The arbitration view that lasted 16 years may have a major change, Shanghai employers lose the option of open-ended labor contracts?

Since January 2025, the Internet has circulated a message that "after Shanghai has signed two fixed term labor contracts, the worker proposes to renew the labor contract without a fixed term, the employer has no right to terminate the labor contract." This news has not been released or confirmed by any official agency, and whether it is true has not been concluded and needs to be further verified. However, one stone aroused a thousand layers of waves, the issue of whether the employer in Shanghai still has the option of non-fixed term labor contract has once again caused concern.

This paper will analyze the possible changes and impacts of this problem in the future period of time, and suggest that employers in Shanghai should adjust their internal employment management mechanism as soon as possible to adapt to major changes and adjustments. If a labor dispute has occurred, the defense idea should be adjusted as soon as possible to avoid economic losses and labor disputes caused by information omissions and incorrect understanding of laws and regulations.

Ⅰ. Differences in views of past adjudications

A labor contract without a fixed term refers to a labor contract with no definite termination time as agreed between the employer and the laborer.

Article 14 of the Labor Contract Law of the People's Republic of China stipulates that if a labor contract with a fixed term has been concluded for two consecutive times and the worker does not fall into the circumstances specified in paragraphs 1 and 2 of Articles 39 and 40 of this Law and the labor contract is renewed, the worker proposes or agrees to renew or conclude the labor contract, unless the worker proposes to conclude the labor contract with a fixed term, A labor contract with no fixed term shall be concluded.

In a word, this article specifies how to conclude a non-fixed term labor contract after the expiration of a fixed-term labor contract for two consecutive times. However, due to the differences in the understanding of this law in practice in different regions, arbitration courts have widely different opinions in judicial practice, which are mainly divided into two categories:

1. Beijing as the main representative of the view (for ease of expression, hereinafter referred to as the "first view") believes that after the expiration of two consecutive fixed-term labor contracts, the employer does not have the right to refuse to sign an open-ended labor contract, that is, as long as the worker proposes to sign an open-ended labor contract (or has not proposed to sign an open-ended labor contract), However, it is not clearly stated that a fixed term contract is signed), then the employer must sign a non-fixed term labor contract.

For example, the Beijing Higher People's Court and the Beijing Labor Dispute Arbitration Commission "Answers to Questions on the application of Law in Hearing Labor Dispute Cases" : "16. After the expiration of the second fixed term labor contract, the employer issues a notice of termination of the labor contract, and the worker claims that the employer should pay compensation for illegal termination of the labor contract. Do you support it? If the employee does not comply with the provisions of Article 39 and Article 40 (1) and (2) of the Labor Contract Law, the employer directly issues a notice of termination of the labor contract (relationship) after the expiration of the second fixed term labor contract, and does not comply with the provisions of Article 14 (2) (3) of the Labor Contract Law, it shall be deemed as illegal termination of the labor contract (relationship). The worker's claim that the employer should pay compensation for illegal termination of the labor contract should be supported."

Another example: The First Court of Civil Trial of the Zhejiang Provincial High People's Court, the Zhejiang Provincial Labor Dispute Arbitration Court, "Answers to several questions on the trial of labor dispute cases (II)" : "Five, the employer and the worker have concluded two consecutive fixed term labor contracts, after the expiration of the second labor contract, the worker's request to conclude a non-fixed term labor contract, should it be supported? Answer: The employer and the worker have concluded two consecutive fixed term labor contracts, after the expiration of the second fixed term labor contract, the worker in accordance with the provisions of Article 14, paragraph 2, paragraph 3 of the labor contract law to renew the labor contract and request the conclusion of non-fixed term labor contracts, should be supported. The contents of the labor contract shall be determined by both parties through consultation in accordance with the principles of legality, fairness, equality, voluntariness, consensus through consultation and good faith. If there is no agreement through consultation, the provisions of Article 18 of the Labor Contract Law shall apply."

