May 11th, the result of the Seventh National Population Census has been released indicating that the proportion of the population over 60 years old had risen by 5.44% compared to it in 2010 as the aging tendency of population in China was deepening. For employers, aging tendency means that problems relating to employment relations and other issues with employees above statutory retirement age will gradually become a normalised agenda in daily business. Due to its relative far back date of establishment, relevant contents within current labour law system of China have not yet been adapted to the speedy economic and social development in many ways. This would pose even more challenge to the relations of employees above statutory retirement age. This article will analyse several of the most frequent problems in practice from a legal perspective of enterprise employment.

 

1. The Recognition of the Nature of the Relations with Employees above Statutory Retirement Age in Current Practice

Passing the statutory age, employee is viewed as disqualified to be the subject of the labour relation by current mainstream opinion and her/his previous labour relation would be transferred into service relation with some exceptions under certain special circumstances. The foundation of this opinion is Article 21 of the Regulation on the Implementation of the Employment Contract Law of the PRC: “An employment contract shall be terminated when an employee reaches the mandatory age for retirement.” The aim to set up a mandatory or statutory retirement age, in terms of legislation, incorporates to draw a clear line for the scope of subjects to which the labour relation could be adopted, and to ensure that employees lawfully enjoy retirement rights. Thus, after such time node, the principle requires the termination of labour relations. This could be considered as an expression of the adjustment on economic and social rights by state legislative power.

However, with the economic and societal development, the health and medical conditions improved by large, labour productivity constantly rises while the specific contents of labour positions vary with each passing day. Moreover, societies that have completed the process of industrialisation entered into the phase of population aging successively where the age structure of the population changed remarkably. All of these factors influenced profoundly the life expectation, working capacity and willingness of individual employees as well as continuously restructured the expectation and management on the age aspect of workers by their employers. In practice, it is increasingly normalised to see employees above statutory retirement age, who in fact in situations of flexible retirement, postponed retirement or even no retirement plan at all, continue to work. Closely concerned legal problems of such employment have surely taken place. Administratively and judicially, to deal with these problems, China now adopts an approach which includes a set of exceptions for these employment relations rather than systematically regulating a flexible retirement mechanism or revising the statutory retirement age.

A distinguishing sign of the most common exception, among others, would be whether the over-aged employee enjoys the retirement remuneration. For the retirement remuneration, as an important part of social security, consists the most significant realistic ground to exercise retirement rights for the employees. Therefore, in current practice, over-aged employees without the retirement remuneration are clearly viewed still as subjects of labour relations. Such regulation also fits into the original legislative aim to establishing a statutory retirement age.

The former Understanding and Application of the Judicial Explanation of Labour Disputes III of the People’s Supreme Court of the PRC defined the relation between the employer and the over-aged employee without retirement remuneration as labour relation. Yet the abolishment of this judicial explanation has also terminated the legal force of such definition. In No. 6 Reply of No. 1 Civil Tribunal of the Supreme People's Court [2015] (No. 6 [2015]), the Supreme Court agreed in principle that for employees who have reached or exceeded the statutory retirement age, it depended on whether they have their retirement insurance or pension as a standard to decide if their labour contract shall be terminated or not. Such standard was maintained in the Interpretation (I) of the Supreme People's Court of Issues Concerning the Application of Law in the Trial of Labor Dispute Cases which was renewed in 2021 mainly according to the expressions in its Clause 6, Article 1 and Article 32. Nevertheless, this new judicial explanation remains silent on whether the relation between the employer and the over-aged employee without retirement remuneration is labour relation.

For now, most regional regulations as well as trial and arbitral calibers avoid giving a direct judgement on this problem as stated above. Instead, they tend to be focused on deciding which sorts of relations of over-aged employees are service relations, and on dealing with realistic issues such as work-related injury. For example, Article 12 of the Meeting Summary II of the Seminar on Legal Application Issues of Labour Dispute Cases of Beijing Higher Court and Beijing Labour Arbitration Committee regulates: “Personnel who is eligible to the old-age insurance, retirement pension, reached statutory retirement age, the employment relation between she/he and her/his former employer or new employer shall be conducted as service relation.” Such regulations could also be found in meeting summaries or documents from Chongqing Higher Court, Jiangsu Province Higher Court and Labour Arbitration Committee, Guangdong Higher Court, etc.

