Prior to 2026, export controls targeting specific countries/regions mainly involved the United States. On December 3, 2024, the Ministry of Commerce issued Announcement No. 46 of 2024 “Announcement on Strengthening Export Controls on Relevant Dual-Use Items to the United States”. Subsequently, five announcements were issued in 2025, adding varying numbers of U.S. entities to the export control list for dual-use items. In addition, on July 9, 2025, the Ministry of Commerce added eight entities in the Taiwan region to the export control list for dual-use items.

Statements by the Japanese Prime Minister in November 2025 triggered heightened tensions in China-Japan relations. On January 6, 2026, the Ministry of Commerce issued Announcement No. 1 of 2026 “Announcement on Strengthening Export Controls on Dual-Use Items to Japan”. The announcement stipulates that: “The export of all dual-use items to military end-users and for military uses in Japan, as well as to other end-users and for other uses that contribute to enhancing Japan’s military capabilities, is prohibited.”

This announcement is highly concise and bears similarities to the aforementioned Announcement No. 46 of 2024 targeting the United States, yet also differs. Both explicitly prohibit the export of dual-use items to military end-users or for military uses in the target country. The difference lies in Article 2 of Announcement No. 46 of 2024, which further provides: “In principle, export licenses for dual-use items related to gallium, germanium, antimony, and superhard materials to the United States shall not be granted; stricter end-user and end-use reviews shall be imposed on exports of graphite dual-use items to the United States” — a clearly operational provision. However, Announcement No. 1 of 2026 does not include similar prohibitions or strict restrictions on specific dual-use items. Beyond banning exports of all dual-use items to military end-users and for military uses in Japan, Announcement No. 1 of 2026 adds the phrase “as well as to other end-users and for other uses that contribute to enhancing Japan’s military capabilities”, which laying groundwork for the subsequent release of a watch list.

Overall, Announcement No. 1 of 2026 has broad coverage but lacks specific targeting. It is more declaratory or cautionary in nature, rather than a set of operational rules.

Nevertheless, tensions escalated further thereafter. On February 24, 2026, the first business day after the 2026 Spring Festival holiday, the Ministry of Commerce issued two announcements.

Among them, Announcement No. 11 added 20 Japanese entities involved in the military and defense industries to the export control list. For entities on the control list, the export of dual-use items to them is explicitly prohibited and shall cease immediately. With reference to the earlier export control lists targeting the United States, such a control list represents a standard practice.

Announcement No. 12 added 20 Japanese entities to a watch list, on the grounds that the end-users and end-uses of dual-use items cannot be verified. The announcement does not ban exports of dual-use items to entities on the watch list, but explicitly prohibits applications for general licenses or obtaining export vouchers through registration and declaration. Meanwhile, applicants for individual licenses must submit a risk assessment report and written commitments regarding entities on the watch list. Furthermore, the announcement stipulates that entities that fulfill their obligation to cooperate in verification may be removed from the watch list upon application and verification by the Ministry of Commerce.

The legal basis for the watch list is Article 26 of the Regulations on the Administration of Export of Dual-Use Items, marking its first practical application. In terms of industries involved, unlike the control list, entities on the watch list are mostly enterprises related to automobiles, electronic components, and raw materials. Upon closer examination of their backgrounds, the Ministry of Commerce of China appears to have targeted entities with potential diversion from civilian to military applications, strengthening end-user and end-use reviews to prevent military use. In other words, this reflects a shift in dual-use item administration from purely regulating the “items” themselves based on whether they qualify as dual-use, to governing end “uses” and “users” through supply chain scrutiny.

In view of the above announcements and circumstances, it is urgent and critical for Japanese companies or enterprises exporting to Japan to take proper measures. In general, the following measures could be taken into consideration.

First, to conduct an inventory of whether exported products fall under dual-use items.

Second, if dual-use items are involved, to clarify and map out the supply chain. Monitor whether entities in the supply chain have been included in the control list or watch list, or are suppliers to listed entities, to assess the existence and magnitude of risks.

Third, to establish a compliance management system for export control response, which mainly includes: (1) Regarding the corporate operation, to demonstrate integrity and independence across organization, management, transactions, and other aspects. (2) To design operational rules for customer screening, item and technology screening, contract clause optimization, supply chain management, etc, which not only projects the enterprise’s compliance image but also effectively prevents risks through daily management. And (3) To establish a crisis early warning and response mechanism. In the event of medium or high-risk incidents or indicators, enable prompt and effective actions, timely submission of supporting evidence, and proper response.

In practice, when implementing employee job transfers, many employers only focus on whether the employee handbook stipulates the employer’s right to unilaterally adjust positions, while ignoring the special requirements applicable to positions exposed to occupational disease hazards.

