Answer: A permanent employment contract does not have a termination deadline, providing the highest employment security for employees. Employers are prohibited from terminating or dissolving employment relationships without legal reasons. According to the Employment Contract Law, an employer must sign a permanent employment contract with an employee under the following circumstances:

The first circumstance is where the employee has worked continuously for ten years for the employer and the employee has requested for a permanent employment, including the situations where the parties is in a current fixed-term employment contract, or their contract just expires but both party are willing to extend the employment. The main issue here is how to identify “continuous work”. One situation is that the employment relationship was suspended for a period of time (for example, the employee did not worked and the employer did not paid wages) during which the two parties maintain the employment relationship. This is typically not considered as “continuous work”;¹Jing Ruling and Huarun Tianneng Xuzhou Coal and Electricity Co., Ltd. Daliu Coal Mine Labor Dispute Appeal Case Civil Judgment of Xuzhou Intermediate People’s Court of Jiangsu Province (2011) Xu Min Zhong Zi No.1555. ¡°Since July 2001. Jing Ruling did not provide services to Daliu Coal Mine, Daliu Coal Mine did not pay remuneration to Jing Ruling, and the employment relationship between the two parties was suspended. As the premise for Jing Ruling and Daliu Coal Mine to sign a permanent employment contract is that Jing Ruling has worked continuously for ten years in Daliu Coal Mine, although the employment relationship between the two parties has lasted for more than ten years, it does not constitute the situation of working continuously for ten years.¡± The labor dispute appeal case between Zhu Junkang and Hongda Salt Industry Co., Ltd. of Hebukesaier Mongolian Autonomous County, Tacheng Intermediate People’s Court of Ili Kazakh Autonomous Prefecture, Xinjiang Uygur Autonomous Region, Civil Judgment (2014) T.M.Y.Z.Z. No.922. ¡°In this case, the employee went home to wait for his role in April 2001. After the restructuring, the employer did not terminate the employment relationship in an explicit way, and the appellant did not sign an employment contract with a new employer, nor did he provide labor. Therefore, the court found that the employment relationship between the two parties was suspended and did not recognize that they had worked continuously for ten years.¡±However, some courts, such as Shanghai High Court, consider that long-term unpaid leave may result in continuous work.² Administrative Ruling Document of the Administrative Adjudication Supervision over Administrative Cases of the Shanghai Social Insurance Administration Center – Shanghai High People’s Court Administrative Ruling Document (2016) HuXingShen 196.The second situation is that the worker has gone through a formal termination procedure after working for a period of time, and then rejoin the employer. This situation constitutes an interruption of employment relationships between the two parties, and does not meet the threshold of “continuous work” required by law. Once aforementioned suspension and interruption of employment relationship have occurred, the duration of continuous work for the employer should be recalculated.

The second situation is where the parties have sign two consecutive fixed-term contracts. After that, if both parties wish to continue the employment and the employee requests to sign a permanent contract, a permanent employment contract must be signed. This situation is quite complex, highlighting once again the need for more thoughtful legislation in legal consequences and practical circumstances when establishing new employment rules in China. Please refer to Should a permanent employment contract be signed after two fixed-term employment contracts?

In the third case, if the employer fails to conclude a written employment contract with the employee within one year from the date of employment commencement, it shall be deemed that the employer and the employee have entered into a permanent employment contract at the end of the year. At the end of the year, the relationship between the two parties automatically becomes permanent, regardless of which party caused the failure to sign a contract. Even if a permanent contract has not been formally signed, it is already deemed to exist in law at the time.

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Mr. Wangdong

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

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  Jing Ruling and Huarun Tianneng Xuzhou Coal and Electricity Co., Ltd. Daliu Coal Mine Labor Dispute Appeal Case Civil Judgment of Xuzhou Intermediate People’s Court of Jiangsu Province (2011) Xu Min Zhong Zi No.1555. ¡°Since July 2001. Jing Ruling did not provide services to Daliu Coal Mine, Daliu Coal Mine did not pay remuneration to Jing Ruling, and the employment relationship between the two parties was suspended. As the premise for Jing Ruling and Daliu Coal Mine to sign a permanent employment contract is that Jing Ruling has worked continuously for ten years in Daliu Coal Mine, although the employment relationship between the two parties has lasted for more than ten years, it does not constitute the situation of working continuously for ten years.¡± The labor dispute appeal case between Zhu Junkang and Hongda Salt Industry Co., Ltd. of Hebukesaier Mongolian Autonomous County, Tacheng Intermediate People’s Court of Ili Kazakh Autonomous Prefecture, Xinjiang Uygur Autonomous Region, Civil Judgment (2014) T.M.Y.Z.Z. No.922. ¡°In this case, the employee went home to wait for his role in April 2001. After the restructuring, the employer did not terminate the employment relationship in an explicit way, and the appellant did not sign an employment contract with a new employer, nor did he provide labor. Therefore, the court found that the employment relationship between the two parties was suspended and did not recognize that they had worked continuously for ten years.¡±
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  Administrative Ruling Document of the Administrative Adjudication Supervision over Administrative Cases of the Shanghai Social Insurance Administration Center – Shanghai High People’s Court Administrative Ruling Document (2016) HuXingShen 196.