China: Employee was found unqualified to establish employment relationship due to having reached the statutory retirement age

The employee and the company decided to further retain the employee after he had reached the retirement age. Also, the employee was not yet entitled to receive the pension. The company and the employee entered into a labor service agreement rather than an employment agreement. The employee filed a lawsuit against the company and claimed his relationship with the company should be deemed an employment relationship rather than a labor service relationship. Through the litigation process, the Court summarized the key issue as in whether the employee is still qualified to enter into employment relationship after he reached the retirement age. Pursuant to the PRC’s labor contract law, individuals will no longer be qualified to establish an employment relationship when they start to receive a pension. However, under the PRC’s Regulation on Implementation of the Labor Contract Law, individuals automatically lose the qualification to establish an employment contract when they reach the retirement age. In view of this conflict of laws, the Court reached a decision in favor of the Company, based on the reasoning that individuals will lose the qualification to enter into an employment relationship if they either reach retirement age, or start to receive a pension.