In fact, given the potential impact on employees’ health posed by positions exposed to occupational disease hazards, when transferring an employee to such positions, the employer shall inform the employee, and reach a mutual consultation according to the “Law on the Prevention and Control of Occupational Diseases”. Paragraph 2 of Article 33 thereof states: “Where, during the term of an existing labor contract, a worker engages in operations involving occupational disease hazards that were not disclosed in the labor contract due to a change in job position or job content, the employer shall fulfill its obligation of truthful disclosure to the worker in accordance with the provisions of the preceding paragraph, and negotiate amendments to the relevant clauses of the original labor contract.” If an employer violates this provision, according to Paragraph 3 of Article 33: “The worker shall have the right to refuse to engage in operations involving occupational disease hazards, and the employer may not terminate the labor contract concluded with the worker on such grounds.”

Therefore, an employer’s right to manage and adjust employment is restricted when transferring an employee to a position involving occupational disease hazards, and mandatory provisions of the aforementioned laws must be implemented. There are many cases in judicial practice have proved this opinion. This opinion has a reasonable logic, that is, if an employer’s right to manage employment were to take precedence over Paragraph 2 of Article 33, that provision would undoubtedly become a dead letter. Furthermore, an employer could recruit a worker for a position free of occupational hazards, then easily transfer the worker to a position exposed to such hazards by exercising its unilateral job transfer right, which would effectively render Article 8 of the “Labor Contract Law” and Paragraph 1 of Article 33 of the “Law on the Prevention and Control of Occupational Diseases” meaningless.

Then if we transfer an employee from a position exposed to occupational disease hazards to a non-hazardous position, is there any risk? The answer is positive. Special attention must be paid to the following matters:

First, Article 35 of the “Law on the Prevention and Control of Occupational Diseases” requires that an employee be transferred to another position if found to have suffered health damage related to the occupation. Therefore, in such circumstances, transferring the employee from a position exposed to occupational disease hazards to one free of relevant occupational disease risk factors is a statutory obligation of the employer.

Second, the job content of the new position shall be reasonable to the employee’s physical condition, as well as the reasonableness of any salary adjustment (positions exposed to occupational disease hazards usually include hazard allowances and thus may offer higher pay than other positions at the same level). For job transfers made on statutory grounds, the salary reduction should not be excessive, and the salary level of other employees in the same post after transfer shall be taken into account.

In addition, in practice, where an employee falls under the circumstances requiring mandatory job transfer under Article 35 of the “Law on the Prevention and Control of Occupational Diseases”, the employee may propose to waive the transfer and voluntarily sign a commitment letter for reasons such as seeking higher income. If the employer accepts such an arrangement, it will face the risk of being penalized. Pursuant to Article 75 of the “Law on the Prevention and Control of Occupational Diseases”, the employer shall be ordered to make corrections and imposed a fine of not less than CNY50,000 but not more than CNY300,000; if the circumstances are serious, heavier penalties shall apply. In such cases, if the employee insists on refusing the transfer, the company may, on the basis of retaining relevant evidence, terminate the labor contract pursuant to Article 40 of the “Labor Contract Law” on the ground that a “major change in the objective circumstances” has rendered the original contract unperformable and no agreement can be reached through consultation.

In judicial practice, the key to determining the validity lies in whether there is an identifiable main contract or fundamental principal claim.

Firstly, if the guarantee contract specifies the title of the main contract, it cannot be extended to other contracts. For example, in the case (2019) Xin 01 Min Chu No. 612, the guarantor undertook joint and several liability for debts under the Framework Agreement. However, the parties did not perform the Framework Agreement but separately signed a General Engineering Construction Contract and other agreements. The creditor later demanded liability based on these later agreements and the guarantee. The court held that the main contract was limited and could not be extended to other separate agreements for the same business.

Secondly, the validity shall be determined based on the interpretation of “all contracts” shall be determined by the context, wording, and circumstances of signing. In the case (2013) Zhe Hang Shang Wai Chu No. 2110, the court interpreted the term “all contracts” in the guarantee by comparing it with “accessory contracts” used elsewhere in the same clause. Combining the facts that Company J authorized the legal representative of Company JT to handle the coal tar cooperation and sign the Cooperation Agreement, the court held that Company J knew the status of all existing contracts and the creditor’s demand for additional security. The guarantee for “all contracts” was interpreted as covering all outstanding business contracts between Company JT and Company W, and the court upheld Company W’s claim.

Thirdly, the validity shall be recognized based on the principle of party autonomy. In the case (2023) Su 0214 Min Chu No. 6515, the Guarantee Contract stipulated that the principal debt contracts included all contracts (both existing and future) signed between the Company A and the Company B. Afterward, multiple sales and procurement contracts were executed. The court ruled that requiring the guarantor to bear joint and several liability for these debts complied with the law and the agreement, and supported the claim.

In addition, the signing dates of the principal and guarantee contracts may also be taken into consideration. In the case (2022) Yu 0527 Min Chu No. 2289, the guarantee undertaking was signed in 2015, while the principal contract was signed in 2016. The court held that the one-year-earlier guarantee could not be deemed to correspond to the later principal contract.