2. The view represented by Shanghai (for ease of expression, hereinafter referred to as the "second view") believes that after the expiration of the fixed-term labor contract for two consecutive times, the employer can refuse to sign the non-fixed-term labor contract by not renewing the labor contract. In this case, it is not illegal to terminate the labor contract.

For example, Opinions on Several Issues concerning the Application of the Labor Contract Law issued by the Shanghai Higher People's Court on March 3, 2009 (Shanghai High Court [2009] No. 73), "IV. Several issues concerning non-fixed term labor contracts, (iv) After the employer and the worker have concluded several fixed term labor contracts in a row, When renewing a contract, a contract with no fixed term shall be concluded. The provisions of Article 14 (2) (3) of the Labor Contract Law shall refer to the circumstances in which a laborer proposes to sign a labor contract with an indefinite term after he has concluded a fixed-term labor contract with the employer for two consecutive times and when the contract is renewed for a third time."

The wording of the above provisions is more obscure, but the expression of "when renewing the contract with the worker for the third time" emphasizes that the employer must have the intention to renew the labor contract, in other words, if the employer does not renew the labor contract, the law does not apply, and thus the purpose of refusing to sign an open-ended contract is realized. It has been nearly 16 years since the Shanghai High Court issued its opinion in March 2009.

Ⅱ. the view of Shanghai has changed

In addition to the different views on the signing of non-fixed term labor contracts in different places, in fact, there has been a certain swing at the national level, but in recent years, a more unified view has been gradually established, that is, after the signing of a second fixed-term labor contract, the employee proposes to renew the non-fixed term labor contract, the employer has no right to terminate the labor contract. Further establish the position of the first view.

In our view, judging from the following guiding signals, I am afraid that the second view will change:

1. In the Interpretation of the Labor Contract Law of the People's Republic of China, prepared by the Legislative Affairs Committee of the Standing Committee of the National People's Congress, it is mentioned that: "The proportion of labor contracts with no fixed term in the whole society is too low, and the problem of short-term labor contracts is serious." It is reasonable to ask the employer to renew the contract, and the employer should continue to use the worker."

From the wording analysis, the point of view of the National People's Congress Legal Work Committee tends to be that the employer shall not refuse to sign the labor contract with no fixed term.

2. In the Guidance for the Trial of Labor Dispute Cases prepared by the First Civil Trial Division of the Supreme People's Court: "After the expiration of the second contract, the employer still has the right to terminate the contract", "the condition of" renewal of the labor contract "in Article 14 (2) (3) of the Labor Contract Law actually implies that the conclusion of an open-ended labor contract should occur when both parties agree to renew the labor contract again".

This point of view is actually the explanation and recognition of the second point of view, indicating that the second point of view is not groundless, and has logical and self-consistent roots.

3. In the "Understanding and Application of the Supreme People's Court's New Judicial Interpretation of Labor Disputes (I)" published in 2021, the views of the People's First Division of the Supreme People's Court have changed, they believe that "due to the large disputes in practice, we must further investigate and demonstrate, and we do not give biased opinions here for the time being", "All localities can still continue the local usual practice to make a determination".

The argument acknowledged the gap between the first and second views and was deeply rooted in the fact that the Supreme Court failed to conclude that the gavel rate was consistent.

4. However, in recent years, the views of the Supreme People's Court have become increasingly clear and firm: In a batch of typical cases issued on April 30, 2024, the Supreme People's Court stated: Article 14 (2) (3) of the Labour Contract Law provides that after a Labour contract with a fixed term has been concluded for a second consecutive time, a worker's request to conclude a contract with a non-fixed term is treaty-making power and the employing unit may not refuse to do so.

5. In June 2024, in the sixth batch of selected questions and answers on FADnet, the Supreme People's Court once again stressed that after the expiration of the fixed-term labor contract for two consecutive times, the worker requests the renewal of the non-fixed-term labor contract, and the employer does not agree to renew the contract, it shall bear the responsibility for illegally terminating the labor contract.

