I. Case Playback

Ms. Ma was just 50 years old. It was her age that really caused her big trouble. Originally, Ms. Ma was assigned to work at a public institution of travel agency as a permanent worker. Ms. Ma hoped she could work until retirement. Unexpectedly, the unit was restructured in August 2004, and Ms. Ma was transformed from a permanent worker into a labor contract-based laborer whose major responsibility was to make hotel reservations for travelers. At the age of 50, Ms. Ma applied for retirement. Unfortunately, the employing unit rejected her application and notified Ms. Ma that her labor contract was about to expire and would not be renewed. Before long, the employing unit issued a dismissal slip and returned Ms. Ma’s files and records to the local administration office. Ms. Ma was enraged and applied for arbitration.
Ms. Ma pointed out that because she was of the legal retirement age, she could naturally terminate the labor relationship. The employing unit should not have issued a dismissal slip but rather should have processed her retirement application and carried out the relevant formalities according to the regulations of Shanghai. Therefore, the employing unit infringed on her right to retire by refusing to process her retirement application. Ms. Ma demanded that the employing unit withdraw the dismissal slip and immediately process her retirement application.
In contrast, the employing unit pointed out that: first, Ms. Ma was a permanent worker and a cadre. Accordingly, Ms. Ma should naturally retire when she is 55 years old pursuant to national regulations. It was appropriate for the employing unit not to renew the labor contract. Even after dismissal, Ms. Ma could still process her retirement application as an unemployed person with the neighborhood committee office. The employing unit never infringed on her right to retire.  What’s more, the Labor Law grants the Social Insurance Fund Administration Center the power to scrutinize the retirement application.  Therefore, the employing unit was not entitled to decide whether the retirement application by Ms. Ma could be approved or not. This leads the unit to the conclusion that this case was not under the jurisdiction of the Labor Law. The employing unit requested that the Labor Arbitration Committee reject Ms. Ma’s application for arbitration.
So, did the employing unit have a responsibility to deal with the retirement application? Did the employing unit infringe on Ms. Ma’s right to retirement? Is this case under the jurisdiction of the Labor Law?
 
II. Legal Background

Retirement refers to the system in which a laborer who is of retirement age ends the labor relationship with the employing unit and receives a social retirement pension.  The laborer enters into the social insurance system where the retired laborer will receive a retirement pension from the state aimed at helping the retired laborer live through the last stages of life. Since the 1950s, China has implemented a statutory retirement system that is still characterized by many features of the planned economy today.
First, the retirement age varies according to different positions. There are two types of laborers: cadres and workers. The term ‘cadre’ refers to a laborer who holds a management-level position or specializes in technology. Laborers who hold any other positions are termed ‘workers’. The retirement age for male laborers is 60 years-old for both titles but 50 for female workers and 55 for female cadres.
In order to classify laborers, Article 95 of Some Suggestions about the Problems of Enforcing the Labor Law provides that “once the employing unit implements a labor contract system, laborers who change from cadre to worker or from worker to cadre shall be subject to the current laws and regulations regarding the current position.” Therefore, whether the laborer is a cadre or a worker is determined by the nature of the work conducted by the laborer when he applies for retirement. But the certification method has already changed from a national unified certification to certification by the employing unit or the dispute resolution party considering the facts.
Second, the calculation methods for the retirement pension are different according to different kinds of employing units. The employing units are divided into public institutional units and enterprise units. The term ‘public institutional unit’ refers to organizations for the public interest, which are sponsored by a national organization or are supported by state-owned assets. These units conduct business in education, technology, culture, sanitation industries, etc. However, the term ‘enterprise unit’ refers to for-profit organizations.
Since the 1950s, the state government planned the retirement pension system as a whole for laborers working in public institutional units. The state did not, however, set up a retirement pension system for the laborers working in enterprise units. Instead, the enterprise itself was wholly responsible for the withholding and distribution of employee pensions. Later, in order to reduce the pressure faced by the enterprise, the state promulgated the Decision of Some Problems about Establishing the Socialist Market Economy in 1993 and proposed a reform in which the enterprise retirement pension system would also be uniformly arranged by the society. In 1997, the central government promulgated the Decision on Establishing a Unified Fundamental Retirement Pension System that specified the operational guidelines for contributing to the retirement pension system. So far, the differences between public institutional unit and enterprise unit pension contributions are narrowing. But, due to various historical reasons, currently the pension standards of public institutional units are higher than those of enterprise.
Article 44, Sub-Article 2 of the Labor Contract Law provides that the means of determining laborer eligiblity to receive basic old-age insurance is the contract termination condition. This means that the new Labor Contract Law transforms the retirement system into an old-age insurance system.
The major difference between a retirement system and an old-age insurance system is as follows: under the old-age insurance system, the requirements for contract termination are based on not only the statutory retirement age but also the number of contribution years. The current regulation provides that the required number of contribution years should be no less than 15 years. Laborers who do not meet this minimum requirement for certain reasons cannot be forced to exit the labor relationship even when they meet the retirement age. This stipulation is deemed to be a protection for the laborers, but, in practice, the guidelines for operating this transformed system remain unclear.
In the current system, whether the laborer must retire depends entirely on the age of the laborer. Once the laborer reaches the retirement age, the laborer has to exit the labor relationship and retire. After the Labor Contract Law is promulgated, there will be two criteria that determine the timing of retirement: one is the retirement age and the other is the number of contribution years. However, problems of the practical operation of the old-age insurance system still need further refinement.
Besides, Labor Contract Law also stipulates the regulations about personal retirement pension accounts.  Due to the high volume of migrant laborers in China, Article 49 of Labor Contract Law provides that the state will gradually adopt measures to establish and strengthen the system that enables the laborers’ social insurance relationships to transfer across regions. This clause particularly reflects the policy direction for social insurance development in China.

