Whether it is a Labor or Service Relation between the Staff on Suspension from duty without Pay with the New Employer

Fact

Mr. Wang, 53-year-old, is on suspension from duty without pay with his original company. Two years ago he was recruited in a property management company as a neighbor security, both parties come into a 3-year service agreement which provides that both party can terminate the contract with one-month notice without any severance. One month ago, the property management company notice, in written form, Mr. Wang the termination. Mr. Wang thins he is entitled to a 2-month severance according to the Labor Contract Law. The company rejected to pay, then Mr. Wang raised it to arbitration.

Issue

Whether it is a labor or service relation between the staff on suspension from duty without pay with the new employer?

The company thinks that Mr. Wang keeps the labor relation with the original company, and cannot enter into two labor relations in the mean time, therefore both parties signed the service agreement to build service relation.

Mr. Wang thinks he is no different from any other employee except that his social insurance is paid by the original company, he shall not be treated differently due to this. The Labor Law shall applies to their labor relation.

Ruling

The arbitration supports the two-month severance on that his relation with the property management company has all elements of a labor relation even though he is on suspension from duty. The labor relation shall not be denied due to his identity.

Director Tony Tang’s Comment:

The issue is on the definition of the relation between staff on suspension from duty with the new employer.

Suspension from duty refers to the legal behavior that the employer cut the unnecessary staff’s position and salary but keep the labor relation. Usually the employer will come into a contract on suspension with the employee to regulate right and duty.

The relation between employee on suspension from work without pay and the new employer has been disputed for long. The original Shanghai Labor and Social Guarantee Bureau issued in 2003 Notice on Special Labor relation which provides seven kind of special labor relation including staff on suspension from work. The notice also defines special labor relation refers to the kind to employment besides the standard labor relation and service relation regulated by civil law that between the employee who provides work, accept management but with labor relation with another company. Right and obligation can be negotiated, except work time, protection and minimum wage referring to the Labor Law standard.

Therefore, after 2003, the new employers use service contract to break through the frame of Labor Law as such in the case is very common.

But the Supreme Court Interpretation on Trial of Labor Dispute (III) issued on September 14^th 2010, Art.8 provides that the disputes arising from staff on suspension from work without pay, with the new employer shall be taken as labor relation. Therefore after September 14^th 2010, the Labor Contract Law shall apply to this kind of relation.

In this case, even through both parties signed the service agreement, but it is still considered labor relation. Therefore the property management shall pay severance to terminate the labor relation with Mr. Wang.