In summary, in judicial practice, there is no unified judicial standard has been formed, so judges would define the relationship between the principal contracts and the guarantee contracts case by case. Given the accessory nature of guarantee contracts, the above-mentioned issues shall be taken into consideration in defining the validity regarding the relationship between the principal contracts and the guarantee contracts. Therefore, for enterprises, it is recommended to avoid the above issues.

In the early days, most judgments were rendered in accordance with Article 26 of the “Explanations on Certain Clauses of the Labor Law” (Lao Ban Fa [1994] No. 289, hereinafter referred to as “No.289”), which states: “Objective circumstances refer to the occurrence of force majeure or other situations that render all or part of the contract clauses unperformable, such as relocation, merger, or asset transfer of the enterprise.”

Nevertheless, as time goes by, the domestic and international economic environment, as well as China’s implementation of full national treatment for both domestic and foreign-funded enterprises, have changed drastically compared with 1994. Local jurisdictions have adopted a relatively broader standard in defining “material changes in objective circumstances”.

Article 79 of the “Answers to the Trial of Labor Dispute Cases (I) issued by the Higher People’s Court of Beijing Municipality and the Beijing Labor and Personnel Dispute Arbitration Commission” (Jing Gao Fa Fa [2024] No. 534) stipulates: “ ‘Material changes in the objective circumstances on which the labor contract was concluded’ refer to unforeseeable changes occurring after the conclusion of the labor contract, which render all or the main clauses of the labor contract unperformable, or make continued performance obviously unfair due to excessive costs, thus frustrating the purpose of the labor contract.” This provision also lists more situations constituting material changes in objective circumstances, including production restructuring, corporate restructuring, changes in the business scope of franchised enterprises, etc. However, in judicial practice in Beijing, courts still keep a relatively conservative and caution in defining such material changes.

Although Shanghai has not issued specific provisions, its judicial criteria have also changed since 2020. In some cases, courts have exceeded the scope prescribed by No. 289. For example, in the case (2021) Hu 01 Min Zhong No.15455, the court held that, “The situations covered by No.289 are merely illustrative examples and not exclusive. If an employer indeed needs to adjust or change its organizational structure due to market conditions, international competition, technological innovation, etc., such situations shall also be recognized as material changes in objective circumstances.” However, courts still keep a relatively conservative and caution in defining such material changes.

However, since the end of 2025, judicial practice in Shanghai has shown a further relaxing trend, that is, “Situations such as department dissolution or merger are often recognized as material changes in objective circumstances, provided they are not caused by pure business decisions.” This trend means that amendments to labor contracts—such as organizational restructuring and salary adjustments—resulting from a deteriorating economic environment and operational difficulties are more likely to be supported by judicial authorities.

It should be noted that the procedure on defining material changes in objective circumstances shall be completed, which means there shall be a failure to reach an agreement on the amendments to labor contracts. Meanwhile, the amendments on the adjustment of positions and relevant terms after negotiation shall be operational and reasonable.

From the perspective of judicial practice rules, a memorandum is generally deemed legally binding if it has the following characteristics:

Firstly, it contains the essential terms of a contract. Some parties believe that a document titled as a memorandum is not a contract or agreement, and thus is not binding. This opinion is incorrect. According to the relevant provisions of the “Civil Code”, the formation of a contract depends on its content rather than its title. Paragraph 1 of Article 3 of the “Judicial Interpretation of the Supreme People’s Court on Several Issues Concerning the General Provisions of the Contract Book of the Civil Code” stipulates: “Where a dispute arises between the parties over the formation of a contract, if a people’s court can ascertain the names of the parties, the subject matter and the quantity, it shall generally affirm the formation of the contract.” Paragraph 2 of Article 6 stipulates: “Where the parties only express the intention of a transaction by signing a letter of intent, a memorandum or other documents, without agreeing to enter into a contract within a certain period in the future, or even if there is such an agreement, the subject of the contract to be entered into in the future, the subject matter and other contents cannot be ascertained, and one party claims the formation of a preliminary contract, the people’s court shall not support such a claim.” Therefore, a memorandum shall be legally binding if its content includes the essential terms of a contract. For example, in (2025) Ji 08 Min Zhong No. 857, the memorandum stipulated that the equity transferee would be Company A or Company B, based on which the court held that the subject of the future contract had not been agreed upon, and thus the memorandum was not a preliminary contract and had no legal effect.

Second, even if a memorandum does not contain the essential terms of a contract, it is often deemed legally binding if the essential terms of a contract between the parties can be inferred from the actual performance. This is mainly based on Article 490 of the “Civil Code”, which stipulates: “Where one party has performed the principal obligations and the other party has accepted the performance before the signature, seal or fingerprint affixation, the contract shall be formed.” For example, in (2023) Jing 01 Min Zhong No. 2853, (2018) Lu 14 Min Zhong No. 3391 and (2017) Hu 0116 Min Chu No. 4529, the courts held that the memorandums were binding on both parties because one party had actually performed the obligations agreed upon in the memorandums.

