Labor disputes tend to occur among the contractor, the affiliated party, the lessor and lessor of business license in cases involving illegal contracting or subcontracting to employers without entity qualifications. To be specific, it’s worth pondering over who takes responsibility once occupational injury occurs if in the process of construction, the construction unit subcontracts partial duties to employers without entity qualifications. The above matter involves sorting legal relations and attribution of liability. Court decisions vary from case to case. On 1st December 2015, the Shenzhen Intermediate Court issued “Judgment Guideline of Shenzhen Intermediate Court on Trial of Labor Dispute Case” (hereinafter as “Judgment Guideline”), with “Explanation on the ‘Judgment Guideline on Trial of Labor Dispute Case’” (hereinafter as “Explanation”) attached as elaborations and also provisions regarding the aforementioned matter.

A. The legal relations between contract-issuing party, lessor, or affiliated person and employee

Regarding the issue above, whether any legal relations exists between the contractor, lessor, or affiliated person and employee, opinions are summarized as below:

 a) There is service relationship between the individual or organization without employer entity qualification, and based on the service relationship, the employee with occupational hazard can claim indemnity to the sub-contractor[1]; b) It depends on the subject knowledge of employee[2], whether the employee has sufficient reason to believe that the contract-issuing party is employer[3]. Such provision refers to the regulation of agency by estoppel of civil law.

Though certain local courts have prescribed regulations concerning such labor issues in respective guidelines, but as it’s without legal force, it can’t be referenced in court decisions in judicial practice. The “Notice on Issues relating to Confirmation of Labor Relationship” (hereinafter as “Labor Relationship Notice”) issued by Labor and Social Security Department has become the most widely cited legal base. It stipulates in Article 4 that, where an employer engages in building construction, mining, etc. and contracts the project (business) or operational rights out to another organization or natural person without employer entity qualifications, the party awarding the contract with the employer entity qualifications shall bear the employer entity responsibility for workers recruited by such organization or natural person. However, for the question how to understand the employer entity responsibility, the opinions cannot reach consistence. Although in some of the judgments it has been confirmed that the contract-issuing party shall bear the employer entity responsibility, it doesn’t constitute labor relations between the contractor and the employee.[4] But in other judgments the labor relationship is confirmed according to this provision and the contract-issuing party has been sentenced to make the payment or compensation to employee[5].

Other than the aforementioned provisions, the court is inclined to rule according to the evidence provided by both parties on whether the employees are affiliated to the employer in the course of employment or whether the employer has employment management over employees or whether the work of employees has constructed part of employer’s operation, so that to confirm whether there exists labor relationship.

Before the issuance of the Judgment Guideline, the court of Shenzhen had already adopted the measure of evaluation on a case-by-case basis in sympathy with the labor relationship notice. But Article 58 in Judgment Guideline has provided a new thought. It stipulates that save the work-related injuries confirmed by Social Security Authority, where an individual contracts, affiliates to another party or leases other’s business license, employee recruited by contractor, lessee, or party affiliated to another party claims to confirm the existence of labor relationship between the employee and contract-issuing party, lessor, or affiliated person with employer entity qualification, the court shall not support such request.

There exist difference voices in the process of enacting Judgment Guideline. on If the employee’s subject knowledge to the contract, leasing of business license or affiliation makes a difference for the confirmation of labor relationship. At last the Shenzhen Intermediate Court adopted an objective standard, that is whether the employee has prior knowledge of the existence of relationship of contract, leasing or affiliation or not, the court shall not support employee’s claim for confirmation of labor relationship. Where the work-related injuries has been confirmed by Social Security Authority, pursuant to Article 11 of Explanation, if the work-related injury is confirmed based on labor relationship, then the court shall recognize the confirmation; if it is confirmed merely based on “Regulations of Several Issues regarding Trial on Work-Related Insurance Administrative Cases”, then this confirmation cannot be the effective evidence to confirm existence of labor relationship.

B. Joint and Several Responsibility of Labor Remuneration, Payment for Treatment of the Injury

Under current judicial practice, employee normally requests the court to confirm the existence of labor relationship. Therefore, the determination of the responsibility of contract-issuing party, lessor, or affiliated person is normally decided on labor relationship. But in guidelines issued by certain district courts, it is deemed that the joint and several responsibility of contract-issuing party, lessor, or affiliated person is not directly related to labor relationship, and the guidelines only stipulate that contractor and sub-contractor of building construction assume the liability together[6].

Similar regulations can be found in the following provisos of Article 58. It is regulated that employees directly claim the contract-issuing party, lessor, or affiliated person to assume the related joint and several responsibility together with contractor, lessee, or party affiliated to another party in accordance with Article 32, Article 33 of “Regulation of Guangdong Province on the Payment of Wages”, Article 94 of “Labor Contract Law” and “Measures for Lump-sum Compensation to the Disabled or Deceased Employees of Entities Involving Illegal Employment”, the court shall support such request. Such regulation means that the existence of labor relationship doesn’t limit employee to request the contract-issuing party, lessor, or affiliated person to assume the joint and several liabilities for compensating work-related injuries or paying the labor remuneration.

In terms of legal force, the Judgement Guideline is mainly for providing guidance in Shenzhen trial practice and in a way, reflects the tendency in court rulings. For future reference, it is likely the court rules however the judge deems appropriate. On the other hand, the court may dismiss the request without convincing evidence, under which condition the employee still has the option to request labor remuneration and injury insurance from the actual employment entity.