With the development of Chinese economy, more and more foreigners are being employed in China, among which there is a group of “Laowai” who has already reached or even passed the Chinese statutory retirement age (the “Elderly Foreigners”). The Elderly Foreigners are not like their Chinese fellows who are retired completely at the age of 55 or 60, but still being active at their jobs or even acting as middle-level and high-level managers or technicians in many companies. The question is, whether the employment form of the Elderly Foreigners is service or employment under Chinese law?

To answer the question, let us start from the laws. The Regulations on the Management of the Employment of Foreigners in China provides that in China, the minimum employment age for a foreigner is 18, but there is no explicit provision to specify whether they shall be bound by requirements of the Chinese statutory retirement age. In some regions such as Beijing and Shanghai, local regulations stipulate that the upper age limit is 60 or, 60 for male and 55 for female. However, these local regulations do not provide a clear instruction on the foreigners’ statutory retirement age in China and, at the same time, allow the liberation of the aforesaid age requirements for talents urgently needed. [1]Thus, does it mean that the Elderly Foreigners in China are not legally required to retire?

Let’s not draw the conclusion quickly and the answer is not that simple. To crack the puzzle, we conducted a research on several cases through public resources available and realized that the answers of local courts in various regions are not the same.

The Affirmative: Since they have already reached the Chinese statutory retirement age and are enjoying pension insurance, their relationship with employers is a service one!

In a case regarding resignation payment dispute in Beijing, the foreigner had reached the Chinese statutory retirement age when he was recruited. He signed an employment contract and obtained the Work Permit for Foreigners. However, the court ruled directly based on the ground that the foreigner had reached the Chinese statutory retirement age and determined that their relationship was a service one. [2]Similarly, in another case in Beijing, the court also found the existence of a service relationship in an employer’s termination dispute. Nevertheless, in this case, due to the reason that the foreigner had been enjoying pension insurance in his own country, aside from the fact that the foreigner had reached the Chinese statutory retirement age, the court also employed the ground of the provision that an employment contract is terminated once an employee had started to enjoy the pension insurance in its judgment.[3]

For the foreign experts, the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (IV) provides that where a foreigner who has the Foreign Expert Certificate and obtains the Work Permit for Foreign Experts in China establishes an employment relationship with an employer within the territory of China, such a relationship may be confirmed as employment relationship. However, in a case regarding employer’s termination disputes in Anhui Province, the court did not directly confirm the relationship in question as an employment one solely based on the fact that the foreigner had reached the Chinese statutory retirement age. Instead, it was held that the aforementioned judicial interpretation did not specifically exclude foreign experts from the restrictions of retirement age under the PRC law. Hence, the foreigner who has reached the Chinese statutory retirement age in this case shall be considered as having lost the eligibility of establishing an employment relationship and the concerned relationship hereof is a service one. [4]A similar judgment was made in a case of employer’s termination dispute in Jiangsu Province upholding the opinion that once a foreign expert has reached Chinese statutory retirement age while performing an employment contract she is deemed to be having a service relationship with the employer.[5]

Thus, from the view of the affirmative side, the Chinese statutory retirement age applies to the Elderly Foreigners in China. The principle hereof is that once reaching the Chinese statutory retirement age employment should then cease to exist, regardless of the provisions in the employment contract and the length of the work permit. For the issue of whether they are enjoying pension insurance, the situation in their home country will be considered as well as that in China. For foreign experts, reaching Chinese statutory retirement age could possibly indicate the existence of a service relationship. 

The Negative: with the approval of competent authorities and agreement with the employer, even though the Elderly Foreigners had reached the Chinese statutory retirement age, employment relationship could be ascertained!

For instance, in a case regarding delayed wage payment dispute in Jiangsu Province, the foreigner had already passed the Chinese statutory retirement age when he was recruited, however, and the employer still executed the employment contract with him and applied the work permit for him. The court held that the employment of this foreigner did not violate the restriction of age under the Regulations on the Management of the Employment of Foreigners in China. Furthermore, the employer and employee had already executed the employment contract, applied for the work permit and received the certificate of practitioner from the competent authority. Therefore, the employment relationship is legally effective and the court consequently supported the foreigner’s request on the severance pay.[6]

In two cases in Shanghai, the foreigners in both reached the Chinese statutory retirement age after being recruited and the employment contracts and the work permits thereof had not expired. The courts ruled that the law does not explicitly prohibit the employment of foreigners who are above the Chinese statutory retirement age in China, and the parties had foreseen the fact that the foreigners will reach the Chinese statutory retirement age during the term of the contracts when they prepared to execute the employment contracts and apply for the work permits. However,  the employment contracts were still executed and the work permits obtained. Therefore, the agreement on establishing an employment relationship had already accomplished and the situation that an employment contract is terminated after the employee having reached the Chinese statutory retirement age does not apply to this case. The courts finally supported the foreigner’s requests of compensation for wrongful termination.[7]

In the second case in Shanghai, the employer used the ground of the employee reaching the Chinese statutory retirement age to unilaterally terminate the employment contract and cancelled the work permit. For this case, having affirmed an unlawful termination, the court ruled that the application of the work permit is a statutory condition to performing the employment contract of a foreigner however, and due to the fact that the employer had cancelled the work permit and the foreigner had already lost the statutory qualification of working in China, the employment contract cannot be performed anymore. Hence, the court did not support the foreigner’s request of reinstating the employment relationship but it held that the employer shall bare the compensational obligation for not being able to reinstate the employment relationship.[8]

Accordingly, from the view of the negative side, the current PRC law does not clearly state the application of the Chinese statutory retirement age to the Elderly Foreigners in China and when an employment contract and a work permit for a foreigner meet Chinese statutory retirement age, the negative side tends to hold that the relationship shall be considered as an employment one.

Three points of advice

The question from the abovementioned cases is: what shall the employers do when facing the Elderly Foreigners of their own? We provide the three following advice: 

  1. Verify the foreigner’s age and his/her pension status in home country and within the territory of China.
  2. If the foreigner is approaching the Chinese statutory retirement age when recruited, the employer should try to align the length of the foreigner’s employment contract with his/her distance to the Chinese statutory retirement age, and use it to apply for work permit accordingly. Thus, the employer could retain the choice of extending the work permit at the time of the foreigner’s age reaching the Chinese statutory requirement. If the foreigner already is at the age of retirement when recruited, it is suggested that the employer shall clarify in the employment contract, service agreement or other written contracts that Chinese statutory retirement age should apply to the foreigner and the relationship envisaged is a service one in order to conveniently claim in the possible dispute that the relationship is a service one.  
  3. Based on the local judicial practice, carefully terminate an employment relationship with a foreigner and apply for an annulment of his/her work permit on the ground that they have reached the Chinese statutory retirement age.

Editor’s note: This article was simultaneously published on Chinalawinsight.com