In addition, judicial authorities usually take the following factors into account when determining whether a memorandum is legally binding:

(1) The parties of the contract shall be valid, such as, whether the official seal, special contract seal, or the signature of an authorized representative is affixed. For example, in (2021) Jing Min Zai No. 158, although only the relevant personnel signed the memorandum, there was evidence proving that an apparent agency was formed between the parties, and thus the court held the memorandum to be legally binding. In another example, (2020) Er 01 Min Zhong No. 8420, the court held that the memorandum had no legal effect because only one party had signed it.

(2) The content shall not violate the mandatory validity provisions of laws and administrative regulations. For example, in (2025) Hu 74 Min Zhong No. 30, the court held that the memorandum was invalid because it violated the principles of fairness, impartiality and investor risk self-bearing in the bond market transaction order.

(3) If the memorandum is an accessory contract, the principal contract shall have legal effect. For example, in (2025) Jing 03 Min Zhong No. 12011, the court held that the agreement on the dispute resolution method in the memorandum constituted an amendment to the arbitration clause in the capital increase agreement and its supplementary agreements, and such amendment was not binding because it lacked a legally valid prior procedure. In another example, (2018) Shan Min Zhong No. 454, the court held that the memorandum was a supplementary contract to the construction contract, and thus the memorandum was also invalid because the construction contract was invalid.

This perception is incorrect. If handling additional benefits improperly, companies may encounter troubles and burdens. Then how to handle additional benefits properly?

Firstly, it is recommended to formulate clear rules for additional benefits. These rules should cover the eligible recipients or eligibility criteria, specific content, payment methods and timelines of the benefits, as well as revocation rules, among other details. Otherwise, if disputes arise over issues such as eligibility, it would be difficult for companies to eliminate those disputes. In addition, if the rules are not clear enough, the implementation of those rules will bring risks to companies.

Take additional annual leave as an example, Article 13 of the “Measures for the Implementation of Paid Annual Leave for Enterprise Employees” stipulates that if the annual leave days and/or wage compensation agreed upon by both labor and management parties or specified in the internal rules and regulations of an enterprise is higher than the statutory standard, the agreed or specified terms shall prevail. Therefore, in principle, additional annual leave shall be implemented in accordance with the agreements between labor and management parties or the internal rules and regulations of the enterprise. In the absence of such agreements or provisions, there are many dispute cases involving the order of taking statutory annual leave and additional annual leave, as well as compensation for unused leave. Judicial authorities have not yet formed a completely unified judgment standard on this issue. Regarding the order of taking leave, the mainstream judicial tendency is that statutory annual leave shall be taken first. However, in individual cases, it is held that in the absence of agreed or specified rules, an interpretation unfavorable to the company shall be adopted, which means the additional annual leave shall be taken first (e.g., (2021) Jing 03 Min Zhong No. 12973). In terms of compensation for unused leave, the mainstream judicial tendency is not to support conversion at three times the statutory annual leave wage standard, but to support conversion at the normal wage standard (e.g., (2019) Jing 0108 Min Chu No. 59471, (2023) Hu 0105 Min Chu No. 15965, (2023) Yue 01 Min Zhong No. 22172).

Secondly, for the vast majority of additional benefits beyond statutory requirements, there is no mandatory requirement requires to go through democratic consultation/notification procedures. However, even if democratic consultation is not conducted, companies must still notify employees and retain relevant evidence. This is to prevent employees from claiming that they are unaware of the relevant rules and thus refusing to accept adverse changes when the companies revoke such benefits for some or all eligible recipients. However, a few special additional benefits are legally required to go through democratic consultation procedures, such as the enterprise annuities.

Article 7 of the “Measures for Enterprise Annuities” stipulates that participation in an enterprise annuity shall be determined through collective consultation between the enterprise and its employees, and the enterprise annuity plan shall be submitted to the employee representative congress or all employees for discussion and approval. Articles 9 and 10 further stipulate that the enterprise annuity plan shall be submitted to the human resources and social security department at or above the county level where the enterprise is located, and shall not take effect until the relevant department raises no objection. It can be seen that although enterprise annuities are additional benefits beyond statutory requirements, the law has formulated detailed provisions for them because such benefits are not a one-way expenditure by the enterprise, but a joint investment by both the enterprise and its employees. However, in December 2025, the “Opinions of the Ministry of Human Resources and Social Security and the Ministry of Finance on Further Improving the Work of Enterprise Annuities” (MOHRSS Announcement〔2025〕 No. 77) stipulated the simplification of procedures for establishing enterprise annuities, which only require discussion and approval by the employee representative congress or all employees, and no longer take the opinion of the competent human resources department as a prerequisite for entry into force.

