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How Chinese Judges See Employment Status in Gig Economy?

Sat, 27 Aug 2022
Categories: Insights

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Key takeaways:

  • The gig economy accommodates a huge number of workers, which alleviates the employment pressure faced by China after the COVID-19 outbreak.
  • As lawsuits involving workers in the gig economy increase, Chinese courts are now facing difficulties in determining whether gig workers are employees and who is the employer. 
  • The newly-issued policy in July 2021 put the employment status under the "quasi-employment relationship", a third type between the general civil relationship and the employment relationship.
  • China’s gig economy mainly appears on sharing economy platforms, which usually provide takeout services (such as Meituan and Eleme) or on-demand ride services (such as DiDi).

Gig workers, such as delivery guys, couriers or drivers, get the opportunity to provide corresponding services to users from such platforms.

So, can gig workers be protected by the Labor Law as regular employees?

An article published by the research group of Beijing First Intermediate People’s Court talks about this issue.

The article titled “Definition Rules of the Legal Nature of Employment Relationship Between the Platform and the Gig Workers Under the New Employment Status” (新就业形态下平台用工关系法律性质的界定规则) is published in People’s Court Daily (人民法院报) on 23 Sept. 2021.

The highlights of this article are as follows:

I. The rise of China’s gig economy

According to the Sharing Economy Development Report of China (2021) (中国共享经济发展报告(2021)) released by the State Information Center in 2021, the number of workers in China’s sharing platform enterprises had reached about 6.31 million as of 2020.

According to the data of Meituan, a Chinese takeout platform, the total number of its workers in the first half of 2020 was 2.952 million; according to the data of another takeout platform Eleme, the total number of its workers was about 3 million.

The gig economy accommodates a huge number of workers, which alleviates the employment pressure faced by China after the COVID-19 outbreak.

II. Gig economy troubles Chinese courts

1. Increasing lawsuits involving workers in the gig economy

From 2018 to 2020, the courts in Beijing, Shanghai, Guangdong, and Zhejiang, the four most economically developed regions in China, closed more than 2,000 first-instance civil cases involving gig economies such as takeout and express delivery.

The number of such cases is increasing year by year.

2. Difficulty in determining whether such workers are employees

Compared with the traditional employment relationship, workers in the gig economy enjoy flexibility and autonomy in terms of working hours.

Generally, gig workers can decide whether and when to take orders, which order to take, and when to rest, which provides them with flexibility as to working hours.

Therefore, this kind of employment does not have a strong personality and organization subordination like that in the traditional employment relationship.

However, the platform often supervises and controls the work performance and remuneration of workers through specific algorithm logic, user ratings and other management means.

Therefore, this enables the sharing economy platform to control gig workers to a certain extent, which is different from the relationship between the parties under general civil contracts.

3. Difficulty in determining who is the employer

The platform usually establishes cooperation with gig workers in the following ways:

A. The platform signs a general civil contract, instead of an employment contract, with the gig worker;

B. The platform cooperates with a supplier who actually employs the gig worker;

C. The platform requires the worker to register as an individual business, and then the platform signs a general civil contract with the individual business.

D. The platform establishes several affiliated companies, which are respectively responsible for contract conclusion, vehicle provision, remuneration payment, deposit collection, and the like.

In addition, the supplier of the platform may further outsource the business to another contractor who will ultimately employ the gig worker.

Such practice makes it difficult for the court to determine who should undertake the employer obligations for the gig worker.

III. The author’s views on Employment Status in China’s Gig Economy

1. Chinese courts need a set of rules for determining the employment status

The author believes that it is necessary to provide a set of rules for the court to tackle the above dilemma.

The author suggests that such rules should specify:

A. In principle, the court should determine the legal relationship between the two parties based on the contract.

B. If the contract concluded by both parties is inconsistent with the real legal relationship, the court shall uphold the real legal relationship.

For example, although gig workers only conclude a general civil contract with the platform, the court should be cautious about the platform’s intention to shirk its obligations in the Labor Law. Therefore, the court should examine whether there is an employment relationship between the platform and gig workers in a de facto sense rather than focusing on the written contract only.

Specifically, the court should conduct an examination from two aspects:

A. Examine the contract, so as to determine whether the contract only appears to be  a general civil contract, but actually an employment contract in its essence;

B. Examine the working status of the gig worker, so as to determine whether his/her working status conforms to the characteristics of the employee’s work under the contract law.

2. New relationship between individuals and enterprises

Traditionally, under Chinese laws, there are usually two ways for individuals to establish cooperation with enterprises:

A. General civil relationship: both parties sign a general civil contract, according to which the individual and the enterprise, each with equal standing, cooperate with each other, that is, the enterprise neither manages the individual, nor needs to bear the obligations as an employer;

B. Employment status: both parties sign an employment contract, and then the individual becomes an employee of and is managed by the enterprise.

In practice, in most cases, the court tends to hold that the contract signed between an individual and an enterprise is an employment contract, so as to protect the interests of workers as much as possible.

However, the new policy issued by the Chinese government in July 2021 puts forward another type of relationship, namely the "quasi-employment relationship". The policy refers to it as "a circumstance not fully consistent with the employment relationship". (Note: see our earlier post “Ride-hailing Drivers in China: Not Employees, But Independent Contractors”)

This type of "quasi-employment relationship" on the one hand, does not acknowledge that gig workers have already fallen under the employment status, and on the other hand, requires the platform to bear some of the obligations as an employer.

The purpose of this policy is to balance the interests of the platform and gig workers, namely, a compromise reached by both sides. 

In other words, the quasi-employment relationship has become a buffer zone between the general civil relationship and the employment relationship.

However, this poses a challenge to Chinese courts: how should courts distinguish between the employment relationship and the quasi-employment relationship?

The author believes that in an employment relationship, employees are personally, organizationally, and economically subordinated to employers; whereas in a quasi-employment relationship, workers are economically subordinated to employers but not so much in terms of personality and organization subordination.

 

Photo by Taha on Unsplash

Contributors: Guodong Du 杜国栋

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