Answer: It is a complicated legal issue to judge whether a work relationship is an employment relationship or an independent contractor relationship (It is called LaoWu relationship or also expressed as Guyong relationship in some of judicial decisions).
Generally speaking, an contractor is not an employee and is not protected by employment law at all. The relationship between the contractor and the company receiving the service is an equal civil contract relationship, which makes the disputes between the two parties only resolved by civil procedures such as civil/commercial arbitration entities or courts. The employee under the employment relationship is dependent to and managed by the employer, and the employment dispute between the two parties should be brought to the Employment Dispute Arbitration Committee for employment arbitration in accordance with employment law.
There is no consensual test on the distinguishment. The legal criteria for determining whether a worker is a contractor or an employee can be derived from court cases. In the case of Cong Mingzi before the Supreme People’s Court in 2016, Mr. Cong Mingzi delivered newspapers for a newspaper office, spent fuel on his own car, operated on a family basis, and was paid according to the number of pieces delivered. Although the office provided work certificate, work clothes, bank cards, and performance evaluation of him, the Supreme People’s Court considered that the relationship between the two parties was a contractor relationship.1Supreme People’s Court (2016) Supreme Fa Min Zai No.148, Civil Judgment on Employment Dispute Retrial by Cong Mingzi and the Supreme People’s Procuratorate of the People’s Republic of China.In 2022, Shanxi High Court pointed out that the personal, organizational, and economic dependence of a worker in the work relationship is the core criterion. 2Shanxi Provincial People¡¯s High Court (2022) Jin Min Shen No.2684. Song Zhijun, Shanxi Zhongxin Ganzhuang Coal Industry Co., Ltd. Employment Dispute Civil Trial Supervision Civil Ruling. ¡°Subordination/dependence is the core standard, including personality subordination, organizational subordination and economic subordination. The biggest difference between contractor relations and employment relations is that in addition to providing labor, workers in employment relations should also be subject to the management of the employer, obey its arrangements, abide by its company rules, and become part of the employer.¡± In the case of Wang Maochun before Fuxin Intermediate Court of Liaoning Province in 2022, it is held that the nature of the relationship between the two parties should not only be relied on the contractual agreement between the two parties, but also be examined the essence of the relationship.3Liaoning Fuxin Intermediate People’s Court, (2022) Liao 09 Min Zhong No.772, Mingzhe Group Co., Ltd. Fuxin Branch, Wang Maochun Employment Dispute Civil Judgment of Second Instance. ¡°Whether the work relationship between a worker and an employer constitutes employment relationship can not be dictated only by the written agreement of the parties, but also by judging whether the work relationship conforms to the characteristics of employment relations.¡±Therefore, this distinction criterion can be divided into two parts:
The first part is to examine whether the nature of the substantive relationship between the two parties has the characteristics of employment. The following are some important factors: from the perspective of the staff, considerations of whether the work is an independent business or whether it has personal dependence on the company (for example, Cong Mingzi case of the Supreme Court in 2016), the time characteristics of the work for the company (the closer the time is near full-time, the stronger the personal dependence has, the more likely it should be recognized as an employee), whether the worker pays taxes or whether there is a business entity, whether the worker can hire a substitute to complete their work, whether they use their own tools to work, and whether they also provides similar services to other companies. On the other hand, from the company’s point of view, it examines whether the nature of the worker¡¯s work is an important part of the company as a whole, and how the company controls and manages the worker. These are the main judgment factors.
The second part looks at the subjective understanding and agreement of the relationship between the two parties, including: the nature of the relationship between the two parties stipulated in the contract, whether the company makes deduction of social insurance contribution and personal income tax for the worker, in daily work managements whether the company treats the worker differently from normal employees, and the characteristics of work hours. However, this subjective cognitive factor is the subordinate judgment dimension, which can only play a role when the characteristics of the substantive relationship between the two parties are in a relatively vague state.
For the consequences of finding a contractor relationship or an employment relationship, please refer to What are the different legal consequences of an employment relationship or a contractor relationship between myself and the company?
Despite the aforementioned rules, there are many special forms of employment relations and contractor relations due to the unique deep administrative involvement of China’s employment law and the shortcomings of the legal framework for employment relations. Please refer to What are common special employment relationships in daily life? What are common contractor relationships in daily life?
This article is a part of our new book“Employment Law in China: A Practical Guide. A book about “What should I do” with case laws.”Stay tuned, and the book will soon be published as an electronic books!
Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
Email: wangdong@royalaw.com
- 1Supreme People’s Court (2016) Supreme Fa Min Zai No.148, Civil Judgment on Employment Dispute Retrial by Cong Mingzi and the Supreme People’s Procuratorate of the People’s Republic of China.
- 2Shanxi Provincial People¡¯s High Court (2022) Jin Min Shen No.2684. Song Zhijun, Shanxi Zhongxin Ganzhuang Coal Industry Co., Ltd. Employment Dispute Civil Trial Supervision Civil Ruling. ¡°Subordination/dependence is the core standard, including personality subordination, organizational subordination and economic subordination. The biggest difference between contractor relations and employment relations is that in addition to providing labor, workers in employment relations should also be subject to the management of the employer, obey its arrangements, abide by its company rules, and become part of the employer.¡±
- 3Liaoning Fuxin Intermediate People’s Court, (2022) Liao 09 Min Zhong No.772, Mingzhe Group Co., Ltd. Fuxin Branch, Wang Maochun Employment Dispute Civil Judgment of Second Instance. ¡°Whether the work relationship between a worker and an employer constitutes employment relationship can not be dictated only by the written agreement of the parties, but also by judging whether the work relationship conforms to the characteristics of employment relations.¡±