III. Lawyer Debate

The employing unit infringed on Ms. Ma’s right to retire, because Ms. Ma will lose RMB 700 per month if she retires as an unemployed person.
Professor Xu Minglang from Legal Service Center of East China University of Political Science and Law in support of Ma. Ma

In my opinion, the employing unit obviously infringed upon Ms. Ma’s right to retire.
First, Ms. Ma was formerly a permanent worker with the original unit. After the unit was reorganized and became an enterprise, Ms. Ma was transformed into a laborer with a labor contract and a labor relationship. How could Ms. Ma be classified as a ‘cadre’ if she was a laborer with the employing unit? It is a wrong conclusion that Ms. Ma should retire at the female cadre retirement age of 55.
Second, the employing unit once pointed out that Ms. Ma could retire as an unemployed person, which flagrantly infringed on Ms. Ma’s rights. According to Article 3 of the Notification on Measures of the Distribution of Retirement Pension of Retired Personnel in Organs and Public Institutions issued by the Shanghai Social Insurance Management Bureau, “Once a public institution is reconstructed into an enterprise, any retirement application submitted thereafter shall be processed according to the system applied to enterprise. If a laborer has been working for 25 years before the unit’s reorganization, the retirement pension is calculated on the basis of the benefit formula stipulated before the unit reorganization and 1/120 of the balance existing in the personal pension account after the unit’s reorganization.” According to this provision, Ms. Ma might not receive the preferred benefits if the labor relationship was terminated when she was 50 years old and was dismissed by the employing unit. Specifically, Ms. Ma might lose RMB 700 per month if this happened. Therefore, we can conclude that the employing unit did infringe upon Ms. Ms. Ma’s rights.
Third, the Labor Arbitration Committee should accept this case according to Article 2, Sub-Article 3 of the Regulation on the Treatment of Enterprise Labor Disputes, in which labor disputes include disputes arising from the social insurance issues between the employing unit and the employee.

This case is out of the jurisdiction of labor arbitration.
Lawyer Pan Jie from Zhengjie Law Firm in support of the employing unit

In my opinion, the employing unit did not breach the contract by ending the labor relationship and issuing the dismissal slip. This case does not fall under the jurisdiction of the Labor Law.
Procedurally, the employing unit shall make a confirmation whether a person can retire at the age of 50 or 55. Then, the employing unit shall submit the retirement application of the laborer to the Social Insurance Fund Administration Center. If the laborer and the employing unit cannot agree with each other on certain issues, then the employing unit is entitled to submit the application on its own. The Social Insurance Center shall not scrutinize the substance of the application. Thus, the employing unit shall determine whether the laborer complies with applicable regulations. If the laborer does not agree with the decision of the unit, he may file an application for Labor Arbitration. If the laborer’s application is rejected, only then can the laborer file a petition directly with the Court.