In practice, some companies fail to perform democratic consultation procedures in accordance with the law, or some companies bear the employee’s share of the annuity, which is equivalent to a special savings for employees, so they believe that it is not necessary to go through statutory procedures, and thus also ignore issues such as the scope of application, contribution standards, withdrawal standards and termination conditions of the annuity. If a company has not formulated an annuity plan or reached an agreement with employees on the annuity, is it required to go through democratic consultation procedures when it intends to lower the standards or revoke the annuity? According to MOHRSS Announcement〔2025〕No. 77, a company may unilaterally decide to revoke the annuity without going through democratic consultation procedures in case of “insufficient sustainable contribution capacity”. However, if the enterprise is operating normally without losses, it shall still go through the statutory democratic consultation/notification procedures.

In summary, it is definitely a win-win thing for employees, companies and society for providing additional benefits beyond statutory requirements. Nevertheless, companies must fully consider the risks of lowering the standards or revoking such additional benefits after they are granted. Therefore, it is necessary to attach great importance to the formulation of rules, as well as the handling of consultation/notification procedures and the retention of evidence in practice.

Risk 1: It is Difficult for enterprises to protect AI-Generated Advertisements on the ground of copyright.

Compared with advertisements created by humans, AI-generated advertisements are at a higher risk of failing to meet the originality requirement for works under the “Copyright Law”. Although advertisements created by humans may also draw on works they have seen or heard before, just as there are no two identical leaves in the world, works created by humans mostly have different degrees of originality unless they are plagiarized or imitated. The current mainstream judicial view on AI-generated works also depends on their originality. That is to say, in theory, AI can be regarded as a tool similar to a ruler or an electronic drawing tool. If the instructions given to AI, including prompts, parameters, etc., are selected and arranged with originality, the AI-generated work shall be a work protected by the “Copyright Law”. However, due to the large number of reference elements in the AI database, if the prompts, parameters, etc., lack originality and are merely a simple combination of elements, such works will usually not be recognized as works in the sense of the “Copyright Law” and thus cannot be protected on the ground of copyright. In addition, it is also important to prove the process of originality in selecting and arranging elements such as prompts and parameters. For example, in the case of (2024) Su 0582 Min Chu No. 9015, the court held that: “The plaintiff failed to provide the original records of the creation process and could not prove that it had made sufficient personalized choices and substantive contributions to the AI-generated results, so the involved pictures do not constitute works in the sense of the Copyright Law.”

Risk 2: Advertising infringement may lead to liability for compensation.

Since AI is not a simple electronic drawing tool, its intelligent part lies in the fact that it is fed a large amount of data (graphic, text, and audio elements). Therefore, if the selection or arrangement of prompts, parameters, etc., lacks originality, that is, there is an unauthorized “image embedding” or “audio embedding”, in addition to the aforementioned Risk 1, it may also be suspected of infringing the rights of others.

Risk 3: Violating software usage agreements or platform agreements may lead to liability for breach of contract.

When using AI software, enterprises usually have to sign agreements with software rights holders, such as user service agreements or user license agreements. If the software is used beyond the scope authorized or permitted by the agreement, for example, the agreement stipulates non-commercial use but the enterprise uses the AI software to generate commercial advertisements, it shall be deemed a breach of contract. In addition, some enterprises may publish advertisements on large platforms. If they violate the platform agreements, such as failing to meet the platform’s special requirements for AI-generated advertisements, it may also constitute a breach of contract.

Risk 4: The content or the label of the AI-generated advertisements does not comply with relevant laws and regulations.

AI software cannot automatically identify whether the content complies with the relevant requirements of the “Advertising Law”, such as the authenticity of the stated content, ethics and morality, extreme words and etc. Therefore, if manual review is not conducted, there is a risk of non-compliance. In addition, the “Measures for the Labeling of AI-Generated Synthetic Content” came into force on September 1, 2025. According to this regulation, enterprises shall add explicit or implicit labels to the text, audio, images, videos, and other content generated by AI. This is also a point that enterprises tend to ignore or are unwilling to label, thus triggering risks.

To sum up, if an enterprise intends to use AI to generate advertisements, it is recommended to take the following four compliance review steps.

1. To review the agreements with advertisers, AI software holders, and advertising platforms, pay attention to intellectual property clauses, permission for commercial use, allocation of liability for infringement, etc.
2. Pay attention to work traceability. Enterprises should keep records of the process of using AI software to generate works, such as the initial copy, ideas, prompts, embedded images, and records of multiple parameter adjustments, modifications, optimizations, screenings, and etc. The purpose is to demonstrate the enterprise’s intellectual input.
3. Never ignore the post-review. Any AI-generated content shall undergo manual review before being released, with special attention to the authenticity and ethics of the advertisement, as well as the presence of explicit or implicit labels.
4. To strengthen awareness of copyright and data security. Employees or suppliers using AI software should be reminded to ensure that the content “fed” to the AI tool does not infringe the rights of others, and the uploaded information should not contain trade secrets, personal information, etc., so as to comply with the requirements in the field of data security.

