Beijing Government Says Ku6.com’s Staff Dismissals Are Illegal

Earlier this month, Chinese online video website Ku6.com announced it was downsizing staff by up to 20%. But now local media reports state those layoffs are not legal.

In accordance with the related items in the Chinese Labor Law and Labor Contract Law, the Bureau of Human Resources and Social Security of Beijing’s Haidian District has reportedly announced that Ku6.com’s previous employee layoffs are illegal and invalid, and the bureau ordered the Chinese video website to make rectifications before May 30, 2011.

Prior to this, Ku6.com said it would cut about 20% of its staff in a company restructuring, and all those employees are sales department staff. The company planned to complete the restructuring within two weeks.

According to a report in Hexun.com, Ku6.com said it has already received the notice from the bureau and will check and improve the layoff procedure. However, the company said it will not change the original layoff plan and the decided compensation plan. If necessary, the company will apply for administrative reconsideration or take legal action to protect its enterprise interests.

An insider from Ku6.com revealed that most of the employees involved in the layoff are currently “on holiday” and Ku6.com did not publish further explanation. Some employees who are responsible for important advertising clients may return to their positions.

While Ku6.com suffered the personnel turbulence, its major competitors in the Chinese video market are busy expanding. Youku.com recently announced plans of financing USD593 million by issuing additional shares; Phoenix New Media, which just was listed in the U.S., announced its new video media strategy; Tudou.com is making final preparations for its IPO after a marital spat delayed the fulfillment of its bankers’ dreams; and Tencent invested in Huayi Brothers to expand its video industry resources.

According to Ku6.com’s financial results for the first quarter of 2011, the company’s total operating revenue was USD6.6 million, a year-on-year increase of 178.5%; while it made net losses of USD10.9 million.