December 2024
/ Contents /
Spotlight on News
1. Supreme People’s Court Issues First Batch of Guiding Cases on Labor Disputes in Emerging Employment Forms.
Legislation Updates
1. The Ministry of Human Resources and Social Security and four other departments issued the Notice on the Full Implementation of the Individual Pension System.
2. Guangzhou: Measures for the Implementation of the Trade Union Law of the People’s Republic of China (2024 Revision).
Case Study
- Beijing No. 3 Intermediate People’s Court: A fixed-term labor contract is valid if the employee cannot prove a request for an open-term contract or evidence of fraud, coercion, or exploitation. The employer is not obligated to pay double wages for failing to sign an open-term contract.
2. Supreme Court Case: Lowest performance evaluation rank does not equate to "incompetence for work" and does not justify unilateral termination of labor contract.
Spotlight on News
1. Supreme People’s Court Issues First Batch of Guiding Cases on Labor Disputes in Emerging Employment Forms.
On December 23, 2024, the Supreme People's Court held a press conference and published a set of typical cases related to wage arrears disputes and guiding cases on labor disputes in emerging employment forms. This release marks the first time the Supreme People's Court has issued such guiding cases on this topic, coinciding with the 30th anniversary of the promulgation of the Labor Law of the People’s Republic of China.
In practice, determining whether a labor relationship exists between platform companies and workers is often challenging and controversial. The existence of such a relationship is crucial for protecting workers' rights and interests. The guiding cases focus on the issue of identifying labor relationships between workers in emerging employment forms—such as food delivery riders, network anchors, and ride-hailing drivers—and platform companies. The cases clarify that, even when a platform company uses contracts, cooperation agreements, or requires workers to register as individual business owners, a labor relationship should still be recognized if there are factual elements of employment and control over work management. Furthermore, the cases emphasize that when determining the existence of a labor relationship, one should look beyond formalities and appearances, focusing on the substance of the relationship and adhering to the principle of seeking truth from facts. This ensures that formal aspects are not overemphasized at the expense of the reality of the working relationship.
These guiding cases are essential for addressing the issue of platform companies attempting to circumvent labor relationships through cooperation agreements. They also help clarify the distinction between agency relationships, platform operational management measures, and labor management, preventing an overly broad definition of labor relationships that could hinder the healthy development of the platform economy.
Legislation Updates
1. The Ministry of Human Resources and Social Security and four other departments issued the Notice on the Full Implementation of the Individual Pension System.
On December 12, 2024, the Ministry of Human Resources and Social Security, along with the Ministry of Finance, the State Taxation Administration, the National Financial Regulatory Administration, and the China Securities Regulatory Commission, jointly issued the Notice on the Full Implementation of the Individual Pension System (the “Notice”). Starting December 15, 2024, China will fully implement the individual pension system.
According to the Notice, the individual pension system is designed as a supplement to the existing pension framework. Workers participating in the Urban Employee Basic Pension Insurance or the Urban and Rural Residents Basic Pension Insurance are eligible to join the system. Participants can contribute up to RMB 12,000 annually to their individual pension accounts. Once funds are deposited, individuals can choose to either save the funds or invest in retirement-oriented products, such as pension savings, retirement financial products, pension insurance, or pension funds.
Additionally, under the Announcement on Implementing Individual Income Tax Preferential Policies for Individual Pensions Nationwide, participants are entitled to tax incentives. During the investment phase, returns on investments in individual pension accounts are temporarily exempt from individual income tax. During the withdrawal phase, individual pensions are not included in comprehensive income but are taxed separately at a flat rate of 3%. The tax paid is categorized under “wages and salaries” for reporting purposes.
Currently, 36 pilot cities (districts) have begun implementing the individual pension system, with plans for gradual expansion nationwide. As of the end of November 2024, 72.79 million people have participated in the system.
2. Guangzhou: Measures for the Implementation of the Trade Union Law of the People’s Republic of China (2024 Revision).
On December 10, 2024, the Standing Committee of the 16th Guangzhou Municipal People’s Congress issued Announcement No. 52, and the Measures for the Implementation of the Trade Union Law of the People's Republic of China in Guangzhou (the “Measures”) will come into effect on January 1, 2025.
Article 6 of the Measures clarifies the rights of workers in new forms of employment to join and organize trade unions. It stipulates that local federations of trade unions shall promote the establishment of trade union organizations by platform enterprises and platform-based labor cooperation enterprises in accordance with national regulations, actively encouraging workers in new forms of employment to join unions. Workers in new forms of employment or flexible employment, who do not have fixed employers, may apply to join the trade union of the platform enterprise or platform-based labor cooperation enterprise where they work. Alternatively, they may join regional or sectoral trade union federations. Article 11 of the Measures specifies that employee representative congresses and general employee meetings may be convened and voted on online. It allows large enterprises with substantial workforces, dispersed workplaces, and inconsistent working hours—where gathering employee representatives may be difficult—to hold meetings via teleconferences or online video conferences for matters that do not involve secret ballots. Voting on such matters may also be conducted online.