1. Time Limit for Disputes over Requesting Confirmation of Labor Relations

There is no clear nationwide regulation on this issue. Labor arbitration commissions strictly apply the 1-year time limit. Most courts hold that the 1-year time limit is applicable, but a few courts argue that confirming labor relations is an action for confirmation, which does not involve substantive rights and obligations, and thus the 1-year time limit shall not be applied. (e.g., (2023) Jing Min Shen No. 2341, (2023) Hu 02 Min Zhong No. 5718, (2023) Su 0113 Min Chu No. 340).

It should be noted that even if individual courts rule to confirm the labor relationship on the ground of an action for confirmation, the relevant substantive rights, such as double wages for failure to sign a contract timely, economic compensation, statutory paid annual leave and etc., shall still be adjudicated in accordance with the time limits related to those substantive rights.

2. Time Limit for Disputes over the Difference in Double Wages for Failure to Sign a Labor Contract Timely

Article 7 of the “Regulations on the Implementation of the Labor Contract Law” stipulates: “If an employer fails to conclude a written labor contract with a worker within 1 year from the date of employment, it shall pay the worker twice the monthly wage in accordance with the provisions of Article 82 of the ‘Labor Contract Law’ from the day after the first month to the day before the first anniversary of the employment date…”

Paragraph 2 of Article 1 of the “Answers to Several Questions on Labor Disputes of Shanghai Municipality” stipulates that the 1-year arbitration time limit shall apply to the difference in double wages for failure to sign a labor contract timely, and the arbitration time limit shall be calculated monthly starting from the failure to sign a written labor contract. Article 41 of the “Answers to (I) on Trying Labor Dispute Cases jointly issued by the Beijing Higher People’s Court and the Beijing Municipal Labor and Personnel Dispute Arbitration Commission” stipulates that the 1-year arbitration time limit shall apply to the difference in double wages for failure to sign a labor contract timely, which shall be calculated on a daily basis for one year backward from the date when the worker claims rights. These two provisions are typical calculation methods in judicial practice. Shanghai adopts the forward calculation method, while Beijing uses the backward calculation method. Since both cities apply the 1-year arbitration time limit, the final results are almost the same. The difference lies in that Shanghai calculates on a monthly basis and Beijing calculates on a daily basis.

3. Time Limit for Disputes over Labor Remuneration and Overtime Pay

Paragraph 4 of Article 27 of the “Labor Dispute Mediation and Arbitration Law” stipulates that disputes arising from the arrears of labor remuneration during the existence of the labor relationship shall not be subject to the 1-year arbitration time limit; however, if the labor relationship is terminated, the worker shall file a claim within 1 year from the date of termination of the labor relationship. In addition, Article 4 of the “Provisions on the Composition of Total Wages” stipulates that overtime pay is part of the total wages, so the arbitration time limit for overtime pay shall be implemented in accordance with that for arrears of labor remuneration.

There is a special occasion, that is, if the employer issues an IOU to the employee for the arrears of labor remuneration, according to Article 15 of the “Interpretation (I) of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases”, the employee’s claim for the amount stated in the IOU does not involve disputes over labor relations and shall be subject to a 3-year statute of limitations. Accordingly, if the employer issues an IOU, it essentially transforms into a debt dispute as a normal civil dispute, and is no longer subject to the 1-year time limit.

4. Time Limit for Disputes over Statutory Paid Annual Leave Wages

There are great differences in practice regarding the time limit for disputes over statutory paid annual leave wages. On December 12, 2023, the “Interpretation (II) of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (Draft for Comment)” was published to solicit opinions from the public. Article 5 of the draft stipulated that the arbitration time limit for unpaid annual leave wage remuneration should apply to the arbitration time limit for labor remuneration. However, when the judicial interpretation was officially issued in 2025, this article was deleted. In the 5th issue of Qiushi in 2025, Fan Wei, a professor from the School of Labor Economics of Capital University of Economics and Business, published an article titled “Differentiated Application of the Arbitration Time Limit for Annual Leave Wage Remuneration”, which specifically analyzed the nature of statutory paid annual leave wages, that is, in practice, there are two viewpoints, statutory paid annual leave wages belong to welfare and should be subject to the 1-year arbitration time limit; and statutory paid annual leave wages belong to labor remuneration and thus there is no time limit restriction during the existence of the labor contract.

