An employee is transferred to a new employer for reasons not attributable to himself, whether the frequency of the labor contract signed with the original employer shall be consolidated into the frequencies of the labor contract signed with the new employer?

Jia and Company A, a Beijing company, signed a labor contract which expired on Feb. 16,2016. After the expiration, Jia was arranged by Company A to sign a 3-years labor contract with Company B, a wholly-owned subsidiary of Company A. During the implementation of the contract with Company B, Company A sold its share to a third party. Before the expiration day, Company B sent a notification of termination to Jia, notifying him that the contract would be terminated on the expiration date and the company would pay economic compensation. Jia hold that he had already signed a fixed-term contract for twice, so Company B should renew the contract and sign a non-fixed-term contract. Therefore, Jia filed a labor arbitration against Company B for illegally terminating the labor contract. The labor arbitration committee rejected Jia’s claim, but both the first and second instance courts supported Jia’s claim (2021 Jing 03 Min Zhong 7906).

The focus of the dispute is where an employee is transferred to a new employer for reasons not attributable to himself, whether the frequency of the labor contract signed with the original employer shall be consolidated into the frequencies of the labor contract signed with the new employer?

Article 14 of the “Labor Contract Law” stipulates that where a fixed-term labor contract has been concluded twice consecutively, despite those statutory exceptional circumstances, the employer shall sign a non-fixed-term contract with the employee. Article 10 of the “Implementation Regulations of the Labor Contract Law” stipulates that if an employee is transferred to a new employer for reasons not attributable to himself, the original employer could choose to pay economic compensation for his length of service, or let such length of service to be calculated into the length of service for the new employer. However, Article 10 does not mention the frequency. Therefore, there is no nationwide unified rule.

From some local regulations and judicial practice rules, there are significant regional differences.

At present, Zhejiang province clearly stipulates that the frequency should be calculated consistently. The basis for this opinion is Article 3 of the “Answers on Several Issues Concerning the Trial of Labor Dispute Cases (V) by of the Civil Adjudication Tribunal No.1 of the High People’s Court of Zhejiang Province and the Employment Dispute Arbitration Court of Zhejiang Province”.

However, in many other provinces and cities, although there is no local regulation, in judicial practice, the main opinion regarding such dispute is that the frequency should not be calculated consistently. For example, Shanghai, Guangzhou and Jiangsu Province.

Some provinces and cities stipulate that only when an employer has malicious intent, the frequency should be calculated consistently. For example, the “Guidelines for the Trial of Labor Dispute Cases by the Shenzhen Intermediate People’s Court” (2015) and the “Minutes of the Seminar on the Application of Law in Labor Dispute Cases by the Beijing High People’s Court and the Beijing Labor Dispute Arbitration Commission (II)” (2014) both stipulate that the malicious violation of Article 14 of the “Labor Contract Law” by an employer is invalid, and the length of service and frequency of labor contracts should be continuously calculated. The two regulations have also listed some circumstances, which include the change of the employer by means of establishing affiliated enterprises, or changing the employer’s name.

It is very interesting that although Beijing has such regulation, in individual cases, the local courts may hold the same opinion as Zhejiang. For example, in the case in the beginning, the court clearly pointed out that “when an affiliated unit signs labor contracts with the same employee, the frequency should be calculated consistently, not matter whether both employers have malicious intent or not.”

In summary, where an employer requires its employee to sign a labor contract with another employer for various reasons, the frequency of signing a labor contract should be taken into consideration. It is recommended to check the local regulations and judicial practice rules, by which both employers could make a comprehensive plan regarding the issues related to the length of service, the frequency and etc.