The LCL requires all labour contracts to be in writing. Significant penalties will be imposed on employers who fail to comply with the new contract laws. Employees reserve the right to claim double payment for the number of months worked without a written contract for up to 12 months. This rule is targeted at companies, which adopt "informal" employment relationships.

The LCL imposes severe restrictions on the use of probationary periods in employment. Probationary periods are permitted, but the duration is to be based on the terms in the employment contract, with a maximum period of six months. Furthermore, an employee is subject to only one probationary period by the same employer. Wages during the probationary period must also be no less than 80% of the contract wage.

Under Chinese law, an employee can be discharged either at the expiry of a term contract or for a cause. To avoid the need to terminate an employee for a cause, employers had chosen to hire employees under a series of short-term contracts. This practice is no longer possible under the LCL. The employer is permitted to enter into a maximum of two term-contracts with the employee. If the employer wishes to continue hiring the employee upon the expiry of the second term, the subsequent employment contract is deemed to be an “open-term contract.” Under an open-term contract, the employee is employed until he chooses to terminate the contract or when he reaches retirement age. The employer can only terminate for breach of contract.

Many foreign employers require most or all of their Chinese employees to enter into non-competition agreements that restrict their right to work for a competitor after the termination of their employment. The LCL imposes significant restrictions on the use of these agreements. The most important restriction is that non-competition agreements cannot be imposed on all employees. Only senior management and employees with access to critical trade secrets are required to enter into a non-competition agreement. The duration must be limited to two years and the geographic scope limited to a reasonable area. In addition, the employer must pay compensation to the employee during the period that the non-competition restriction is in effect.

All employers must maintain a written employee handbook setting out the basic rules and regulations of employment. This requirement applies to all companies regardless of size and number of employees. The failure to maintain an employee handbook means that an employer will effectively be unable to discharge employees for a cause, since a “cause” must be determined with reference to the employee handbook.