On April 14, 2014, Zhejiang Province’s Interpretations (II) on Several Issues in Trials of Labor Dispute Cases was promulgated, mainly addressing the below issues:

  1. Where a contractor qualified for hiring employees, illegally subcontract its contract to a subcontractor not qualified as an employer, and then the worker hired by the subcontractor requests for acknowledgement of employment relationship with the contractor, such a request should not be upheld. However, if the worker is subject to injury or death during work, and requests the contractor to undertake compensation in accordance with the work-related injury rules, such a request should be upheld.
  2. Employer may not refuse to enter into an open-ended employment contract if the employee raises so after completion of two fixed-term employment contracts.
  3. Penalty of double salaries

(1) Where the employer fails to enter into a written employment contract within 1 year upon the commencement of work, the counting of double salary penalty should not exceed 11 months.

(2) Where an employee proposes to sign an open-ended employment contract in accordance with Article 14 of theEmployment Contract Law, but the employer fails to do so, the counting of double salary penalty should not exceed 11 months.

(3) Where the last month’s salary in terms of the double salary penalty does not exceed the statute of limitation of 1 year, the double salary penalty should be supported in its full amount.

  1. Where it is stipulated in the employment contract that “if the employee continues working for the employer after this contract expires, an extension of the original employment term should be deemed”, and the parties actually have performed such a clause, it should be deemed that the parties have signed a new employment contract. Accordingly, after the expiration of the extended employment contract, the employee is entitled to enter into an open-ended employment contract and the employer may not refuse such a contract.
  2. Where an employee severely violate the employer’s internal policies to the extent that a dismissal of employment contract can be triggered, generally, the employer should exercise its right to dismiss the employee within 5 months after it is aware or should be aware of such a violation.
  3. Calculation base and compensated years of service for severance

(1) The calculation base of severance refers to the average salary of 12 months under normal working status, exclusive of abnormal working status, such as medical treatment period.

(2) Where the employee’s average salary is higher than 3 times of the local average salary, and his/her years of service with the employer stretch over the date of January 1, 2008, and the employment contract is terminated or ended after January 1, 2008, and the employer is obliged to pay severance, then if the employee’s years of service exceed 12 years, the severance may not exceed 12 months’ salary.

  1. Where the compensation stipulated in the non-compete agreement is lower than the minimum living expense, and the employee has undertaken the non-compete obligation, the employee may request the employer to make up the balance at the standard of 30% of the average salary of 12 months before the termination or ending of employment contract. If such a standard is lower than the local minimum salary, the balance should be made up per the local minimum salary standard.
  2. If the labor dispatch institution recognize the service period agreed between the service-accepting company and the employee, such agreement of service period is valid and effective. If the agreed service period is beyond the term of employment contract, the employment contract should be extended until the expiration of the service period. If the labor dispatch institution does not recognize such agreed service period, the agreement should be invalid.
  3. Statute of limitation for compensation of unused annual leave

The ordinary statute of limitation applies to the compensation of unused annual leave, which should be calculated from the first day of next year. If the employee agrees on the arrangement of carrying forward the current year’s annual leave entitlement to the next year, the statute of limitation should be calculated from the first day of the year after next year. If the employment relationship is terminated or ended, it should be calculated from the termination date/ending date.