Whether a Dispatch Agreement is Invalid if the Position is not Temporary, Alternative or Complementary?

Lee signed a labor dispatch contract with Shanghai Company A, and was dispatched to Company B as an operator. One year later, because of a dispute, Lee insisted that the position was not complementary, so the dispatch contract was invalid, Company B was the de factor employer and should pay double the wages for unsigned a labor contract. In the end, the Shanghai No.2 Intermediate People’s Court determined that the position was not complementary, but since this article is a regulatory requirement, the dispatch contract should be deemed as valid. Coincidentally, in a similar case in Nanjing, a labor dispute between Nanjing Company C and the driver Han, the Nanjing Intermediate People’s Court determined that the position was not complementary, but the article is a mandatory requirement, so the dispatch contact should be deemed as invalid.

Why different courts have different judgements?

Article 16 of the “Labor Contract Law” stipulates that the labor dispatching can only be implemented on a temporary, supplementary or alternative position. Article 52 of the “Contract Law” stipulates that the contract which has violated the mandatory provisions of laws or administrative regulations shall be deemed as invalid. In practice, there are disputes on whether Article 16 of the “Labor Contract Law” shall be deemed as a mandatory requirement.

The first viewpoint is that this article is a mandatory requirement. Therefore, once the dispatching position is not temporary, supplementary or alternative, then the dispatch contract is invalid, and the employee shall have a de factor labor relationship with the unit which has received the dispatch service. For example, (2016) Su-01 Min Zhong No. 4718 judgement, and (2016) Su Min-Shen No. 2041 judgement.

The second viewpoint is that this article is a regulatory requirement. Therefore, even if the dispatching position is not temporary, supplementary or alternative, the dispatch contract is still valid, but the dispatching unit and the unit which has received the dispatch service should be subject to administrative punishment. The “Shanghai Municipality Meeting Minutes on Several Issues Regarding the Law Applicable to Labor Dispatch” adopts this viewpoint and points out: the articles related to the position and the percentage of dispatch are regulatory requirements for the dispatching unit and the unit which has received the dispatch service, if any of the unit has violated these articles, the effectiveness of the dispatch contract and the relevant labor contract shall not be affected. The administrative department of human resources and social security shall order the relevant units to make rectification within a time limit. On the investigation of the relevant judgements, the court in Beijing, Hebei and so on, would be in favor of this viewpoint.

We tend to agree with the second viewpoint. However, since there are still disputes among different local judicial departments, we recommend companies not to recruit dispatch workers for those positions which are not temporary, supplementary or alternative. In addition, if a company has already recruited dispatch workers for such positions, then it would be better to pay attention to the viewpoint, tendency of the local judicial departments in advance.