[Title] Labor Dispute Case Between Wang and [Company Name]

[Keywords] Labor disputes / Determination of labor relations

【Key Points of the Ruling】

Whether a labor relationship exists between a worker and the entity employing them shall be determined in accordance with Article 1 of the “Notice on Matters Concerning the Establishment of Labor Relationships [Document No.] Labor and Social Security Department Document (2005) No. 12.” If an employer hires a worker without entering into a written employment contract, but simultaneously meets all of the following conditions, a labor relationship shall be deemed to exist: (1) Both the employer and the worker possess the requisite legal and regulatory qualifications; (2) The various labor rules and regulations formulated by the employer in compliance with the law apply to the worker, the worker is subject to the employer’s labor management, and performs paid work arranged by the employer; (3) The work provided by the worker constitutes an integral part of the employer’s business operations.

[Basic Facts of the Case]

In the labor dispute case between the plaintiff Wang and the defendant, [Company Name] Co., Ltd., after being duly accepted by the People’s Court, the court proceeded with a simplified procedure in accordance with the law and held a public trial. The plaintiff, Wang, and the authorized representative of the defendant, [Company Name] Co., Ltd., appeared in court to participate in the proceedings. The trial of this case has now concluded.

Plaintiff Wang filed a lawsuit with this court, requesting the court to order the defendant to pay: 1. Double compensation for failure to sign a labor contract, amounting to × yuan (× yuan/month × 11 months, from January 201× to December 201×); 2. Economic compensation in the amount of × yuan (× yuan/month × 12 months); 3. Economic losses resulting from the defendant’s failure to pay mandatory national insurance premiums, totaling × yuan (× yuan/month × 12 months × 12 years). Facts and Grounds: In 200×, the plaintiff began working for the defendant. The plaintiff worked for the defendant for a total of × years without signing a labor contract or having social insurance contributions made on their behalf. In × month of 201×, the defendant unilaterally terminated the labor contract. On × day of × month of 201×, the defendant issued a statement to the plaintiff detailing the plaintiff’s employment history with the defendant. After multiple unsuccessful attempts to negotiate with the defendant regarding these claims, the plaintiff has now brought the case before the court.

The defendant, [Company Name] Limited, argues that no employment relationship existed between the plaintiff and the defendant. Rather, the two parties entered into an agreement under which the plaintiff received a commission based on a percentage of the sales volume of the defendant’s products sold by the plaintiff—thus establishing an equal, agency-based sales relationship. Consequently, there are no labor-related claims as asserted by the plaintiff, which are grounded in an employment relationship.

【Judgment Result】

The plaintiff Wang’s claim is dismissed.

【Reasons for the Ruling】

Whether a labor relationship exists between the worker and the employing entity shall be determined in accordance with the provisions of Article 1 of the “Notice on Matters Relating to the Establishment of Labor Relationships [Document No.] Labor and Social Security Department Document (2005) No. 12.” If an employer hires a worker without entering into a written labor contract, but simultaneously meets all of the following conditions, a labor relationship shall be deemed established: (1) Both the employer and the worker possess the requisite legal and regulatory qualifications as subjects; (2) The various labor rules and regulations formulated by the employer in compliance with the law apply to the worker, the worker is subject to the employer’s labor management, and performs paid labor arranged by the employer; (3) The labor provided by the worker constitutes an integral part of the employer’s business operations. In this case, starting from January 2005, the plaintiff has been engaged in the sale of certain products at the workplace provided by the defendant. However, the plaintiff’s working hours were not restricted by the defendant, the defendant’s labor rules and regulations did not apply to the plaintiff, and the defendant did not exercise any attendance management over the plaintiff. The remuneration earned by the plaintiff consisted solely of commissions derived from the sale of products. There was no relationship of management and being managed between the parties. Therefore, based on the above-mentioned provisions, the parties do not meet the characteristics of a labor relationship. All other claims made by the plaintiff are predicated upon the existence of a labor relationship between the parties. Since no such labor relationship exists, the plaintiff’s claims are hereby dismissed.

[Relevant Statutes]

According to the provision of Article 1 of the “Notice on Matters Relating to the Establishment of Labor Relations [Document No.] Labor and Social Security Department Document (2005) No. 12,” if an employer hires a worker without entering into a written labor contract but simultaneously meets the following conditions, a labor relationship shall be deemed established: (1) Both the employer and the worker possess the requisite legal and regulatory qualifications as subjects; (2) The various labor rules and regulations formulated by the employer in accordance with the law apply to the worker, the worker is subject to the employer’s labor management, and engages in remunerated work arranged by the employer; (3) The work provided by the worker constitutes an integral part of the employer’s business operations.

[Lawyer’s Perspective]

1. In the course of filing a labor dispute case, workers should reasonably distinguish between an employment relationship and a consignment sales agency relationship. To determine whether a relationship constitutes an employment relationship, the key is to ascertain whether there exists a relationship of subordination in terms of status. Any legal relationship in which an employer pays remuneration to an employee, permits the employee to perform work in the capacity of an employee of the employer, and where the employee’s labor constitutes an integral part of the employer’s business or the employee is actually subject to the employer’s supervision and management should be recognized as an employment relationship. As for those who do not accept the employer’s management, constraints, or control, assume business risks using their own skills, facilities, and knowledge, and have no status-based subordination to the employer, the legal relationship between the parties may be determined based on the actual circumstances. A labor contract is an agreement by which an employee and an employer establish an employment relationship and clearly define the rights and obligations of both parties; an employment agreement is one form of labor contract. By contrast, a mandate contract is a contract whose object is the entrustment of certain affairs to be handled. Its core content lies in the prior consultation and agreement between the principal and the agent, whereby the agent undertakes to handle the affairs of the principal either for compensation or gratuitously, and no status-based subordination need exist between the principal and the agent.
2. Workers should develop an awareness of protecting their rights.