The current local regulations issued by Shenzhen and Shandong Province reflect the aforementioned second viewpoint. The “Guidelines for the Trial of Labor Dispute Cases by the Intermediate People’s Court of Shenzhen” stipulates: “The time limit for applying for labor arbitration of unpaid annual leave wages shall start from January 1 of the third year. However, if the labor contract between the two parties is terminated or dissolved, it shall be calculated from the date of termination or dissolution of the labor contract.” Article 20 of the “Answers to Several Questions on the Trial of Labor Dispute Cases by the Third Tribunal for Trial Supervision of the Shandong Higher People’s Court” stipulates that the arbitration time limit for statutory paid annual leave shall be implemented in accordance with that for labor remuneration, that is, if the labor contract is in existence, the statutory paid annual leave wages that should have been enjoyed but not received since the employee joined the company can be claimed retroactively.

5. Time Limit for Disputes over High-Temperature Allowances

Courts in Shanghai, Shandong, Shenzhen generally hold that high-temperature allowances refer to the special wage compensation paid to workers engaged in economic construction and enterprise production and operation activities under high-temperature conditions, so the nature of such allowances belong to non-labor remuneration income, and the arbitration time limit for claiming such allowances shall be the 1-year time limit, that is, calculated from the date when the party knows or should know that its rights have been infringed (e.g., (2023) Hu 0109 Min Chu No. 884, (2021) Yue 0306 Min Chu No. 34322).

However, the Beijing area tends to hold that such allowances belong to labor remuneration and are subject to the special arbitration time limit. Employees can apply for arbitration within one year after leaving their jobs (e.g., (2025) Jing 02 Min Zhong No. 2768).

Case 2: In June 2023, the company notified Hu that since it had been unable to operate normally for half a year and still had no business at present, it could no longer afford the employees’ salary. The company decided to put him on leave starting from June 26, 2023 and pay him living expenses in accordance with relevant legal regulations. In April 2024, after the termination of the labor relationship between the two parties, Hu initiated labor arbitration, claiming that the company had not suspended production and operation. He demanded the company to pay the difference between his regular monthly salary and the amount paid during the so-called production suspension period. After labor arbitration and the trials of the two levels’ instance, the court determined that the company’s suspension of production and operation was not targeted at any individual employee and did not constitute a situation of unreasonably failing to provide working conditions. Thus, the court rejected Hu’s claim. ((2025) Jing 01 Min Zhong No.5617.)

Why the above two “long-term leave” have different legal consequences?

Although neither company explicitly mentioned the suspension of production and operation in their notifications, regarding the payment to employees during such “long-term leave”, both companies essentially acted in accordance with the provisions governing the suspension of production and operation. Article 12 of the “Interim Provisions on Wage Payment” stipulates: “If an enterprise suspends production and operation due to reasons unrelated to employees, it shall pay employees’ salaries in accordance with the standards specified in the labor contracts within one wage payment cycle. If the suspension exceeds one wage payment cycle, and employees provide normal labor, the labor remuneration paid to them shall not be lower than the local minimum wage standard.” The aforementioned provision has granted enterprises the right to take necessary measures to reduce labor costs when facing operational difficulties.

However, there are no clear provisions on the specific circumstances under which enterprises can apply the rules concerning the “suspension of production and operation”. From the perspective of judicial practice, the reasons and implementation plan for an enterprise’s suspension of production and operation must be objective and reasonable. On one hand, the enterprise must provide sufficient and valid evidence to prove that the suspension is indeed caused by objective factors, such as operational difficulties, technological upgrading and renovation, or the reconstruction of the production environment. Taking operational difficulties as an example, the enterprise has to prove its production or core business has been substantially suspended and it has lost sustainable operating income. Meanwhile, it should provide supporting materials including financial statements (profit and loss statements, balance sheets) over a consecutive period, bank statements, and special explanations on the deterioration of its business conditions. On the other hand, when formulating the implementation plan, enterprises must ensure that the specific measures are not targeted at individual employees. According to relevant laws, employers are obligated to provide working conditions as agreed in the labor contracts. Arranging for an individual employee to take “leave” alone would be deemed as a failure to fully perform the obligations specified in the labor contract, or a failure to provide necessary working conditions, and a disguised form of wage reduction, which is neither reasonable nor legal (as Case 1). In individual cases, judicial authorities generally make a comprehensive judgment on whether the enterprise is engaging in disguised layoffs or wage cuts in the name of operational difficulties to intentionally harm employees’ legitimate rights and interests. Such judgments are based on factors including the enterprise’s management structure, the ratio of suspended employees to the total on-staff employees, as well as the positions, job roles and length of service of the relevant employees.

In addition, enterprises must ensure the legality of procedures when implementing the suspension of production and operation. Since such suspension would inevitably have a severe impact on employees’ income, it constitutes a major matter related to employees’ vital interests. It is advisable to carry out democratic consultation and notification procedures in accordance with Article 4 of the “Labor Contract Law”. Specifically, the following steps can be followed: (1) To formulate a detailed plan, specifying the scope of application of the production suspension, the wage standard during the suspension period, the conditions for resuming work, and the arrangements for employees. (2) To submit the plan to the trade union or the employees’ congress for discussion, explain the plan in detail, fully listen to opinions, and keep written records of the consultation process. (3) The final plan must be approved by the enterprise’s competent authority and then announced to all employees via bulletin boards, emails, or other means. And (4) If the local administrative authorities require the enterprise to complete filing procedures before the suspension, such procedures shall be performed in accordance with the relevant regulations.

