After seeing an employment recruitment posting published online by a company, Ah Lu went to the company hoping to be recruited. He expected to sign a labor contract but the company signed a Marketing Representative Cooperative Agreement. When a dispute broke out, the company claimed that the agreement was not a labor contract and that they therefore had no legal responsibility or liability as an employing unit.
Would the legislative authority rule against the company? The lawyer in support of Ah Lu argued that a labor relationship had been formed between the parties and the company should lawfully bear the liability, while the lawyer in support of the company thought that since Ah Lu had signed the cooperative agreement, he should bear the relevant liability.
I. Case Playback
Ah Lu, while browsing an employment service website, found a posting released by one company for a job based on a labor contract system with a salary of RMB 1,600 and a performance-related bonus adjustment Ah Lu thought this may be appropriate for him because there were no age restrictions or academic qualifications. He went to visit the company soon after he received a recommendation letter issued by an employment center. He was formally recruited as a market specialist after a simple interview; his job was to conduct market promotion work for the company.
After a short training, staff members including Ah Lu were asked to sign their names on a Marketing Representative Cooperative Agreement with a one-year time period. Ah Lu happily signed his name to this agreement as he thought it was an agreement referring to a performance-based percentage adjustment in the original employment information. In fact, Ah Lu’s job was merely to promote certain legal advice firms to corporations. Six months passed and neither his monthly salary of RMB 1,600 nor his social insurance had been paid by the company. After several fruitless negotiations, Ah Lu filed an application with the district level Labor Arbitration Committee claiming for payment of his unpaid salary and for the company to conduct official employment and unemployment procedures. But the company knew that Ah Lu and the other employees had merely signed a Marketing Representative Cooperative Agreement; this made staff agents rather than employees of the company which deprived them of a right to a labor contract. Accordingly, a labor relationship did not exist nor did a requirement to contribute to social insurance.
Ah Lu stated that while visiting the website of an employment center he found the job posting released by the company which indicated that the position was based on a labor contract system. Legally, everything had been arranged; his interview with the company was a kind of promise. He was hired by the company; both sides had reached an agreement to establish a labor relationship. Nevertheless, the person in charge of the company held the point of view that job postings should be regarded as recruiting advertisements which fit the category of job offer invitations. We should rely on the final agreements reached by the two parties which showed that the relationship was a simply a professional representative relationship.
Before arbitration, Ah Lu together with his colleagues reported to the Labor Inspection and Supervision Department for the company not paying social insurance according to relevant regulations.
II. Legal Background
The labor relationship is a kind of social relationship with a nature of equality, subordination, property and personal qualities. The characteristics of equality and property are displayed when two parties sign a labor contract according to the law. The signing of a labor contract is based on equal consultation between the laborer and the employing unit. After the contract is signed, the subordinate relationship between the laborer and the unit becomes personal which distinguishes a labor contract from a civil contract that has either equality and property or equality and personal characteristics.
Common civil contracts require first an offer, followed by a commitment. An offer refers to a declaration of will to sign a contract with the other party. A commitment refers to a declaration of will to accept the offer and agree to sign a contract as offered by the other party. If one party, based on the offer made by the other party, expresses his own suggestions about the contract, such acts are called counter-offers. Once the parties make a commitment, the contract is formally established. Sometimes people make offer invitations in order to attract people to make an offer.
However, signing a labor contract is somewhat a different procedure. The procedure is divided into two stages. The first is recruitment in which the unit invites applications for a published position. The number of applicants is confirmed and the offer is tailored to the pool of candidates. The behaviors of the unit are restricted by law: for example, units are forbidden to discriminate, the content of the job posting should be in conformity with the content of the labor contract later provided by the unit, etc. The establishment of the labor contract, at the first glance, looks quite similar to an offer invitation, but in fact they are different. The offer invitation is a declaration of will used to attract others to make an offer to the offer-issuing employer. Once the invitation is accepted by a party, the inviting employer receives the offer and the invited party makes the offer.
In the first stage of a labor contract negotiation, once the unit starts recruiting, it is permanently fixed as the employer that makes the employment offer. Even after the offer is confirmed, the applicant himself still cannot make an offer to the unit. Rather, the unit offers the selected applicant a draft labor contract.
The second stage of establishing a labor contract combines the two stages of civil contract establishment, namely the offer and the commitment. The unit, as the offering party, provides the draft labor contract to the selected applicants who may make a counter-offer or make a commitment. Once a commitment is made by either party, the labor contract is formally signed and the labor relationship is established.
III. Lawyer Debate
A labor relationship has been formed because of the salary commitment.
Lawyer Zhu Xin Yao from Shanghai Cheng Ping Law Firm in support of Ah Lu
A job posting released by the company advertised a job based on a labor contract system with a monthly salary of RMB 1,600 and a performance-based bonus adjustment. Ah Lu was hired as a market specialist after the interview. Hence, a labor relationship was formed between Ah Lu and the company.
It should be regarded as an offer if the contents of the commercial advertisements were in conformity with the regulations concerning employment offers as regulated in the Contract Law. Besides, an interview should be thought of as a kind of job offer, and an admission into the company should be considered a job commitment. According to Article 14 and Article 21 of the Contract Law, an offer is a declaration of will where one party expects to sign a contract with another party while a commitment is a declaration of will where the offering party agrees on an offer. Hence, the interview procedures verified a consensus on a labor relationship reached between the parties to be a declaration of will that Ah Lu was admitted into the company. Therefore, a labor contract was in fact established.
As a matter of fact, a factual labor relation was formed between Ah Lu and the communication company. Ah Lu worked in the communication company, and his business was conducted in the name of this company. The business profit was also collected by the company. Ah Lu received training from the communication company which could prove that he was under the administration and management of this company. That a factual labor relation was formed between Ah Lu and the communication company is completely proven by the above evidence.
