Court rules on retiree’s ‘special employment relationship’

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Court rules on retiree’s ‘special employment relationship’

The Nantong Municipal People’s Court in Jiangsu province upheld a retiree’s claim that an employment relationship existed between a company and the retiree. The retiree was hired by the company after reaching the statutory retirement age, but the retiree had not drawn a pension from the social insurance fund. The company entered into a signed service agreement with the retiree. After the service agreement expired, the employee continued to work at the company without entering into a written renewal agreement. The employee filed a claim that the service relationship had become an employment relationship with the company. On this basis, the employee sought compensation from the company for its failure to enter into a written employment contract, and for its salary payments being less than the local minimum wage.

The court ruled that even though the employee had reached the statutory retirement age, the relationship could not be a service relationship because the employee was not drawing a pension from the social insurance fund. By not drawing a pension, the relationship was more similar to an employment relationship, so the court ruled that the relationship should be deemed as a special employment relationship.

In terms of compensation, the court granted one claim and denied the other. The court ruled that the company and the employee could orally agree to their rights and obligations under a special employment relationship, so a written employment contract was not required and no compensation was owed for the failure to enter into one.

However, the court ruled that the employer was obligated to pay the local minimum wage under a special employment relationship, and so the employer was ordered to pay the difference between the employee’s salary and the local minimum wage.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at danian.zhang@bakermckenzie.com