Answer: Labor dispatch contract means that a human resources company (dispatch employer) signs an employment contract with an employee, and the employee is dispatched to work for a third-party company (the host employer). In principle, you should be an employee of the human resources company. However, in practice, labor dispatches are often be considered invalid because they violate the law.
The determination of the invalidity of labor dispatch is an uncertain issue from law to the judicial practice in China. Invalid labor dispatch include three circumstances: false labor dispatch, dispatch employer being lack of qualifications, and labor dispatch violating the “three characteristics” of labor dispatch.
The first situation is that false labor dispatch leads to invalidity.1Guangdong Provincial High Court (2022) No.30, Liang Yongzhen, Shunfeng Automobile Sales Service Co., Ltd. of Duanzhou District, Zhaoqing City, and other civil judgments on retrial of labor disputes. ¡°To sum up, the above-mentioned acts of Shunfeng Company and Zhuobo Company do not conform to the relevant provisions of the Employment Contract Law of the People’s Republic of China on labor dispatch. Shunfeng Company’s act of evading the main responsibility by means of false labor dispatch should be invalid.¡±Employment law does not provide a systematic definition of what is false labor dispatch. Generally speaking, a host employer pretends to sign a dispatch contract with dispatched employees and a dispatch employer, but, in reality, the dispatch employer does not undertake any employment management of the employees. This kind of labor dispatch violates the honest principle of Chinese civil law by concealing the purpose of a direct employment relationship in the form of a lawful labor dispatch, making it invalid. Only Article 67 of the Employment Contract Law stipulates a type of false labor dispatch, namely, the practice of host employers setting up a dispatch company to dispatch employees to itself, which is referred to ¡°reverse dispatch¡± in the judicial practice.
The second situation is that the human resources company does not have the qualification of labor dispatch. Whether this situation leads to the invalidity of labor dispatch is a point of conflict in the judicial practice. For example, in the case of Xi’an Vehicle Factory of Zhongche Group, Shaanxi Provincial High Court ruled that the labor dispatch is invalid due to the dispatch employer lacking the qualification,2Shaanxi Provincial People¡¯s High Court (2017) Shan Min Shen No.278, CRRC Group Xi’an Vehicle Factory v. Xi’an Vehicle Factory Industry and Trade Corporation Rubber and Plastic Products Company and other companies. ¡°After examination, the Court holds that ¡ because the rubber and plastic products company does not have the qualification to operate the labor dispatch business, the Labor Employment Agreement signed between the company and the applicant, Xi’an Vehicle Factory of CRRC Group, lacks the content of the labor dispatch agreement stipulated by law. Therefore, the original trial finding that the labor dispatch behavior of the rubber and plastic products company was invalid is correct.¡±while some other cases determined that the labor-dispatch qualification requirement falls under the realm of administrative management and thus will not lead to the invalidity of labor dispatch.3(2020) E 07 Min Zhong No.363, Wu Zhixiong, Ezhou Gedian Weimin Labor Service Station Labor Dispute Second Instance Civil Judgment. ¡°The mandatory provisions of Article 57 of the Law on dispatch are administrative provisions, not validity-related provisions, and the failure to obtain the qualification of labor dispatch does not mean that the dispatch is invalid.¡± Shaanxi Yan’an Intermediate Court (2019) No.152, Wang Yamei and Zichang Oil Production Plant of Yanchang Oilfield Co., Ltd., Civil Judgment of the Second Instance of Labor Dispute. ¡° Regarding the appellant’s claim that Zichang Dingli Human Resources Co., Ltd. does not have the qualifications to engage in labor dispatch, its registered capital does not conform to the law, and it has not obtained operational permit in labor dispatch, after examination, we considered that the above-mentioned provisions are administrative norms and do not constitute the situation of “violating the mandatory provisions of laws and administrative regulations” in Article 52 of the Contract Law.¡±
The third situation is that labor dispatch violates the “three characteristics” of temporary, substitutive, and auxiliary work under the Employment Contract Law. The temporary characteristic means that labor dispatch work shall not exceed six months. Whether this situation leads to the invalidity of labor dispatch has two opposite judicial practices. One is that the violation of the three characteristics of labor dispatch will not lead to the invalidity of labor dispatch;4Shanxi Provincial People¡¯s High Court (2017) Jin 04 Min Zhong No.2704, Labor Dispute Appeal Case between Li Kexing and State Grid Shanxi Electric Power Company. Article 4 of the 2014 Summary of the Meeting on Several Issues Concerning the Application of Law to Labor Dispatch jointly issued by the Shanghai Human Resources and Social Security Bureau and the Shanghai High Court. It states that iolation of the three characteristics of labor dispatch does not lead to invalidity of labor dispatch.the other is the opposite.5Article 30, paragraph 1, of the Regulations on the Protection of Workers’ Rights and Interests in Chongqing in 2011stipulates that the use of dispatched workers in non-temporary, auxiliary and substitutive roles shall be regarded as the direct establishment of employment relationships between the host employers and the dispatched workers. Article 30 of the Regulations on the Protection of Workers’ Rights and Interests in Liaoning Province in 2013 and Article 31 of the Regulations on the Protection of Workers’ Rights and Interests in Shantou Special Economic Zone in 2015. Intermediate People’s Court of Xuzhou City, Jiangsu Province (2017) Su 03 Min Zhong No.6802, Civil Judgment of Second Instance of Labor Dispute between Shijingwang and Xuzhou Mining Group Co., Ltd. and Jiahe Coal Mine of Xuzhou Mining Group Co., Ltd. This is a defect in the construction of the legal framework of labor dispatch in employment law, which requires comprehensive considerations for improvement by balancing the protection of employees’ rights and interests with the flexibility for employers’ staff recruitment and business operation. Please refer to How to establish more reasonable legal rules for judging the invalidity of labor dispatch?