During the onboarding process and throughout their employment, workers should fully understand their legitimate rights and interests. In China, workers enjoy a wide range of rights, including the right to employment, the right to sign a labor contract, the right to remuneration for labor, the right to rest and leave, the right to occupational safety and health protection, the right to vocational training, the right to social insurance benefits, and the right to file complaints and seek resolution of labor disputes.

1. Before starting a job, workers should thoroughly understand the relevant information about their employer. Upon joining the workforce, they must sign a labor contract with the employer in accordance with the law. (2) Enhance one’s own qualifications and learn, understand, and apply the law. After a labor dispute arises, workers should first attempt to resolve the issue through negotiation with their employer. They may also apply for mediation by the enterprise’s labor dispute mediation committee. Alternatively, workers can directly file a request for arbitration with the Labor Dispute Arbitration Commission. If a worker disagrees with the arbitration award, they may file a lawsuit with the People’s Court within 15 days from the date of receiving the award. (3) Join a trade union organization and rely on it to protect your rights. (4) Regularly pay attention to collecting evidence, such as the labor contract, phone directory, pay stubs, salary cards, attendance records, timekeeping sheets, employee ID badges, company regulations, workload reports, and so forth.

3. Employers shall employ workers in compliance with the law and take precautions against employment risks.

Employers shall strictly and fully fulfill their obligations as prescribed by law, including signing written employment contracts with employees, making lawful social insurance contributions for employees, paying wages to employees on time, safeguarding employees’ rights to rest and leave, and providing labor protection measures for employees. By doing so, employers can avoid arbitration or litigation disputes arising from labor-related issues and ensure the legality of their employment practices. If an employer fails to comply with labor laws, it may face the risk of having to pay compensation. The main circumstances under which an enterprise must pay compensation include: 1. Payment of statutory compensation: (1) Failure to sign a written employment contract with an employee in a timely manner; (2) Illegal agreement on a probationary period; (3) Being ordered to pay wages, overtime pay, or economic compensation within a specified time limit but failing to do so; (4) Illegal termination or dissolution of an employment contract. 2. Liability for damages caused: (1) The employer’s rules and regulations are unlawful; (2) The employment contract lacks essential clauses or the employer fails to provide the employee with a copy of the contract; (3) Withholding documents or requiring employees to provide guarantees, or collecting property from employees during recruitment; (4) Illegally withholding employees’ files or other items after terminating or dissolving the employment contract; (5) The employment contract is rendered invalid due to reasons attributable to the employer; (6) The employer commits serious violations of labor laws; (7) Failure to promptly provide proof of termination or dissolution of the employment contract; (8) The employer does not possess legal business qualifications. 3. Joint and several liability for compensation: (1) Hiring employees who already have an existing employment relationship with another entity; (2) Illegal use of labor dispatch services; (3) Illegal employment practices under individual contracting arrangements.

4. Employers and employees should establish a harmonious labor relationship. 
　　(1) Strengthen legal publicity and foster modern employment management practices in enterprises. Employers should shift their employment mindset, cultivate a corporate culture that demonstrates humanistic care, and create a well-organized and conducive environment for employees’ career development. They should also standardize employment practices, establish advanced management systems that are aligned with current laws and regulations, and prevent any infringement upon workers’ rights and interests. Workers, in turn, should further enhance their awareness of labor rights protection and their ability to safeguard those rights through lawful and rational means. 
　　(2) Emphasize mediation and consultation to foster a standardized and harmonious employment environment. At the outset of any dispute between an employer and an employee, the employer should promptly engage in preliminary consultations and communications, ensuring that robust channels and mechanisms for mutual dialogue are in place to prevent the escalation of conflicts. When disputes cannot be resolved through negotiation and reconciliation, both employers and employees should promptly seek redress through legal channels. Both parties should pursue their rights rationally within the framework of the law. 
　　(3) Uphold “dual protection,” simultaneously safeguarding both the legitimate rights and interests of workers and the autonomy of enterprises in employment. Strive to find the optimal balance and convergence point between the interests of both parties, integrating the protection of workers’ immediate and long-term interests as well as their local and fundamental interests. We must not only ensure the stability of labor relations but also pay attention to the flexibility of employment practices, thereby promoting a “win-win” situation for both employers and employees and fostering the healthy and sustainable development of labor relations. 
　　(4) Strengthen multi-party collaborative cooperation and establish a sound mechanism for resolving disputes. Actively leverage a diversified dispute-resolution mechanism and a long-term, coordinated framework involving multiple sectors—including administrative departments, enterprise trade unions, arbitration institutions, judicial authorities, and social organizations—to proactively facilitate the simultaneous resolution of disputes through mediation and enforcement.