5. Conclusion

In China, businesses may, based on its autonomy in management and to the extent permitted by law, decide at its own discretion to engage outsiders to do certain work or provide certain services by entering into a civil contract for service with the individuals. However, the relationship between the businesses and the individuals would be easily confused with the employment relationship under the labor laws of China. It is often that such individuals seek the status of employees by filing labor arbitration to request confirmation of the employment relationship.

If they are finally re-characterized as employees, they would be protected by labor laws and regulations, otherwise, they would be probably deemed as independent contractors and their relationships with the businesses would be bound by civil laws.

In practice, it is not easy to distinguish independent contractors from employees. If the business wants to avoid re-characterization of independent contractors as employees, it must structure its written agreement with independent contractors carefully and skillfully to make the items obviously different from the stipulations in a typical employment contract. What’s more, in its daily management, the business should not have much management or control of the independent contractors to avoid formation of a subordinate relationship.

Meanwhile, the business shall observe the principle of good faith and shall not willfully evade employer liabilities by entering into false contracts for service with the individuals who are de facto employees. Otherwise, these individuals will likely be re-characterized as employees by labor arbitrators and judges in the event of labor dispute, and the business would be finally required to bear employer liabilities.