Do employers need to pay economic compensation for the dismissal of foreign employees?

★Nutshell

John, a foreign worker, joined a manufacturing company in Shanghai on November 18, 2013 and applied for a foreigner employment permit.

The two parties signed a bilingual labor contract, which agreed that the Chinese and English versions of the contract were equally valid, and further agreed that ” The company shall not be required to pay any economic compensation to the employee if the labor contract is terminated or suspended by the company or the employee for any reason.”

On November 17, 2016, the labor contract expired and the company decided not to renew it, so John applied for arbitration, demanding the company to pay economic compensation. After John was supported by the labor arbitration committee, the company then brought the case to the people’s court.

★Judgment

After hearing the case, the court held that according to ‘RULES of THE ADMINISTRATION of EMPLOYMENT OF FOREIGNERS IN CHINA’and the relevant regulations of the city, the labor standards in respect of minimum wages, working hours, rest and leave, labor safety and health, social insurance, etc. for foreigners employed in China may be applied if the parties to the labor contract so request; other labor rights and obligations may be determined in accordance with the contents of the contract or the actual performance of the contract; other than these, the parties to the labor contract shall not apply the relevant labor standards and labor treatment if they so request.

According to the relevant agreement of the labor contract, the Chinese and English versions of the contract have the same effect, although the employment contract translates the English word “termination” as “中止(suspension)”, the Chinese equivalent of “termination” should be “结束(end)”, “终止(termination )”, and in conjunction with the other provisions of the labor contract, “termination” is translated as “终止(termination)”. Therefore, through the overall interpretation, the word “中止(suspension)” in this article should only be the result of a clerical error.

Therefore, according to the agreement between the two parties, the company is not required to pay economic compensation to John.

★Comment by Lawyer Tang

This case is a labor dispute related to the employment of foreigners in China.

With the gradual progress of China’s reform and opening up, the number of foreigners coming to China for employment has been increasing year by year. Foreigners holding foreigner employment certificates are required to sign labor contracts, establish labor relations and participate in social insurance in the same way as Chinese employees.

However, in the event of a labor dispute between a foreign employee and the employer, can they be subject to the same provisions of Chinese labor law as Chinese workers?

There are different views on this in judicial practice. Compared with ordinary workers, foreigners often have higher education, knowledge and skills, and are able to negotiate with employers on an equal footing. Therefore, the law allows foreigners and employers to negotiate and agree on their labor rights and obligations, and only compulsorily apply Chinese labor laws in areas such as minimum wage, working hours, rest and leave, labor safety and health, and social insurance.