The Measures align with the provisions of the Trade Union Law of the People’s Republic of China and the Measures for the Implementation of the Trade Union Law of the People’s Republic of China in Guangdong Province. In addition to refining aspects such as membership options for workers in new forms of employment and the democratic management models for employee representative congresses, the Measures also clarify the scope of employee supervision over trade unions and the supervisory powers of trade unions. These provisions aim to strengthen the role of trade unions in protecting workers’ rights from the outset, effectively safeguard their legitimate interests, and promote the establishment of harmonious labor relations.
Case Study
1. Beijing No. 3 Intermediate People’s Court: A fixed-term labor contract is valid if the employee cannot prove a request for an open-term contract or evidence of fraud, coercion, or exploitation. The employer is not obligated to pay double wages for failing to sign an open-term contract.
Facts
On June 6, 2005, Employee Wang signed a labor contract with a company, valid from June 6, 2005, to December 31, 2006. On December 1, 2006, the contract was renewed and extended until December 31, 2007. On December 21, 2007, the parties signed a new labor contract that ran until December 31, 2009. Subsequent renewals occurred every two years until December 31, 2019. The most recent renewal agreement was effective from May 1, 2020, to May 31, 2022.
On April 14, 2022, the company issued Wang a Notice of Termination of Labor Contract, deciding not to renew the contract. Wang then filed for labor arbitration and litigation, demanding compensation for the unlawful termination of the labor contract and double wage differences for the failure to sign an open-term labor contract.
Wang then filed labor arbitration and litigation, demanding the company pay compensation for the unlawful termination of the labor contract and double wage differences for failing to sign the open-term labor contract.
Judge’s Viewpoint
In its first-instance judgment, the Beijing Chaoyang District People’s Court ruled that the employer’s act of directly issuing a notice of termination after the expiration of the second fixed-term labor contract violated Article 14, Paragraph 2, Item 3 of the Labor Contract Law and constituted unlawful termination. As a result, the employer was required to pay compensation for the unlawful termination. However, regarding the fixed-term labor contracts signed by both parties, the court held that Wang’s signature on the renewal agreements served as evidence that both parties mutually agreed to the fixed-term contracts. This conduct was found to be in compliance with legal provisions, and the company was not required to pay double wages for failing to sign an open-term labor contract.
In its second-instance judgment, the Beijing No. 3 Intermediate People’s Court upheld the first-instance decision regarding the unlawful termination. The employer was ordered to pay compensation for the unlawful termination.
However, with respect to the double wage claim for failing to sign an open-term labor contract, the court found that the law does not prohibit employers and employees from entering into fixed-term contracts. Wang’s signature on the labor contract renewals indicated that he voluntarily agreed to the fixed-term arrangements. Additionally, Wang failed to provide evidence showing that he had specifically requested an open-term labor contract or that there was any fraud, coercion, or exploitation in the signing process. Therefore, it was determined that Wang voluntarily entered into the fixed-term labor contracts, and the company was not obligated to pay double wages for not signing an open-term labor contract.
2. Supreme Court Case: Lowest performance evaluation rank does not equate to "incompetence for work" and does not justify unilateral termination of labor contract.
Facts
In July 2005, Employee Wang signed a labor contract with a company, which had Employee Performance Management Regulations stating that performance evaluations were categorized into four levels: S, A, C1, and C2, representing Excellent, Good, Misalignment with Values, and Performance Needing Improvement, respectively. The proportions of employees in each category were set at 20%, 70%, and 10% for S, A, and C (C1, C2) levels, respectively. Employees rated as "incompetent" were generally assigned the C2 rating.
Wang initially worked in the company’s distribution department as a sales employee. However, after the department was dissolved in January 2009, he was transferred to sales in the East China region. Wang's performance ratings for the second half of 2008, the first half of 2009, and the second half of 2010 were all C2. The company considered Wang to be incompetent in his role, and after providing him with economic compensation, the company terminated his labor contract.
Wang filed for labor arbitration and litigation, claiming that the company’s actions constituted unlawful termination of the labor contract and demanded compensation for the unlawful termination.
Judge’s Viewpoint
The court ruled that, according to the company’s Employee Performance Management Regulations, the “C (C1, C2)” performance rating was limited to 10% of employees. Although Wang had received a C2 rating in the past, this rating does not automatically equate to “incompetence for work.” The company, by relying solely on the limited proportion of C ratings in its performance evaluation system, could not prove that Wang was truly incompetent for work. Therefore, this basis did not meet the statutory conditions for the lawful unilateral termination of a labor contract.
Moreover, while Wang was transferred from the distribution department in January 2009, he continued to perform sales work both before and after the transfer. The primary reason for his transfer was the dissolution of the distribution department, not his perceived incompetence. Therefore, the company was ordered to pay Wang compensation for the unlawful termination of the labor contract.