal normative document establishing the legal framework for labor discipline and governance within an enterprise. Under current labor legislation, the formulation, registration, and enforcement of internal labor regulations require strict adherence to substantive content (such as working hours, disciplinary measures, and material liability) as well as procedural requirements (including consultation with representative organizations of employees at the grassroots level). Non-compliance or procedural defects in drafting internal regulations not only subject enterprises to administrative sanctions but also invalidate disciplinary enforcement actions in the event of labor disputes.

1. Scope of Application

Employers with 10 or more employees are required to issue written Internal Labor Regulations (ILR) and register them with the competent state authority. Employers with fewer than 10 employees are not legally required to issue a written ILR, but doing so is advisable to provide a proper basis for labor management and disciplinary action. This requirement applies to all types of enterprises, including foreign-invested enterprises, regardless of industry.

2. Conditions Under Current Regulations

In terms of content, a valid ILR must comprehensively address the core areas: working hours and rest periods; workplace order; occupational safety, hygiene, and fire prevention; prevention of sexual harassment and the handling procedure for related violations; protection of company assets, trade secrets, technological secrets, and intellectual property; circumstances allowing temporary reassignment of an employee to different work than stated in their labor contract; disciplinary violations and corresponding sanctions; material liability; and the person(s) with authority to handle labor discipline.

The ILR’s content must not contravene the Labor Code or related legislation, and sanctions must be proportionate to each violation. Before formal issuance, the employer must consult the grassroots employee representative organization, where one exists. A written ILR only takes full legal effect once the registration procedure with the competent authority has been completed.

3. Legal Procedure Required

Procedure name: Registration of Internal Labor Regulations.

Within 10 days of issuance, the employer submits a registration dossier including: a written request for ILR registration; the ILR document itself; the written comments of the grassroots employee representative organization (where applicable); and any other documents relating to labor discipline or material liability (if any). Within 7 working days of receiving the dossier, if unlawful content is identified, the receiving authority will notify the employer and provide guidance for amendment and re-registration.

Outcome: The ILR officially takes effect 15 days after the competent authority receives a valid and complete dossier, becoming the official legal basis for consistent labor management and disciplinary enforcement.

4. Penalties for Violations

An employer that fails to publicly announce or post the ILR at necessary locations may face a warning or a modest fine. Higher fines apply to: employing 10 or more employees without issuing a written ILR; failing to register the ILR with the competent authority; or applying an ILR that has not been registered, has been registered but is not yet effective, or has expired. Notably, if an employer disciplines an employee for conduct not specified in the ILR, the fine is significantly higher, and the employer may also be required to reinstate the employee and pay full wages for the corresponding period of missed work.