The legal consequence of an invalid labor dispatch is that the employee(s) and the host employer has formed a direct employment relationship, and the employee can directly claim the rights under employment law against the host employer. At the same time, in the above three situations, the labor dispatch employer will inevitably be at fault for the invalidity of the labor dispatch, so the employees can also require the labor dispatch employer to bear a joint and several liability according to Article 92 of the Employment Contract Law.
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- 1Guangdong Provincial High Court (2022) No.30, Liang Yongzhen, Shunfeng Automobile Sales Service Co., Ltd. of Duanzhou District, Zhaoqing City, and other civil judgments on retrial of labor disputes. ¡°To sum up, the above-mentioned acts of Shunfeng Company and Zhuobo Company do not conform to the relevant provisions of the Employment Contract Law of the People’s Republic of China on labor dispatch. Shunfeng Company’s act of evading the main responsibility by means of false labor dispatch should be invalid.¡±
- 2Shaanxi Provincial People¡¯s High Court (2017) Shan Min Shen No.278, CRRC Group Xi’an Vehicle Factory v. Xi’an Vehicle Factory Industry and Trade Corporation Rubber and Plastic Products Company and other companies. ¡°After examination, the Court holds that ¡ because the rubber and plastic products company does not have the qualification to operate the labor dispatch business, the Labor Employment Agreement signed between the company and the applicant, Xi’an Vehicle Factory of CRRC Group, lacks the content of the labor dispatch agreement stipulated by law. Therefore, the original trial finding that the labor dispatch behavior of the rubber and plastic products company was invalid is correct.¡±
- 3(2020) E 07 Min Zhong No.363, Wu Zhixiong, Ezhou Gedian Weimin Labor Service Station Labor Dispute Second Instance Civil Judgment. ¡°The mandatory provisions of Article 57 of the Law on dispatch are administrative provisions, not validity-related provisions, and the failure to obtain the qualification of labor dispatch does not mean that the dispatch is invalid.¡± Shaanxi Yan’an Intermediate Court (2019) No.152, Wang Yamei and Zichang Oil Production Plant of Yanchang Oilfield Co., Ltd., Civil Judgment of the Second Instance of Labor Dispute. ¡° Regarding the appellant’s claim that Zichang Dingli Human Resources Co., Ltd. does not have the qualifications to engage in labor dispatch, its registered capital does not conform to the law, and it has not obtained operational permit in labor dispatch, after examination, we considered that the above-mentioned provisions are administrative norms and do not constitute the situation of “violating the mandatory provisions of laws and administrative regulations” in Article 52 of the Contract Law.¡±
- 4Shanxi Provincial People¡¯s High Court (2017) Jin 04 Min Zhong No.2704, Labor Dispute Appeal Case between Li Kexing and State Grid Shanxi Electric Power Company. Article 4 of the 2014 Summary of the Meeting on Several Issues Concerning the Application of Law to Labor Dispatch jointly issued by the Shanghai Human Resources and Social Security Bureau and the Shanghai High Court. It states that iolation of the three characteristics of labor dispatch does not lead to invalidity of labor dispatch.
- 5Article 30, paragraph 1, of the Regulations on the Protection of Workers’ Rights and Interests in Chongqing in 2011stipulates that the use of dispatched workers in non-temporary, auxiliary and substitutive roles shall be regarded as the direct establishment of employment relationships between the host employers and the dispatched workers. Article 30 of the Regulations on the Protection of Workers’ Rights and Interests in Liaoning Province in 2013 and Article 31 of the Regulations on the Protection of Workers’ Rights and Interests in Shantou Special Economic Zone in 2015. Intermediate People’s Court of Xuzhou City, Jiangsu Province (2017) Su 03 Min Zhong No.6802, Civil Judgment of Second Instance of Labor Dispute between Shijingwang and Xuzhou Mining Group Co., Ltd. and Jiahe Coal Mine of Xuzhou Mining Group Co., Ltd.