In June 2014 alone, three different courts showed stricter scrutiny of the use of labor dispatch arrangements. The courts ruled in favor of dispatched employees who sued for direct hire or equal treatment.
For example, according to a June 16, 2014 report, the Binhu District People’s Court in Wuxi, Jiangsu Province, ruled against an employer that hired an employee through a labor dispatch agreement. The individual had worked at the company for one year without an employment contract before the company formally hired him through a third-party staffing agency. After being terminated, the employee sued the company and the court ruled that because the company had failed to enter into an employment contract with him within a year of his commencement of work, an open-term employment had been formed between the parties. In addition, the employee’s job position did not fall within the temporary, auxiliary, or substitute job position categories for which labor dispatch was allowed.
In a similar case reported on June 17, 2014, the Xintian County People’s Court in Hunan Province ruled that a labor dispatch arrangement was invalid and ordered the company to reinstate the employee to direct employment. In that case, the company had originally directly employed the employee on an open-term contract. The company then undertook a corporate restructuring; after the spin-off, the successor employer put the employee on a labor dispatch arrangement for one year. The court ruled that the original open-term contract was still binding on the successor company, that the switch to a labor dispatch arrangement was invalid, and therefore that the termination upon expiration was unlawful.
Finally, as reported on June 18, 2014, the Shimen County People’s Court in Hunan Province upheld the claims of 12 dispatched employees for “equal pay for equal work.” The employees worked for a local tobacco company that hired them through an agency. These employees later found out that their salary was substantially lower than those of directly hired employees in equal or similar positions. The company argued that these 12 employees were not company employees and not even dispatched employees, because this was an outsourcing arrangement with a vendor. The court, however, ruled against the company, because the employees were under the direction and management of the company during their work, and they therefore should be deemed as dispatched employees. The court ordered the company to compensate the employees for their underpaid salaries on the ground of “equal pay for equal work.”