Case Information:

Appellant: Xu Weidong

Appellee: Wuhan Steel Group Jiangnan Gas Thermal Co., Ltd.

Court: Wuhan Intermediate People’s Court

Case Ref.: [2014] E Wuhanzhong Minshang Zhongzi No. 00136

Key Points of the Judgment:

Employment Contract Law comes into effect on Jan 1, 2008, Article 66 of which stipulates that “generally labor dispatch is applicable in the job positions which are temporary, auxiliary or substitutable”. Such provision is not a mandatory one. Therefore, the labor dispatch agreements effective before Jul. 1, 2013, the date when the Employment Contract Law was amended, should not be affected due to the inconsistency between their applicable position and their statutory eligibility.

Key Facts:

Xu Weidong joined Wuhan Steel Group Jiangnan Gas Thermal Co., Ltd. (the “Jiangnan Gas Company”) on Nov. 9, 2004. Jiangnan Gas Company entered into two labor dispatch agreements with Wuhan Zhongxin Human Resources Service Co., Ltd. (the “Zhongxin Company”) on May 1, 2010 and Jun. 21, 2011 respectively, providing that Zhongxin Company dispatches employees to provide service for Jiangnan Gas Company. Concurrently a supplemental agreement was executed stipulating that Jiangnan Gas Company pays salaries to the dispatched employees on behalf of Zhongxin Company. Xu Weidong entered into two 1-year-term employment contract with Zhongxin Company, in which he agreed to be dispatched to work for Jiangnan Gas Company.

From Jun 2012, Xu applied for labor dispute arbitration and filed for a lawsuit at Wuchang District People’s Court subsequently, pledging for the ruling that the labor dispatch agreements between Jiangnan Gas Company Zhongxin Company are invalid and thus there exists labor relation between him and Jiangnan Gas Company. After the claims were rejected, he appealed to Wuhan Intermediate People’s Court, alleging that in the so-called labor dispatch arrangement, the job contents, working locations and salary payment methods of dispatched employees including the appellant had not been changed. And the appellant worked in that position for years, therefore the position may in no manner be categorized as temporary positions and should not be eligible to labor dispatch arrangement.

Judgment:

The appeal is dismissed and the former ruling is sustained.

Reasoning

  1. Employment Contract Law was amended as of Jul 1, 2013, providing that “labor dispatch is a supplementary form of labor-using and shall be exclusively applied in the temporary, auxiliary or substitutable positions”. However, in accordance with the principle of “lex prospect non respect”, labor dispatch agreements effective before the amendment date should not be subject to the amended version of Employment Contract Law.
  2. Article 66 of Employment Contract Law before amendment provides that “generally labor dispatch is applicable in the job positions which are temporary, auxiliary or substitutable.” This provision is not a mandatory one and it may not constitute the basis for ruling that a labor dispatch agreement is invalid for the inconsistency between its position and the statutory eligibility of labor dispatch positions.

Source: Judicial Opinions Website

KWM Comments: Under the revised Employment Contract Law as well as the newly promulgated Interim Regulations on Labor Dispatch, employers should check if certain labor dispatching positions are legally eligible. If not eligible, where the labor dispatch agreement came into force before the amendment to Employment Contract Law, its validity will not be affected to any extent.