Viewpoint | Interpretation of the "Supreme People's Court Interpretation (II) on the Application of Law in the Trial of Labor Dispute Cases"

Interpretation: Articles 1 and 2 clarify the subject responsibility of labor employment, which is no longer limited to "having the qualification as an employer," but requires examination of whether there is "legal business qualification." For example, if a contractor with legal business qualifications subcontracts or assigns to a subject without legal business qualifications, or the actual employer is an organization or individual without legal business qualifications, and the affiliated party is a unit with legal business qualifications, this constitutes statutory employer responsibility. It should be noted that employer responsibility is limited to "payment of labor remuneration" and "work injury insurance benefits after recognition of work-related injuries," excluding confirmation of labor relations and payment of economic compensation.

Interpretation: This article stipulates the identification of labor relations in cases of mixed employment, first looking at the employer who signed the written labor contract. If no written labor contract is signed, labor relations are comprehensively identified based on actual employment management (working hours, work location, work content, laborer's management, payment of labor remuneration, social insurance, and housing fund contributions). In determining responsibility, related companies involved in mixed employment bear joint payment responsibility. If there is an agreement between the laborer and the related companies, the agreement prevails; if not, the laborer can require multiple employers to jointly bear the responsibility for payment of labor remuneration and welfare benefits.

Interpretation: Articles 4 and 5 concern the recognition of labor relations for foreigners working in China. Article 4 stipulates three categories of foreigners who can request confirmation of labor relations with employers. First, foreigners who have obtained permanent residence qualification, referring to those who have obtained the "Permanent Residence Permit for Foreigners in China"; second, those who have obtained work permits and legally reside in China, referring to foreigners who have obtained the "Foreigners' Employment Permit" and completed relevant visa and residence procedures; third, foreigners who meet the relevant conditions according to national regulations (such as Articles 9 and 10 of the "Regulations on the Administration of Employment of Foreigners in China").

Although the permanent representative office of a foreign enterprise does not have independent legal person status and is not the "employer" stipulated in the labor contract, it can participate as a party in labor dispute litigation to facilitate case investigation and protect the interests of all parties. Parties also have the right to apply to the people's court to add the foreign enterprise as a party to the litigation. It should be noted that litigation subject qualification and employer qualification are two different legal concepts. The representative office's participation as a party does not mean it has employer qualification in the labor relationship; the actual employer may still be the foreign affairs service unit or other actual employer.

Interpretation: This article stipulates the calculation method for double wages when no written labor contract is signed. If the employer fails to conclude a written labor contract with the laborer in accordance with the law, it shall pay double wages. There are different understandings in judicial practice regarding how to calculate double wages; this article unifies the judicial standard. The formula for calculating double wages is: monthly wage ÷ 21.75 days × actual working days. It should be noted that the part less than one month is calculated according to actual working days, excluding statutory holidays, annual leave, personal leave, and sick leave.

Interpretation: This article stipulates three situations where double wages are not paid for not concluding a written labor contract. First is force majeure, which refers to objective circumstances that are unforeseeable, unavoidable, and insurmountable; second is when the laborer intentionally or through gross negligence fails to conclude the contract. For example, if the laborer deliberately delays or uses their job duties to conclude a false labor contract causing the labor contract not to be concluded, the employer is not liable. The employer bears the burden of proof in these two cases. Third are other situations stipulated by laws and administrative regulations. If other situations are stipulated by departmental rules or local regulations, the legal responsibility to pay double wages cannot be exempted.

Interpretation: This article stipulates situations where double wages are not paid for not concluding a written labor contract. Article 42 of the Labor Contract Law covers cases such as occupational diseases, work injuries, medical treatment periods, pregnancy, maternity, and breastfeeding periods; Article 17 of the Implementation Regulations of the Labor Contract Law covers cases where the labor contract expires but the agreed service period has not yet expired; Article 19 of the Trade Union Law covers cases where the term of office of trade union cadres has not expired. In these cases, even if the labor contract expires, it is deemed automatically renewed, and the employer does not need to pay double wages for unsigned labor contracts. The rights and obligations during the automatic renewal period are the same as the original contract. If the employer unilaterally terminates the labor contract, it constitutes illegal termination.

Interpretation: This article clarifies that double wages are not paid during the period deemed as concluding an open-ended labor contract, which is consistent with the mainstream view in judicial practice. The period stipulated in the third paragraph of Article 14 of the Labor Contract Law, "deemed that the employer and the laborer have concluded an open-ended labor contract," is equivalent to both parties having concluded a labor contract. The laborer can request to supplement the written labor contract, but after one year of the "deemed open-ended" period, double wages for unsigned labor contracts cannot be claimed.

Interpretation: This article identifies four types of consecutive conclusion of two fixed-term labor contracts. To avoid concluding an open-ended labor contract with the laborer, the employer may alternate concluding labor contracts with the laborer through affiliated enterprises or other means to evade the condition of consecutively concluding two fixed-term labor contracts with the same employer. This article stipulates that as long as the laborer's workplace, job content, and management subject have not fundamentally changed, regardless of whether the employer uses contract term extension, automatic renewal mechanisms, affiliated subject conversion, or other dishonest evasion methods, it will trigger the legal consequences of consecutively concluding two fixed-term labor contracts.