IV. Final Judgment

After the hearing, the Arbitration Committee ruled that it was appropriate for the employing unit to terminate the labor relationship upon expiration of the labor contract. Ms. Ma’s request for withdrawal of the dismissal slip lacked legal grounds. Therefore, Ms. Ma’s petition was turned down. Ms. Ma’s request to process her application for retirement was not within the jurisdiction of the Arbitration Committee and therefore was overruled because the retirement process is a set of specific administrative actions.
Ms Ma found the judgment unacceptable and filed a suit with the Court. After the hearing, the Court found that after the rejection of Ms. Ma’s original request to process her retirement application, her new request, including her request to withdraw the dismissal slip and renew the labor relationship between both parties, had changed substantially from the petition she made in the arbitration process. Overall, Ms. Ma’s petition was overruled.

V.  Editor Evaluation

No matter whether one takes the perspective of the laborer’s claim or the employing unit’s claim, we believe that Ms. Ma should win the case.
First, from Ms. Ma’s perspective, she claimed that she was a worker and was entitled to demand the employing unit arrange her retirement at the age of 50. Nevertheless, the employing unit’s claim that Ms. Ma was a cadre and was not subject to the standard for worker’s retirement puts it in a self-contradictory position. If Ms. Ma was a cadre who did not renew her labor contract until expiration, then she would lose her status as a cadre and become a worker, because she was no longer regarded as management level or technical level. Under this situation the employing unit should arrange her retirement because, at 50 years old, Ms. Ma had already reached the female worker mandatory retirement age. Why is such a clear-cut case so complicated? It is because there are loopholes in the relevant regulations.
The current retirement system requires the employing unit to submit the retirement application to the relevant state organ - The Social Insurance Fund Administration Center - which is authorized to review and approve the retirement. The approval process involves administrative procedures, so it was reasonable for the Arbitration Committee to exclude it from its jurisdiction. Since arbitration was unfeasible, could Ms. Ma file an administrative petition? In this case, the dispute about the retirement arose not due to a denied application to the Social Insurance Fund Administration Center; but rather, the employing unit’s refusal to submit the application materials. How could there be administrative litigation when there was no administrative action? Therefore, a seemingly easy and straight-forward case becomes difficult given the various loopholes in the Chinese legal system.
Besides the loopholes in the legal system that caused this awkward situation, the negative attitudes about the law displayed by various departments cannot be absolved. In this case, the Arbitration Committee or the Social Insurance Fund Administration Center could have easily demanded that the employing unit process the retirement application and prepare the necessary paperwork. But these two departments were so keen on protecting their own interests that they could not dare take a small step forward to assist in the case, resulting in the current situation.
After the Labor Contract Law is promulgated, older laborers like Ms. Ma shall be protected by a much higher standard. Article 45 of the Labor Contract Law stipulates that “If a labor contract expires but any of the circumstances specified in Article 42 hereof applies, the term of the labor contract shall be extended in accordance with the law until the relevant circumstance ceases, at which point the contract terminates.”  Article 42 provides that “An employing unit may not dissolve a labor contract if the laborer has been working for the unit continuously for no less than 15 years and is less than 5 years away from the legal retirement age.”
We can see that Ms. Ma who had been working in the employing unit for more than 20 years was totally in compliance with the situation stipulated in Article 45 of the Labor Contract Law. No matter whether Ms. Ma is classified as a cadre or a worker, she had less than 5 years before she could retire. Under no circumstances was the employing unit entitled to terminate the labor contract until Ms. Ma retired.

VI. Editor’s Final Comments

The Labor Contract Law takes a step forward from the Labor Law in regard to the protections for laborers. In terms of the dissolution and termination of the labor contract, five categories of people enjoy special legal protection: the old, the weak, the sick, the disabled and the pregnant.
 “The old” refers to a laborer who has been working for the unit continuously for no less than 15 years and is less than 5 years away from the mandatory retirement age. Ms. Ma in this case belongs to this category of “the old”.
“The weak” refers to a laborer who is engaged in operations exposing him to occupational hazards and has not undergone a pre-departure occupational health check-up, or is suspected of having contracted an occupational disease and is being diagnosed or under medical observation.
 “The sick” refers to a laborer who has contracted an illness or sustained a non-work related injury and whose mandatory medical treatment period has not expired.
   “The disabled” refers to a laborer who has been confirmed as having lost or partially lost his capacity to work due to an occupational disease or a work-related injury.
   “The pregnant” refers to a female laborer who is in her pregnancy, delivery, postpartum, or lactation period.
  For these groups of people, the Labor Contract Law stipulates that the unit cannot dissolve a labor contract under non-fault conditions. The unit is also not allowed to terminate the contract until the laborer’s special circumstance comes to a conclusion except when the termination of a “disabled laborer” is subject to the laws and regulations governing work-related injuries.

From LexisNexis