★Nutshell
Mr Jiang applied for the marketing director position in a management company in Shanghai in August 2019. And his salary was over 60000 yuan after tax per month.
According to the calculation of the company, if it signed the employment contract it would pay almost 1.13 million yuan per year for labor cost, including personal tax, social insurance and some other expenses. Considering the high labor cost, and in order to avoid tax and social insurance, the management company, Mr Jiang and the third party, a technology company have reached an agreement on that the third party would formally contract the marketing business from the management company and then subcontract this business to Mr Jiang.
In January 2020, Mr Jiang proposed to terminate the cooperative relationship.
After that, he initiated a labor arbitration to confirm the labor relation with the management company, and to require it to pay overtime and double wages for no written labor contract.
★Judgment
After the trial, the court holds that as a well-paid professional, Mr Jiang’s negotiation and communication skills were better than ordinary laborers when he signed the contact. So the signature made after several consultations shall be regarded as a final confirmation after his careful consideration, therefore the contract reflected the genuine intention of both parties. Both parties shall be equally binding by the contract.
In the course of contract implementation, the management company had never managed Mr Jiang, even no work attendance check, which failed to meet the managing and being managed criteria of labor relation. The corresponding service fees were also paid by the third party, which failed to conform to the criteria of labor relation that the employer paid the employee directly.
To sum up, considering the agreement of both sides, and the failure to meet the management criteria, it was too hard to classify the relationship between Mr Jiang and the management company as a labor relation. Mr Jiang’s other appeals based on the labor relation couldn’t be supported, too.
★Comment by Lawyer Tang
In recent years, with the increasingly strict enforcement of Labor Contract Law of the People’s Republic of China, in order to avoid tax and social insurance, some companies negotiate with the laborers to reach the agreement on not entering into a written labor contract with each other. Instead, they have established outsourcing relationships, and even drawn a third party in to “isolate” risks. The labor remunerations are also paid by the third party in the name of outsourcing service fees.
Such behavior seems to take advantage, but in fact, it is very risky.
For laborers, no labor contracts and no social insurance means they are unable to obtain medical expenses reimbursement, work injury insurance treatment, maternity allowance, pension and other living securities. In the case of redundancy, they can’t get any economic compensation.
For the “outsourcing companies”, since usually the “outsourcers” work in the companies’ own offices, and the “outsourcers” are managed by the companies, and the job content of the “outsourcers” are managed by the companies and constitutes the companies’ business, the relationship between them would be probably classified as labor relation.
Once the relationship has been classified as labor relation, the employees can ask their employers to pay the double wages for no written labor contract, the unpaid social security, the loss from social insurance benefits and so on. The employees can even terminate the labor relation for no social security and claim for the economic compensation.
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