Following the amendment of labour dispatch rules in the Employment Contract Law in 2012, and the Interim Labour Dispatch Regulations that took effect in 2014, local governments have successively issued implementing rules for the amended labour dispatch legislation. Recently several new rules regarding labour dispatch were issued by local governments in Shanghai municipality, Shenzhen municipality and Anhui province.
On 31 December 2014, the Shanghai municipal labour bureau and Shanghai High People’s Court presented their opinions on applying the amended labour dispatch legislation. The opinions draw a line between the power of labour bureaus and the power of arbitration tribunals/people’s courts on regulating labour dispatch activities. More importantly, the opinions clarify some important issues as follows:
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- No employment relationship between the host company and the dispatch worker will be deemed established if the host company uses dispatch workers for excluded positions, or in excess of the legally allowed percentage;
- It has been confirmed that the expiration of a labour contract/dispatch term, the termination of the labour dispatch agreement, the retirement of an employee, or the rectification of illegal dispatch can all serve as a legal ground for returning dispatch workers to dispatch agencies;
- Dispatch agencies can also withdraw dispatch workers from the host companies if the host companies do not perform their obligations;
- The opinions provide some guidance for differentiating between labour dispatch and outsourcing. Generally the application of company policy and the level of control over the workers are important factors to consider when determining the nature of a relationship. The company may exercise partial control of the outsourced worker due to the needs of work safety, quality control and other management needs, as long as such control does not materially change the legal relationship between the company and the outsourced worker.
On 1 January 2015, Shenzhen Municipal Labour Bureau issued the Measures on Supervising Shenzhen Labour Dispatch Agencies. According to the Shenzhen measures, the Shenzhen government will establish a database and credit files of labour dispatch agencies, host companies and dispatch workers. Labour dispatch administrative permit information, as well as any unlawful activities of labour dispatch agencies, will be recorded in credit files.
For labour dispatch agencies that conduct serious unlawful activities – for example, obtaining labour dispatch administrative permits through fraud, bribery and other dishonest methods – the government will establish a “blacklist for the labour dispatch industry”, publicise the list through media and government websites, and keep a record in credit files. The government is also working on improving the disclosure and public search function of the credit files.
On 20 January 2015, the Anhui Provincial Labour Bureau issued a notice to implement the Interim Labour Dispatch Regulations. The notice reiterates the requirements of the regulations and requires lower-level labour bureaus in Anhui to supervise the transition of labour dispatch mechanisms. All employers must make sure that the ratio of labour dispatch workers does not exceed 10% of the total workforce as of 1 March 2016.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