After reading the above content, do you think there are any problems with the “suspension from post” policy launched by a certain construction engineering group that has been circulating online recently?

1. The agreement with a specific location which shall have the actual connection with the agreement.

According to Article 35 of the “Civil Procedure Law”, parties to a contract may, by written agreement, choose a court with jurisdiction over a dispute that has an actual connection to the dispute, including the defendant’s domicile, the place of contract performance, the place of contract signing, etc. Therefore, if the signing location is clearly stipulated in a electronic contract, the parties’ autonomy of will should be respected in principle.

However, it should be noted that if the agreed specific location lacks an actual connection with the dispute (for example, the domiciles of the parties are not in that location, and the performance of the agreement also does not have any connection with the agreed location), it shall be deemed as invalid and then the statutory jurisdiction rules shall be applied. For example, in the case (2023) Zui Gao Fa Min Xia No.36, the Supreme People’s Court clearly stated that, “The parties failed to prove that the contract was actually signed in Hangzhou, and the domiciles of both parties were not in Hangzhou. Since Hangzhou had no actual connection with the dispute, the agreement on jurisdiction is invalid.”

2. If there is no agreement on the specific contract signing location, the contract signing location shall be determined case by case.

There are three main situations.

(1) Online Shopping on E-commerce Platforms: The Buyer’s Domicile or the Delivery Location shall be the Contract Signing Location

Article 491 of the “Civil Code” stipulates that, “If a party issues information on goods or services through the Internet, which constitutes an offer, the contract shall be established when the counterparty successfully submits an order, unless otherwise agreed by the parties. Article 24 of the “Civil Procedure Law” and relevant judicial interpretations provide that for sales contracts concluded through information networks, if the subject matter is delivered through the Internet, the buyer’s domicile shall be the place of contract performance; if the subject matter is delivered by other means, the delivery location shall be the place of contract performance. Therefore, the buyer may file a lawsuit in the court at its own domicile or the delivery location.

(2) Mutual Signing via Scanned Copies with Seals: The Recipient’s domicile of the Acceptance shall be the Contract Signing Location

In practice, it is common to conclude contracts by transmitting scanned copies of contracts with official seals through communication tools such as WeChat or email. This method falls under concluding a contract in the form of data messages and shall be governed by Article 492 of the “Civil Code”, which stipulates that the place where the contract is established is the location of the final “recipient”.

In the case (2024) Hu Min Xia Zhong No.10, the court held that, “A party’s sending of a scanned copy of the contract with a seal via WeChat constituted an offer, and the counterparty’s return of the scanned copy constituted acceptance. The time when the acceptance takes effect shall be governed by the rules for the effectiveness of declarations of will in the form of data messages, i.e., it takes effect when it enters the counterparty’s designated system (such as WeChat). In this case, Company B’s sending of the scanned copy of the contract with its seal to Company A via WeChat constituted an offer, and Company A’s return of the scanned copy with its seal constituted acceptance. The acceptance took effect when the scanned copy entered Company B’s WeChat system. In accordance with Article 492 of the ‘Civil Code’, when a contract is concluded in the form of data messages, the main business place of the recipient (i.e., the main business place of Company B) is the place where the contract is established.”

(3) Sequential Signing via Electronic Signing Platforms: Whether the Location of the Last Signatory is the Contract Signing Location?

If both parties sign an electronic contract sequentially through an electronic signing platform (such as “E Qian Bao”, “Qi Yue Suo”, etc.), how to determine the contract signing location?

In judicial practice, there are different opinions. Some courts hold that the location of the last signatory shall be the contract signing location. For example, in the case (2023) Hu 0151 Min Chu No.369, the court held that, “The method of concluding a contract belongs to concluding a contract in the form of a ‘written contract’, and the provision that ‘the place where the last signature, seal, or fingerprint is affixed is the place where the contract is established’ shall apply. Since Company A affixed its seal first, followed by Company B, the court at the location of Company B (the last signatory) shall have jurisdiction.” Some courts hold that there is no geographically defined contract signing location. For example, in the case (2023) Zui Gao Fa Min Xia No.37, the court held that, “There is no geographically defined signing location for Internet contracts. This contract was signed and confirmed in the virtual space of the Internet. Even though the contract stipulated that the signing location was Pudong New Area, Shanghai, since this location had no connection with either party to the contract, the stipulation was deemed invalid.” It can be seen that in the second case, the Supreme People’s Court did not determine the contract signing location in accordance with Article 492 of the “Civil Code”. Therefore, when signing a contract through an electronic signing platform, it is recommended to clearly stipulate a specific signing location that is associated with both parties or the transaction.