China: Shanghai Court Finds Employer Liable After Cross-Region Social Insurance Enrolment Dispute
Ms. Wang entered into an employment contract with the Shanghai branch, and her social insurance was accordingly registered in Shanghai. Subsequently, the Shanghai branch dispatched Ms. Wang to a company in Guangzhou to serve as a promoter. On October 10, 2020, Ms. Wang sustained a work-related injury. On October 28, 2022, Ms. Wang was identified as having a Grade 10 work-related disability following a medical assessment.
Ms. Wang applied to the Shanghai social security authority for work injury benefits, but the agency rejected the application on the grounds that “Ms. Wang is a cross-regionally dispatched employee and the human resources company paid social insurance contributions for her in Shanghai, which violates the Interim Provisions on Labor Dispatch.” Ms. Wang thus requested that the Shanghai branch pay her a lump-sum work-related injury medical subsidy, a lump-sum disability subsidy and other amounts.
The court held that, under the Social Insurance Law of the People’s Republic of China and the Interim Provisions on Labor Dispatch, where a labour dispatch entity dispatches employees across regions, it shall enrol the dispatched employees in social insurance at the place where the labour-using entity is located. If the employer fails to pay work-related injury insurance premiums in accordance with the law and a work-related injury occurs, the employer shall pay the work-related injury insurance benefits. In this case, the Shanghai Branch should have enrolled Ms. Wang in social insurance in Guangzhou in accordance with the law. However, the Shanghai Branch enrolled her in social insurance in Shanghai, in violation of the Interim Provisions on Labor Dispatch, causing Ms. Wang to be unable to claim work-related injury benefits from the work-related injury insurance fund. The losses should therefore be borne by the Shanghai Branch.
Key Action Points
This case concerns a typical dispute arising from a cross-regional labour dispatch arrangement, where the employer, namely the labour dispatching entity, failed to enrol the dispatched employee in social insurance at the location of the labour using entity as required by law, resulting in the work-related injury insurance fund’s refusal to pay benefits. The issue is whether the employer should bear liability for the payment of the relevant work-related injury benefits.
The ruling in this case is highly consistent with the spirit of the Interpretation (II) of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases, clarifying the mandatory force of the statutory rules on insurance participation jurisdiction. In the event that the social insurance fund refuses to make payments, the court will order the employer to bear the full amount of the work injury benefits, including the lump-sum medical subsidy for work injury and the lump-sum disability subsidy, thereby ensuring that injured employees do not lose substantive remedies due to the labour dispatching entity’s non-compliant social insurance enrolment.