Signing the Marketing Representative Cooperative Agreement does not remove the fact of the labor relationship. This cooperative agreement was essentially a commission relationship, not a professional agent relationship. The argument that Ah Lu was merely an agent put forward by the communication company is not acceptable. If he were an agent, why would he be interviewed? Why would he be hired? Why would a salary of RMB 1,600 be specified in the advertisement? A performance-based salary adjustment is quite similar to a regular bonus in nature and is used as a mechanism of incentive and reward. But this labor relationship cannot be denied due to the inclusion of this performance-based salary adjustment clause.
There is no doubt a written cooperative agreement was formed.
Lawyer Ye Hong Jun from Shanghai All Bright Law Firm in support of the unit
First, Ah Lu, as a person with complete civil capacity, should have understood that the Marketing Representative Cooperative Agreement was a cooperative commercial contract and not a labor contract in which no contents of a labor contract were specified. Therefore, he should bear all the liabilities of the agreement as long as he had signed this Marketing Representative Cooperative Agreement.
Second, the employment advertisement released by the company and the Marketing Representative Cooperative Agreement signed between Ah Lu and the company are completely different. Ah Lu signed the Marketing Representative Cooperative Agreement only after a brief review of the employment advertisement. However, when the dispute arose, he claimed the damages because he thought that he had established a labor relationship with the company. This situation is due to his own neglect. This kind of act should not be supported by the committee.
IV. Final Judgment
Ah Lu’s application was supported by the Labor Inspection and Supervision Department who ruled that the company must contribute to his social insurance. However, the judgment of Labor Arbitration Committee was made on the basis that Ah Lu had entered into a business representative relationship but not a labor relationship. On these grounds, Ah Lu’s claim was dismissed. Ah Lu had no choice but to file a lawsuit to the Court appealing the arbitration judgment.
He was told that the suit would be suspended until a specific conclusion was made by the Labor Inspection Group.
Meanwhile, the employer applied for administrative reconsideration of the Labor Inspection Body verdict and afterwards instituted an administrative lawsuit appealing the original judgment by the Labor Administration Department after reconsideration.
Finally, Ah Lu’s petition was supported by the Court.
V. Expert Evaluation
Laborers should clear their eyes when they sign their names on the contract.
Professor Dong Baohua from East China University of Political Science and Law
Three main problems should be addressed before the settlement of this case.
First, there is a question whether a labor contract was formed between Ah Lu and the company. According to the current Contract Law in China, the establishment of a contractual relationship should be based on the offer and commitment procedures. We also need to distinguish an offer from an ‘invitation to offer’. In this case, the key lies in the employment advertisement. The nature of the employment advertisement directly impacts the recognition of a relationship between Ah Lu and the company.
In China, the conclusion of a labor contract can generally be divided into two stages namely the recruitment stage and contract conclusion stage. The recruitment stage is a procedure where the potential candidates are determined by the company. Offers are sent out to the public by the company, and the applicants are determined as the candidates. The contract conclusion is a stage when offers are sent to the candidates again and the contents of the contract are affirmed through negotiation between the parties.
The employment information released by the company on the website was equivalent to the recruitment listing of the company whose aim was to attract applicants and help identify candidates. Therefore, the website information should be regarded as an offer made by the company rather than an invitation to offer where Ah Lu would have been expected to make an offer to the company. Ah Lu went to be interviewed and was hired into the company which should be regarded as the confirmation of his candidacy. An offer was once again sent to Ah Lu by the company which indicated the declaration of will on behalf of the company supporting Ah Lu’s participation and employment. This was in conformity to the procedures for establishing a labor relationship. The only shortcoming was that there was no written labor contract.
Second, is a factual labor relation formed even though no labor contract was signed between Ah Lu and the company? A factual labor relationship is composed of three elements according to the current laws in China. The first element is qualified labor relationship subjects. The second is proof that the laborer is managed by the company. The third is the laborer’s work is a part of the company operations. According to the concrete situation of this case, it is obvious that Ah Lu and the company are legal subjects of the labor relationship, that there was no doubt that Ah Lu was managed by the company during his work, and that Ah Lu’s work was part of the company operations. Hence, it is certain that a factual labor relationship was formed.
Third, can a factual labor relationship be altered because a “Marketing Representative Cooperative Agreement” was signed afterwards? A certain agent relationship was formed by the signing of Marketing Representative Cooperative Agreement. In the debates between lawyers, some people argue that a labor relationship cannot coexist if an agent relationship was also formed. Others think that an agent relationship cannot be formed if a labor relationship is established.
I hold the point of view that either logic is untenable. In fact, an agent relation can either be formed between subjects of equal status or between subjects with unequal status. The labor relationship is naturally unequal, as the attached subjects - laborers - will work under the auspices of the employing unit, because it is the nature of the employment system to meet the requirements of the unit. When the agreement is signed, an agent relationship is formed.
However, the system of wage compensation will be changed to some extent if the agent relationship is established as the original fixed salary of a labor relationship and then is modified to a salary with performance-based bonuses. This salary relationship is an incentive mechanism and does not impact the legality of the laborer in the company. On the contrary, if a civil agent relationship had been formed between Ah Lu and the company, Ah Lu should have had some specific qualifications such as business-operation qualifications. Apparently, Ah Lu was not qualified for this and therefore a civil representative agent relationship could not have been established between him and the company.
This is a complicated case owing to the existence of the Marketing Representative Cooperative Agreement. I want to warn laborers that they should be very cautious when signing a contract.
From LexisNexis
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