Matters Relevant to the Establishment of an Employment Relationship Circular

(Issued by the Ministry of Labour and Social Security on May 25 2005.)

Lao She Bu Fa [2005] No.12

Labour and social security departments (bureaux) of the provinces, autonomous regions and municipalities directly under the central government:

Recently, authorities in certain regions have reported that some employers, when recruiting workers, do not execute employment contracts with them, and when employment disputes arise, it is difficult to protect the lawful rights and interests of workers due to the difficulty in determining the employment relationship between the parties, thus adversely affecting the harmony and stability of employment relationships. We hereby notify you on matters relevant to the establishment of an employment relationship between an employer and a worker as follows, in order to regulate the employment of workers by employers, protect the lawful rights and interests of workers and promote social stability:

1. If an employer has recruited a worker but failed to enter into a written employment contract with him or her, an employment relationship shall nonetheless be established if:

(1) the employer and the worker satisfy the qualifications of a party as specified in laws and regulations;

(2) the worker is subject to the employment rules and regulations formulated by the employer in accordance with the law, is subject to the employment management of the employer and engages in remunerated work arranged by the employer; and

(3) the work provided by the worker is a component of the employer's business.

2. When determining whether an employment relationship exists between two parties in circumstances where the employer did not execute an employment contract with the worker, reference may be made to the following documentation:

(1) proof or record (staff and worker wage payment roll) of payment of wages and record of payment of the various social insurance premiums;

(2) identification document, such as 'work ID card', 'service ID card', etc. issued to the worker by the employer;

(3) recruitment record, such as the recruitment 'registration form', 'application form', etc. of the employer completed by the worker;

(4) record of attendance; and

(5) the testimony of other workers, etc.

The employer bears the burden of proof in respect of the documents specified in Items (1), (3) and (4) above.

3. If the recruitment of a worker by an employer satisfies Section One, the employer shall belatedly execute an employment contract with the worker, the term of which shall be determined by the parties through consultations. If they fail to reach a consensus through consultations, either party may terminate the employment relationship. However, if the worker meets the conditions for an employment contract without a fixed term and requests such a contract, the employer shall enter into such a contract with the worker.

If the employer terminates the employment relationship, it shall pay the worker severance pay in an amount equivalent to one month's wages for each year the worker worked for the employer.

4. If an employer, such as a construction enterprise, mining enterprise, etc., contracts work (business) or operating rights out to an organization or natural person without qualifications to employ workers, the employer with the qualifications to employ workers shall bear responsibility as the employing entity in respect of the workers recruited by the organization or natural person.

5. If a dispute arises between a worker and his or her employer concerning whether an employment relationship exists between them, an application may be made to the competent labour dispute arbitration commission for arbitration.