China: Typical Cases on Protecting the Rights of Employees in New Forms of Employment
The Supreme People’s Court released typical cases on protecting the rights of employees in new forms of employment, clarifying that determining the existence of an employment relationship between enterprises and online platform truck drivers shall require a substantive review based on actual working practices. This comprehensive assessment considers factors such as whether the enterprise exercises managerial control over drivers through reward and penalty systems, whether drivers retain autonomy in selecting transportation tasks and setting prices, whether compensation constitutes their primary income source, and whether the services provided form an integral part of the enterprise’s business. Where factual employment arrangements and dominant managerial control are present, an employment relationship shall be legally established.
Mr. Yang was engaged in concrete transportation services for a transport company (the “Company”) without a written employment contract. Initially receiving assignments through WeChat groups, he later registered an account on a digital platform bound to the Company exclusively, which approved his access to receive orders through the platform from the Company. The Company calculated his monthly compensation based on completed orders, transportation volume, timeliness performance, and penalty deductions. When a dispute arose, Mr. Yang filed for labour arbitration seeking affirmation of an employment relationship. The labour arbitration commission ruled in favour of Mr. Yang, recognizing the existence of an employment relationship. The Company appealed the arbitral award to the court.
The court of first instance ruled that an employment relationship existed between Mr. Yang and the transport company. The company appealed the verdict, but the court of second instance dismissed the appeal and upheld the original ruling.
The effective judgment held that the core issue of this case was whether an employment relationship existed between the Company and Mr. Yang. Article 7 of Employment Contract Law stipulates: “An employer shall be deemed to have established an employment relationship with an employee with effect from the date of commencement of work.” Accordingly, the court shall determine the legal relationship between the employer and the employee based on the actual employment practices. The essential characteristic of an employment relationship lies in dominant managerial control.
In this case, the court established three key factual determinations: First, the transport company confirmed that Mr. Yang was required to select and bind his digital platform account exclusively to the company, subject to its approval. During operations, Mr. Yang was obligated to follow the company’s assignments, and the company exercised managerial control through penalty impositions. Mr. Yang retained no autonomy over transportation tasks or pricing. Second, the company settled wages with Mr. Yang on a monthly basis. The company acknowledged that Mr. Yang accepted orders nearly daily, and such transportation income constituted his primary source of livelihood. Third, Mr. Yang’s concrete transportation services formed an integral part of the company’s core business operations. In conclusion, factual employment arrangements existed between the parties, characterized by dominant managerial control, thus mandating legal recognition of an employment relationship.
Key Action Points
The guiding case issued by the Supreme People’s Court establishes a criterion for determining new forms of employment relationships, centred on the concept of “dominant managerial control.” This standard makes clear that despite the novel organisational models and technological applications characteristic of platform-based economy, these elements do not alter the essential nature of an employment relationship. The key to establishing such a relationship lies in whether the employer exercises dominative management control over the employee. This assessment requires comprehensive consideration of multiple evidential factors, including the extent to which the employee’s autonomy is restricted, and whether the enterprise formulates and implements work rules along with reward and penalty mechanisms. Ultimately, the actual fact of employment engagement serves as the fundamental objective basis for determination.
Furthermore, the Guiding Case emphasizes the need to look beyond formal arrangements and accurately identify the employer in a de facto employment relationship based on factors such as the entity that actually exercises management control and the true source of remuneration. As a typical judicial application of this guiding principle, the present case not only summarizes and elevates the traditional theory of subordination, but also unifies the adjudicative standards for such disputes. It holds significant practical importance for safeguarding employees’ legitimate rights and interests in accordance with the law, guiding the standardized development of new forms of employment, and ultimately promoting the harmony and stability of employment relations across society.
