On 7 May 2014, Beijing Municipal High People’s Court and Beijing Municipal Labour Dispute Arbitration Committee jointly issued Meeting Minutes (II) of the Seminar on Application of Law in Labour Disputes (“Meeting Minutes II”). The following summarizes local specifics worth highlighting.
Being a student does not disqualify an individual from establishing an employment relationship. The nature of the relationship between a student and a company shall be assessed according to the specific situation. In general, an employment relationship will not be upheld for internships 1) which a student completes according to his/her school’s arrangement or 2) which he/she engages in social practice activities on his/her own initiative. However, if the student works for the company in the name of an internship, an employment relationship will be established.
Written form requirement on employment contract
In general, Chinese labour law requires an employer to conclude an employment contract in written form with a new employee within one month from work commencement. This written form requirement extends to contract renewal. In case of non-compliance, the employee will be entitled to double salary and/or an open term contract depending on when a written contract is finally concluded. Beijing court in its new Meeting Minutes II clarified some related issues.
- Special cases for written form requirement
A claim made by senior management personnel or the head of HR for double salary will not be upheld if his/her employer can prove that the management of employment contract conclusion is part of the aforedsaid employee’s duties. However, if there is evidence to prove that the employer has rejected the employee’s request for the conclusion of a written employment contract, the claim for double salary will be upheld.
By contrast, the Beijing courts will not uphold a legal representative’s claim for double salary due to failure to conclude a written employment contract.
Continuing work after expiration of contract
In general, if an employee continues work after the expiration of a contract, a written employment contract must also be concluded for the new working period. In case of non-compliance, the grace period of one month for liabilities to arise (which applies to new employment) does not apply and liabilities of his/her employer will arise as of the day immediately following the expiration. Consequently, the employee will be entitled to double salary for a period (up to 12 months) from this day to the day before a written contract is concluded.
Some employment contracts may provide for an extension upon expiration of the initial term without specifying the term of the extension. If an employee holding such a contract continues to work after the expiration of the initial term while neither the employer nor the employee asserts termination or expiration, it shall be deemed that they have concluded a new contract with the same terms and conditions (including the term) as those of the previous contract. In such case, the employee’s claim for double salary will not be upheld.
- Double salary
The double salary consists of 100% salary which the employee should receive during the period when there is no written contract (of up to 11 months for new employee and 12 months for existing employee in the case of continuing work as mentioned above) and additional 100% salary as the punitive compensation. The statute of limitation for claiming the punitive compensation is 1 year. This one-year is measured backwards from when the claim is raised.
Two-fixed-term-contract rule for open term contract entitlement
Under Chinese law, if an employee has concluded two fixed-term contracts with an employer (as of 2008), the employee is entitled to an open term contract. The Beijing Meeting Minutes II further clarifies the following issues:
- Upon expiration of the second fixed-term contract, Beijing employers have no right to decide whether or not to renew the contract (unless one of the statutory situations for dismissal applies). At the request of an employee, a Beijing employer must renew the contract and the contract term has to be an open term.
- If a third fixed-term employment contract is concluded following the expiration of the second fixed-term contract, upon expiration of this third contract and at the request of the employee, the Beijing employer must renew the contract and the contract term has to be an open term.
- If the employer and the employee agree to extend the expiration date of an employment contract, whether or not the extension will be deemed as a separate fixed-term contract depends on its expiration date. If the new expiration date is earlier than the original expiration date, the extension will be considered as an amendment to the original term and will not be deemed as a separate fixed-term contract. If, however, the new expiration date is later than the original expiration date, the extension will be deemed as a separate fixed-term contract. Consequently, the above two-fixed-term-contract rule for open term contract entitlement applies.
- If fixed-term contracts provide for an extension of a fixed period upon expiration of the initial term and this contract is actually extended, upon expiration of the extension and at the employee’s request, the employer must conclude an open term contract with him/her.