China: Shanghai: Non-renewal After the Second of Two Consecutive Fixed-term Employment Contract Constitutes Wrongful Termination

On 24 October 2025, during a publicly livestreamed legal lecture co-hosted by the Shanghai High People’s Court and the Shanghai Federation of Industry and Commerce, the presiding judge confirmed that under the internal judicial opinions issued early this year, employers in Shanghai shall sign an open-term employment contract when an employee requests it after the expiration of the second of two consecutive fixed-term employment contracts. Refusal to do so will be deemed wrongful termination, obligating the employer to pay double statutory severance (“2N” damages).

This clarification resolves longstanding inconsistencies in the application of Article 14 of the PRC Employment Contract Law. Unlike most regions in the PRC, where employers are obliged to renew an open-term employment contract after two consecutive fixed-term employment contracts unless the employee requests a fixed-term employment contract, Shanghai had historically permitted employers to refuse renewal without triggering wrongful termination, provided they terminated the employment contract upon its expiration.

However, since early 2025, a seminar summary, purported to be from a meeting held by the Shanghai High People’s Court and widely shared online, has suggested that judicial practices in Shanghai will align with those in other cities. According to the seminar summary, when an employee requests an open-term employment contract after two consecutive fixed-term employment contracts, the employer shall renew an open-term employment contract, regardless of its willingness to renew. It is also emphasized that employers, by signing a second fixed-term employment contract, should reasonably anticipate the obligation to convert it to an open-term employment contract if the employee performs satisfactorily.

Most notably, during this lecture, the judge from Shanghai publicly confirmed the validity of the new internal judicial approach, marking the official acknowledgment of this significant adjudication standards shift. This public endorsement is expected to serve as a definitive reference for future labour dispute resolutions across Shanghai.

Key Action Points

This shift brings Shanghai in line with the majority of the PRC’s jurisdictions and reflects a national policy trend toward stabilizing employment and encouraging long-term employment relations. The judge’s open endorsement of the new internal judicial opinions is expected to unify adjudication practices across Shanghai’s labour arbitration commissions and courts, which had previously issued conflicting rulings this year.

This significant shift in Shanghai’s employment adjudication practice necessitates proactive compliance measures. For employers, it is advised to conduct a comprehensive review of all employment contracts across their workforce, with particular attention to tracking the number and expiration dates of fixed-term contracts because the expiration of the first fixed-term contract represents the final legally secure opportunity for termination without incurring an obligation to open-term employment contract.