6, with the Supreme People's Court and other higher authorities continue to release guidance signals, in January 2025, the Internet spread a message "Shanghai signed two fixed term labor contracts, workers proposed to renew the labor contract without a fixed term, the employer has no right to terminate the labor contract."

To sum up, we believe that under the clear and firm signal and background, it is only a matter of time before the second point of view turns to the first point of view, which provides certain legal support for protecting workers' rights and interests and establishing long-term and stable labor relations during the economic downturn, but the impact on employers can only be left to the market and practice to answer.

Ⅲ. How do employers respond to changes

1. Consult a professional lawyer in labor law as soon as possible to seek comprehensive and reasonable legal advice while the trial view has not yet been authoritative

The signing of non-fixed term labor contract itself is a typical representative of difficult problems in labor law, many non-professionals for the Shanghai area of non-fixed term labor contract signing option issue, but also only know one, do not know the other, blindly fall into the wrong view of overconfidence.

However, once the first view is applied to the Shanghai area, it will lead to a major change in the internal labor system of enterprises, and if it is still on paper and behind closed doors, I am afraid that the best opportunity for compliance will be missed. Therefore, we recommend that employers in the Shanghai area should seek help from well-informed and experienced labor law lawyers as soon as possible to prioritize internal compliance while the dust is still settling, so as to avoid negative cases or internal labor disputes.

2. Pay attention to the term of the first fixed term labor contract, and carefully sign the second fixed term labor contract

If the employer is worried about not being able to refuse to sign an open-ended labor contract, then the first view has an implicit horror: Once the second fixed-term labor contract is signed, as long as the worker is not dismissed, the employer must accept the signing of the non-fixed-term contract. That is to say, as long as the second fixed-term contract is signed, the employer loses the right to terminate the labor contract. In the whole life process of labor and employment, the employer will have and only have one opportunity to terminate the labor contract. That's when the first fixed term labor contract expires.

Therefore, the employer must cherish the termination right of the first labor contract. Once the right to terminate the contract is missed, the second contract, once signed, will probably lead to the result of non-fixed term labor contract.

3. Inspired workers to take the initiative to renew fixed term labor contracts for the third time through measures such as salary and benefits

Article 14 of the Labor Contract Law leaves a possibility for the employer to sign a fixed-term labor contract, that is, "the laborer proposes to sign a fixed-term labor contract". Therefore, how to realize that the laborer first proposes to sign a fixed-term labor contract on his own initiative is the key to realize the non-signing of non-fixed-term labor contracts.

The employing unit shall not reduce the working conditions when renewing the labor contract, but whether to improve the working conditions and what kind of working conditions to improve belong to the employing unit's employment autonomy. Through the formulation of updated salary and welfare benefits or job promotion, equity incentive and other plans, it can effectively guide and inspire the workers to sign a fixed term labor contract. For outstanding talents, constantly challenging themselves to create value, not only for the enterprise to create value, but also the embodiment of self-achievement, and long-term fall in the static labor conditions, fear will kill personal will, is not conducive to enterprise innovation and progress.

4. For labor disputes that have already occurred, the defense ideas should be adjusted as soon as possible to reach a reasonable settlement plan

Although the Internet information is not yet conclusive, with the passage of time, if the tribunal adopts the first view, it will have a 180 degree change in the judgment results of labor disputes that have already occurred. Therefore, the employer should be prepared for danger, take into account the opinion of the upcoming trial, construct a new defense idea and organize the submission of relevant evidence. Under the arbitration or court mediation, if the conditions are ripe, you can also consider accepting the settlement or mediation plan, and truly achieve the conclusion of the case, no sequelae, and no adverse demonstration effect on other employees.

Forethought makes success, failure makes failure. After reading this article, I hope that employers can keep thinking about the following questions and prevent problems before they happen.

1. How to adapt to the changes and adjustments of judges' opinions?

2. How to adopt internal compliance in response to policy changes?

3. How to know the major changes of adjudication caliber first-hand?

4. How to win an arbitration case for an open-ended contract dispute?