Guangdong High Court issues answers on labour disputes

By Patrick Gu, DaHui Lawyers
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The notice on the Answers of the Guangdong Provincial Higher People’s Court on Difficult Questions Concerning the Trial of Labour Disputes (the answers), issued on 1 August 2017, set forth specific provisions on key topics on labour disputes that have long been the subject of concern in the province. We take a closer look at some of the important provisions below.

Patrick GuPartnerDaHui Lawyers
Patrick Gu
Partner
DaHui Lawyers

Are workers under new employment arrangements in an employment relationship with their employers? In this special time where the wave of the internet economy is driving a new round of industrial transformation and upgrading, certain new employment arrangements, e.g. express deliverers for takeout platforms, ride-hailing drivers, webcasters, etc., present difficulties in determining whether the individuals involved are in an employment relationship with the sharing economy platforms.

The answers set forth the criteria for the “two-track system” in relevant industries, such as express delivery – in principle, the relationship between an express delivery employee and his or her employer is determined by the agreement between them. However, the parties should be found to be in an employment relationship when the various labour rules and regulations formulated in accordance with the law by the employer apply to the worker in question, the worker is also subject to the labour management of the employer, he or she engages in the remunerated work arranged by the employer, and the labour that the worker provides is a constituent part of the employer’s business. In such a case, the employer is required to assume the responsibilities under such employment relationship.

With respect to the car hire industry, the answers specify that if a hired car driver who operates by contracting or leasing the vehicle claims an employment relationship with the car hire company, the same should be upheld. This greatly increases the potential operating costs and compliance risks of car hire companies and platforms.

If an employee violates family planning regulations, can the company terminate the employment relationship? There is an ongoing debate on this question in practice. In 2012, the State Council issued the Special Provisions for the Labour Protection of Female Employees, expressly specifying that an employer should not reduce the wages, dismiss or terminate the employment contract of a female employee because she is pregnant, gives birth or is nursing.

In the same year, the Shenzhen municipal human resources and social security authority held a conference on difficult issues in the management of employment contracts and issued meeting minutes. They specify that an employer may not terminate the employment contract of a female employee on the grounds that she has violated family planning, unless otherwise provided in her employment contract, the collective contract or rules and regulations.

The answers follow the thinking in the Shenzhen meeting minutes, specifying that if an employer terminates an employment contract on the grounds that the worker violated family planning regulations, the worker has the right to demand that the employer pay compensation for illegal termination of the employment contract, unless otherwise provided in the employment contract, the collective contract or the employer’s rules and regulations.

When an enterprise relocates, is it required to pay its employees severance pay? In recent years, the Pearl River Delta has been witness to industrial transformation and upgrading, giving rise to a large number of collective and individual labour disputes triggered by enterprise relocations. The answers expressly specify that, in principle, the relocation of an enterprise constitutes a material change in the objective circumstances relied upon at the time of concluding the employment contract; if the employer is required to consult with a worker on amending his or her employment contract but they fail to reach agreement on doing so, the worker may demand termination of his or her employment contract and the employer is required to pay severance pay for terminating such contracts. However, exceptionally, if the relocation of the enterprise does not have a marked impact on the worker and the employer has taken reasonable measures to make up (e.g. providing a shuttle service, travel allowance, etc.), the grounds for termination of the employment contract by the worker in such a case are insufficient and the employer is not required to pay severance pay for terminating the employment contract.

This provision reminds an employer that, when carrying out a large-scale relocation, it should duly prepare a suitable preliminary plan and, to the extent possible, provide the conditions that would facilitate continued performance by its employees of their employment contracts, so as to avoid paying a large amount in severance pay.

Should a dispute over the payment of social insurance premiums be handled by a labour dispute procedure? There are in Guangdong Province, an area where labour-intensive enterprises were formerly concentrated, a large number of outstanding historical issues of unpaid social insurance premiums. With respect to the question of whether disputes between workers and employers over the filing and payment of social insurance premiums fall within the scope of labour dispute resolution, the Interpretations of the Supreme People’s Court on Several Issues Concerning the Application of the Law in the Trial of Labour Dispute Cases (3) specify that only disputes where the employer fails to pay social insurance premiums, the handling authority is unable to make up the payment, and the individual demands that the employer compensate for his or her losses, can go into an arbitration or litigation procedure.

On this basis, the answers further close the door on resolving social insurance premium payment disputes through a labour dispute procedure, specifying that a demand by a worker that his or her employer pay up the social insurance premiums owed while he or she was employed does not fall within the scope of labour dispute handling and will not be dealt with. A case may be handled through the labour dispute procedure only when the worker himself or herself pays the outstanding social insurance premiums to the social insurance authority and then demands that the employer compensate him or her for the portion payable by the company.

In summary, the answers provide new interpretations for past difficult labour dispute issues, and we would recommend that enterprises promptly revise their practical methods so as to avoid potential risks.

Author: Patrick Gu is a partner at DaHui Lawyers

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