 

2. The Recognition of the Nature of the Relations with foreign over-aged Employees

Foreign employees who have exceeded China’s statutory retirement age face certain special particularities in terms of their employment relations and other issues. In judicial practice, for the foreign employees who fulfil China’s employment requirements, China’s statutory retirement age still serves to be the milestone for defining the nature of their employment relations in principle, that is, after reaching China’s statutory retirement age, a foreign employee’s labour contract terminates after expiration therewith the labour relation with her/his employer shall be transferred into a service relation. Such principle has been demonstrated in cases, for instance, of Beijing region, No. 13316 [2013] of Chaoyang Civil Court, No. 4402 [2015] of Beijing No.1 Intermediate Court, No. 5326 [2018] of Beijing 0115, etc. Meanwhile, the eligibility to a retirement remuneration at home country of a foreign employee is also regarded as an important indicator for this reckoning. For example, in the case of No. 13316 [2013] of Chaoyang Civil Court, the court dictated that the concerned foreign employee was not a suitable subject of a labour relation not only because he had already reached China’s statutory retirement age, but also had started to enjoy an old-age remuneration at his home country, so that his labour contract should have been terminated.

 

According to Article 97 of China’s Social Insurance Law, expats working within China shall participate in social security referring to this law. Article 3 in Interim Measures for Social Insurance System Coverage of Foreigners Working within the Territory of China, foreigners lawfully recruited and employed by employers shall participate in the basic old-age insurance for employees, basic medical insurance for employees, work injury insurance, unemployment insurance and maternity insurance in accordance with the law. Therefore, it is the employer’s legal obligation to pay for the foreign employees’ social securities without promissory exemption. If the foreign employee is paying for her/his social security at home country in accordance with bilateral social security exemption agreements between China and 12 countries including Germany, South Korea, Denmark, Finland, Canada, etc., and has started to enjoy the retirement remuneration, such condition would also influence the recognition of the nature of her/his employment relation in China.

In addition, there are still some minority judgements that provided different results. In No. 01082 [2015] of Suzhou Intermediate Court, a foreign employee was recognised as qualified to be the subject of his labour relation despite that he had passed the retirement age even before his entry to the job since the court deliberated that the two parties had signed a written labour contract, his employment did not violate limitations on age regulated in Regulations on the Management of Employment of Foreigners in China as well as his employment had been approved after review by related authorities and had been certificated.

 

3. Work-Related Injury Problem for Over-Aged Employees

Work-related injury insurance is an important part of social securities. From the original aim of institution design, it should have been a separate and parallel branch to the old-age security within the social security system. The existence of labour relation provides a necessary premise for the access to work-related injury insurance, once the labour relation terminates, the qualification of subject to work-related injury insurance would also vanish. Yet in practice, over-aged employees who are not eligible for retirement remuneration turn to be the vacuum between the above two branches of social security system and their rights remain vaguely unprotected. As a result, normally there are two kinds of regional practices: to extend the range of work-related injury insurance to this group, or to settle the problem through civil compensation.

Ministry of Human Resources and Social Security held in its Reply to the No. 2376 Recommendation of the 5th Session of the 12th NPC (No. 2 [2017]) that in the work-related injury insurance system, the labour relation between the employer and the employee is the premise of work-related injury insurance relation, so if there is no labour relation between the over-aged employee and her/his employer, the Regulation on Work-Related Injury Insurances is not applicable for the confirmation of work-related injury. The ministry divided the responsibility of work-related injury of such group, in its Opinions on Several Issues concerning the Implementation of the Regulation on Work-related Injury Insurances (II), into two types. If the employee still works for the former employer before she/he turned over the retirement age, the work-related injury insurance responsibility shall be attributed to the employer, and if the employer hired over-aged or old-age security enjoyed employee, paying for her/his work-related injury insurance at the same time, the Regulation on Work-related Injury Insurances shall be applicable. Such regulation stayed in step with the rules of the Supreme Court.

For rural migrant workers in cities who are not covered by social security due to historical reasons, the Supreme Court held that they are eligible for work-related injury insurance. Regional regulations keep in accordance with it such as those made by Beijing Higher Court and Beijing Labour Arbitration Committee.

Furthermore, there is still another group of over-aged employees who are not entitled to old-age insurance, not working for the former employer, not rural migrant workers in cities and the employer did not pay the work-related injury insurance for them. The major realistic cause for such circumstances is that the administrative authority of social security would not allow this group of employees to pay for social security. For now, no unified regulation has been made for it as clear divergences appear both in academic and in practical views. It requires an analysis combining local judicial and arbitrational conditions and the specific situation on the eligibility for social security of the employee to determine.

 

4. Legal Practical Recommendation

The retirement mechanism within China’s current labour law system is experiencing a transferring phase before it could integrally and stably be formed under a unified framework and become a durable scope to tackle specific problems. Therefore, in practice, the employer may pay additional attention to the related problems of over-aged employees, set up investigations and pre-arrangements in advance in order to achieve labour compliance and to avoid unnecessary waste of cost.

We recommend the employer to specially cover such issue within the current human resource management system. By establishing an exclusive module, the employer may ensure to detect potential risks in time, improve and optimize concerned regulatory frameworks, the context of labour contract and the arrangement of employment. On such basis, the employer may further analyse each and every specific problem and make sure that none of the particular situations in every single individual case has been overlooked thus to construct an optimal management on over-aged employees.

 

Editor: Yang Mingyu