In May 2014 the Beijing Municipal High People’s Court and Beijing Municipal Labour Dispute Arbitration Committee jointly issued the second Beijing opinion concerning labour disputes (the “Second Opinion”). Please refer to our previous August 2014 newsletter for the key issues contained within the Second Opinion.

To clarify understanding of the Second Opinion, the Beijing Municipal High People’s Court issued further meeting minutes (the “Clarification”) on 5 January 2015. This Clarification mainly concerned issues surrounding employees’ entitlement to double salary.

Entitlement to double salary

Chinese labour law requires an employer to conclude an employment contract in written form with a new employee within one month of work commencing. In cases of non-compliance, as of the second month of work commencing, an employee will be entitled to double salary for 11 months, and as of the 13th month of work commencement, an open-term contract will be deemed to be concluded between both parties. (This rule is also extended to contract renewal where the double salary entitlement will instead arise as of the very first month following the expiration of the previous contract.)

Double salary entitlement may also arise from an employer’s failure to conclude an open-term contract despite being entitled to do so. (The situations where an employee may be entitled to an open-term contract include following two consecutive fixed-term contracts or long term service of 10 years, etc.)

No dual entitlement

When applying the above two rules for double salary, previously an employee could argue that he/she is entitled to double salary as of the 13th month of their work commencing as the deeming clause could be construed as that he/she is entitled to an open-term contract in written form.

The Clarification denies such an argument and prevents the double salary entitlement being claimed under the rationale that “deemed to be concluded” deems a written form open-term contract to exist.

No cap in certain situations

The Clarification confirms that, if an open-term contract entitlement arises from other situations (e.g., long term service), the double salary is not capped and the amount is accrued as of the first day when the entitlement arises until the day before the written form open-term contract is finally concluded.

Statute of limitation

The Second Opinion holds that, when applying the one year of statute of limitation to the double salary claims, the one year period is measured backwards from the date on which the claim is raised. The Clarification confirms that this period is counted per day instead of any other period. Moreover, it is the employer’s burden of proving whether the period of limitation has expired or not.