“Interpretation II of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases” takes effect on September 1, 2025
On July 31, 2025, the Supreme People’s Court issued the “Interpretation II of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases” (Fa Shi 〔2025〕 No. 12）， which will take effect on September 1, 2025. The following provisions of this Interpretation deserve attention:
1. Handling of labor relations in special circumstances
| Circumstance | Provisions |
| Subcontracting, sub-subcontracting, and affiliation | If a party accepting the subcontract or sub-subcontract lacks legal business qualifications, or the affiliated party lacks legal business qualifications, the worker may claim that the contractor or the affiliated entity with legal qualifications assumes the main responsibility for employment. (This reminds enterprises to confirm the subject qualification of the counterparty in advance.) |
| “Confused” employment by affiliated companies | Determination of labor relations: If there is a contract, the labor relationship shall be determined in accordance with the contract; if there is no contract, it shall be determined by comprehensively considering factors such as working hours, work content, payment of labor remuneration, and payment of social insurance.Any agreement reached between affiliated companies on the labor remuneration and welfare benefits of a worker shall be subject to the worker’s consent. Otherwise, if the worker claims that the affiliated companies bear joint and several liability, such claim shall be supported. |
| Permanent representative offices of foreign enterprises | Where a permanent representative office of a foreign enterprise is a party to a labor dispute, an application may be filed to involve the foreign enterprise in the litigation. (This provision is expected to increase the possibility that the amount claimed by the worker will be settled.) |
2. Rules for determining failure to sign a labor contract
The Interpretation specifies exceptions where an employer is exempt from paying double wages for failing to sign a written labor contract, including cases of force majeure, intentional misconduct or gross negligence of the worker himself/herself, and other circumstances prescribed by laws or administrative regulations.
The Interpretation emphasizes that circumstances where the term of a labor contract is automatically extended in accordance with the law do not constitute a situation where the employer fails to conclude a written labor contract.
3. To add circumstances of “consecutively concluding two fixed-term labor contracts”
To regulate some enterprises that use legal forms to cover up illegal purposes, thereby covertly extending the term of labor contracts and evading the obligation to renew contracts, the Interpretation adds 2 circumstances that shall be deemed as “consecutively concluding two fixed-term labor contracts”, including: (1) The cumulative extension of the labor contract term reaches 1 year or more and the extended term expires; and (2) The labor contract is automatically extended after its expiration and the extended term expires.
4. To set stricter requirements in terms of confidentiality and non-compete obligations
The Interpretation stipulates that if a worker is unaware of or has no access to confidential matters, the claim to confirm that the non-compete clause is ineffective shall be supported. At the same time, the agreement on non-compete clauses shall be compatible with the scope of confidential matters that the worker is aware of or has access to.
5. To add circumstances of “labor contract being unenforceable”
The Interpretation provides that a labor contract may be deemed as “unenforceable” when the term of the labor contract expires during the arbitration or litigation process and there is no circumstance requiring renewal or extension of the labor contract in accordance with the law; the worker begins to enjoy basic pension insurance benefits in accordance with the law; and other circumstances where the labor contract is objectively unenforceable.
There are flexible interpretations regarding the newly added circumstances, it is recommended to follow up with the subsequent judicial decisions.
6. Exceptions concerning pre-dismissal occupational health examination for occupational diseases
According to the Interpretation, the exceptions include: (1) before the conclusion of court debate in the first instance, the enterprise has arranged for the worker to undergo an examination and the examination confirms that the worker does not suffer from an occupational disease; or (2) The worker refuses to undergo the examination without justifiable reasons.
7. Exceptions to labor arbitration acceptance of social insurance disputes
The Interpretation stipulates that if a worker terminates the labor contract on the ground that the enterprise fails to pay or fully pay social insurance and claims economic compensation, such claim shall be supported. At the same time, if the enterprise and the worker have agreed on separate compensation for social insurance payment, the enterprise may request the worker to return such compensation.