Interpretation: This article stipulates the handling of situations where factual employment continues for more than one month after the labor contract expires. That is, after the first labor contract expires, the employer is given a one-month grace period. If the employer intends to terminate the labor contract within one month, it can still be legally terminated; if the first labor contract expires for more than one month, the laborer has the right to request renewal of the second labor contract under the original conditions. If the employer terminates the contract citing expiration, it constitutes illegal termination and requires compensation or bears the risk of continuing to perform the labor contract. The third paragraph "legal consequences of termination" means that if the employer's termination requires economic compensation, it must be paid; if it is illegal termination, compensation must be paid.

Interpretation: This article stipulates the liability of the laborer for violating the special treatment service period. "Special treatment" usually refers to special benefits such as household registration quotas, housing allocation, or subsidies. When the employer provides special treatment to the laborer, and the laborer violates the service period agreement without the employer's fault as stipulated in Article 38 of the Labor Contract Law, the laborer shall bear compensation liability. It also clarifies that when determining the laborer's compensation liability, the people's court will consider actual losses (such as costs incurred by the employer for providing special treatment), the degree of fault of the laborer (such as intentional misconduct), and the years already served (such as partial fulfillment of the service period, which may reduce compensation) to make a discretionary judgment.

Interpretation: This article stipulates the scope of non-compete. First, if an employee who does not have access to trade secrets or intellectual property confidentiality obligations (such as front desk receptionists, security personnel, cleaners, etc.) agrees to a non-compete clause, it can be claimed as invalid; second, for employees with confidentiality obligations, if the scope, region, duration, etc., of the non-compete clause exceed the reasonable needs to protect trade secrets, the employee may request confirmation that the exceeding part is invalid.

Interpretation: This article clearly stipulates that the employer may agree on a non-compete clause during employment with specific employees, and such an agreement does not require payment of economic compensation to be effective. If the employee violates the non-compete during employment, they must pay liquidated damages.

Interpretation: This article stipulates the responsibilities of employees violating non-compete agreements. First, the non-compete agreement must be valid; second, the agreement must clearly specify the amount or calculation method for returning the non-compete compensation and liquidated damages; third, the liquidated damages should correspond to the employee's income, years of service, non-compete duration, and compensation amount. If the agreed amount is too high, full support may be difficult to obtain.

Interpretation: This article stipulates circumstances where the labor contract cannot continue to be performed. First, the labor contract naturally terminates upon expiration during arbitration or litigation without renewal situations (such as medical leave, female employees' "three periods", etc.), excluding employees with indefinite-term contracts; second, the employee begins to lawfully receive basic pension benefits, noting this is not "reaching statutory retirement age"; third, the employer's bankruptcy or dissolution leads to the termination of the labor relationship, but if due to merger or division, the successor continues performance; fourth, objective circumstances prevent performance of the labor contract (such as dismantling production lines, loss of office space, work stoppage, policy adjustments, etc.).

Interpretation: This article stipulates the impact of occupational health examinations on the effectiveness of labor contract termination. It clarifies that employees engaged in occupational disease hazard work who have not undergone pre-departure occupational health examinations fall under the statutory application for restoring labor relations and continuing to perform the labor contract. Exceptions include confirmation before the first-instance court debate that the employee does not have an occupational disease or the employee's unjustified refusal to undergo the examination (employers should keep evidence of the employee's refusal to cooperate).

Interpretation: This article stipulates wage payment during the period of continued performance after illegal termination. When the people's court determines that the termination or ending of the labor contract is illegal and orders continued performance, the employer shall pay wages from the date of the illegal decision to the day before the actual restoration of the labor relationship. There are two wage standards: first, if the employee is not at fault, the employer shall pay according to the employee's normal wage; second, if both parties are at fault, they shall bear responsibilities according to the degree of fault.

Interpretation: This article stipulates the consequences of not paying social insurance. Paying social insurance according to law is a mandatory national requirement and a legal obligation of the employer. Any "voluntary" declaration, agreement, or promise by the employee not to pay social insurance is invalid. If the employer makes supplementary social insurance payments, it has the right to seek reimbursement from the employee for the social insurance fees already compensated.

Interpretation: This article stipulates the time limit for raising the defense of arbitration limitation period in labor dispute cases. Labor dispute cases generally go through three stages: labor arbitration, first instance litigation, and second instance litigation. This article requires that the defense of limitation period should be raised during the labor arbitration stage. If the defense is not timely exercised during the labor arbitration procedure, it will result in the loss of the defense right in subsequent litigation procedures, except when a party can prove with new evidence that the other party's claim has exceeded the arbitration limitation period.

Interpretation: The repealed provision stated: "When an employer and a person who has legally enjoyed pension benefits or received retirement pension have a labor dispute and initiate litigation, the people's court shall handle it as a labor service relationship." Why was this provision repealed? Because on July 31, 2025, the Ministry of Human Resources and Social Security, the National Health Commission, the Ministry of Emergency Management, the State Taxation Administration, and the National Healthcare Security Administration jointly drafted the "Interim Provisions on the Basic Rights and Interests Protection of Over-Age Workers," which is currently open for public consultation. The provisions include that "employers arranging overtime for over-age workers shall comply with Articles 41, 42, and 44 of the Labor Law of the People's Republic of China" and "employers shall participate in work injury insurance and pay work injury insurance premiums for over-age workers in accordance with national regulations." The "Interim Provisions on the Basic Rights and Interests Protection of Over-Age Workers" have not yet been officially promulgated, and the legal relationship concerning 'over-age workers' remains to be further clarified.