Besides the summary and revise on “Guiding Opinions of Shenzhen Intermediate People’s Court on Several Issues Concerning Trial of Cases on Labor Disputes” (hereinafter as “Guiding Opinions”) issued in 2009, new rules combining the latest changes on labor laws and regulations as well as judicial practice are added into the “Guideline of Shenzhen Intermediate Court on Trial of Labor Dispute Case” (hereinafter as “Judgment Guideline”). The latest tendencies reflected in the new rules of Shenzhen Intermediate People Court are as follows:

The Employer may postpone establishment of a labor contract under certain circumstances

It is prescribed that in the Labor Contract Law, an Employer shall conclude a written labor contract within one month with the employee who has established labor relations from the date the employee commences work; otherwise the Employer shall, each month, pay to the employee twice his wage after one month but less than one year. This is an expansion period of one month. Besides, it is also required by the law clearly that the employer shall terminate the labor relations with written notice, provided that the employee fails to conclude the written labor contract with the employer within aforementioned one month. 

The legislator is intended to supervise the conclusion of labor contract between enterprises and employees, which is quite consistent with the attitude of judicial organizations. It is stipulated in Item 2 of Article 64 in Judgment Guideline, where an employee refuses to conclude written labor contract with the Employer and the Employer fails to terminate labor relations in accordance with the law, the court shall support the request of this employee for twice his wage due to failing to terminate labor relations.

It often occurs in reality that an employer might neither conclude written labor contract, nor terminate labor relations of both parties in this extension period of one month for some objective reasons. Given the objective difficulties, Judgment Guideline specifies four particular circumstances, during the period of which shall not be calculated into the extension period of one month for employer to conclude a written labor contract. Such circumstances include: 1. force majeure; 2. employee, who loses his mental capacity or whose freedom of person has been restrained in accordance with law, is unable to conclude the labor contract objectively; 3.the employee applies for labor arbitration or files a lawsuit to the court to confirm disputes of labor relations or to confirm whether the labor relations is terminated legally or not, and the case is not closed; and other objective circumstances which adequately affect both parties in signing a written labor contract.

But from the date on which these circumstances are eliminated, the extension period of one month for employer, who is obliged to conclude written labor contract, shall continue to calculate. The employer may suspend to conclude the written labor contract under some particular circumstance, yet cannot escape from the obligation to conclude labor contract.

Employees looking to renew their contract shall make their intentions known before expiration of contract

There are three circumstances stipulated in the Item 3 of Article 14 in Labor Contract Law, under which the open-ended labor contract shall be concluded. It is still controversial in judicial practice, where a labor contract was concluded as a fixed-term labor contract on two consecutive occasions, is the employer obliged to conclude open-ended labor contract with employees?

Most local courts tend to believe that where a labor contract was concluded as a fixed-term labor contract twice in a row, so long as the employer raises to renew the labor contract, both parties shall conclude open-ended labor contract. But the judicial practice in Shanghai differs from others: where a labor contract was concluded as a fixed-term labor contract twice in a row, provided that the employer chooses to renew the labor contract, and the employee raises to conclude open-ended labor contract, then both parties shall conclude open-ended labor contract. Where the employer chooses not to renew the labor contract, then it can cancel the labor contract with the severance pay to the employee for cancellation of the labor contract.

It is specified in Article 77 in Judgment Guideline, the employee shall demand to review open-ended labor contract before the expiration and cancellation of the fix-term labor contract; otherwise he may be deemed to waive the right to conclude open-ended labor contract. This provision limits the timing of the employee to put forward concluding the labor contract. Where the employee claims to conclude the open-ended contract after the expiration of fix-term labor contract, or claims that the labor contract between both parties shall be open-ended after renew of fix-term labor contract, such claim may not easily be supported by the court.

The employee shall not claim that he was compelled to terminate the labor contract as the employer fails to provide double pay, paid annual leave and high temperature allowance

It is not rare in practice that employees claim to terminate the labor contract as the employer fails to pay in full amount of labor remuneration due to the lack of fully-paid annual leave and high temperature allowance, and further request the employer to pay the severance pay.

However, such claim cannot be supported in Guangdong Province. It is prescribed in Article 27 of Yue Gao Fa [2012] No.284, where an employer fails to pay full annual leave wage or high temperature allowance to an employee in time according to laws or the labor contract, therefore, the employee claims the termination of the labor contract for the reason that the employer fails to pay full labor remunerations in time, such claim shall not be supported.

It is further stipulated in Article 92 in Judgment Guideline, where an employee claims that he was compelled to terminate the labor contract as the employer fails to provide double pay, fully-paid annual leave and high temperature allowance and requests for the severance pay, the court shall not support such request. Normally the gap of twice wage will not be deemed as part of labor remuneration. Such provision confirms the spirit of Article 27 in Yue Gao Fa [2012] No.284, and furthermore supports the opinion that “twice amount of wage is not part of labor remuneration”, which shall be expanded to apply to the each circumstance regulated in Article 38 in Labor Contract Law.

Both parties can agree on the compensation regarding benefit annual leave that should have been taken

Many enterprises stipulated in labor contracts or in labor rules and regulations that employee can enjoy more annual leave than statutory standard, which is called “Company Benefit Annual Leave”. In cases where employees haven’t fully utilized paid leave, it is still debatable whether the employer should grant compensation according to the statutory standard.

“2013 Minutes of the Seminar on difficult problems concerning employment and personnel disputes in Shenzhen” issued in 2014 proposed a solution for the aforesaid problem. Article 13 of the Minutes stated that annual leave or the wage in lieu of annual leave agreed in the labor contract, collective contracts or labor rules and regulations, the agreement shall be deemed valid even if it is lower than the statutory wage standard of annual leave. In cases where a prior agreement is absent or no amount has been specified, the employee can sue the employer for more than statutory annual leave, and the compensation will be calculated based on the standard statutory annual leave.

Article 110 of Judgment Guideline further stipulated, where the agreed or regulated annual leave is higher than statutory standard, and such arrangement does set a compensation or specific compensation standard, the agreement shall be deemed valid. But if both parties don’t reach such an agreement, or the labor rules and regulations don’t prescribe the compensation standard, the employee can claim compensation for leave that should have been taken.

The prevailing opinion in judicial practice holds that where there is an agreed or regulated compensation standard regarding company benefit leave that should have been taken, both parties should follow the agreement or regulation. Once there is no agreement or regulation, employees don’t have the  right to claim benefit wage that should have been taken.  The opinion of Shenzhen Intermediate Court is as the view in practice, value the agreement reached by both parties or valid labor rules and regulations so much. But if there is no agreement or specific regulation, the court still holds that employers is obliged to pay benefit wage according to the statutory standard.

Editor’s note: This article was first published on Chinalawinght.com