New rules on labor dispute from reading | supreme judicial interpretation 2 (draft) depth resolution

On December 12, 2023, 11 years after the last substantive legislation or interpretation of the Labor Law, the Supreme People's Court issued the Interpretation (II) on Issues concerning the Application of Law to the Trial of Labor Dispute Cases (Draft for Comments) and solicited public opinions. Although the interpretation is currently in the stage of soliciting opinions, many provisions of this interpretation have a significant impact on the handling of existing labor dispute cases. Based on the current judicial practice and the cases handled by myself, this paper shares and analyzes the views as follows:

The authors are Dong Chuanyu, Zhang Heng, Lou Panpan, Geng Yichen and Yang Tianzhi

Supreme People's Court

Interpretation on the application of Law in the Trial of Labor Dispute Cases (II)

(Draft for Comments)

Article 1 The employer shall pay labor remuneration to the employee in the form of equity incentive based on labor relations, and the dispute arising from the employee's request to the employer to pay the object of equity incentive or compensate for the loss of equity incentive shall be a labor dispute, except the dispute arising from the exercise of equity incentive. If the party refuses to accept the award made by the labor dispute arbitration institution and brings a lawsuit according to law, the people's court shall accept the case.

Comments from lawyers:

In the past, equity incentive was a commercial dispute or labor dispute, which has always been a controversial topic.

1. From the perspective of acceptance, in view of the fact that equity incentive involves company law issues, labor arbitration organs often classified such cases as commercial disputes and refused to accept them in the stage of labor arbitration. However, commercial cases charge litigation fees based on the subject amount, while labor dispute litigation costs are almost zero.

In fact, as for the issue that equity incentive is essentially the consideration for workers to provide labor, it was mentioned in the typical cases of labor disputes related to equity incentive issued by Beijing No. 1 Intermediate People's Court in May 2023, and it has been determined that such issues can be accepted as labor dispute cases. In addition, similar views are also held in the precedents or internal arbitration caliber of other cities. We believe that with the continuous upgrading of incentive means, equity incentive and bonus commission are essentially means to encourage workers to create more value.

2. From the perspective of trial, there are various ways for employers to implement equity incentive, including restricted equity, options and virtual equity. Among them, restricted equity refers to the stock of the company that the incentive object obtains free or low price transfer and other rights subject to restrictions according to the conditions stipulated in the equity incentive plan; Option refers to the right that the company gives the incentive object to purchase the company's common stock at a pre-agreed price within a certain period of time; Virtual shares are the right granted by the company to the incentive object to obtain the benefits brought by the rise of stock price in a specified amount in a certain period and under certain conditions. No matter what kind of equity incentive instrument, equity grant is generally divided into three steps: specifying equity incentive plan or system, signing equity incentive agreement to grant incentive equity, and exercising benefit when the incentive object meets the conditions. In practice, relevant labor disputes often occur in the exercise stage of incentive objects.

This Article stipulates that “any dispute arising from the payment of labor remuneration to workers in the form of equity incentive and the worker's request for the employer to pay the object of equity incentive or compensate for the loss of equity incentive shall be a labor dispute, except the dispute arising from the exercise of equity incentive.” It is mainly based on the different objects of dispute to decide whether it belongs to labor dispute. If the unit is required to give equity dividends, earnings or economic losses caused by inability to exercise rights, it belongs to labor dispute; If the subject matter of dispute is equity because of exercise of rights, and matters such as equity transfer and industrial and commercial change are involved, it does not belong to labor dispute and should be settled by traditional commercial dispute clauses such as Company Law and Civil Code. The provisions of “subject matter of equity incentive payment” stipulated in this Article are relatively vague and will lead to different understandings. It is suggested to amend them to “dividends and income from equity incentive payment”, which is closer to the concept of labor remuneration and easier to understand.

Article 2 If a party fails to raise a defense against limitation of arbitration, the people's court shall not explain the issue of limitation of arbitration.

Article 3 Where a party fails to raise a defense of limitation for arbitration during the arbitration period, but raises a defense of limitation for arbitration during the first instance, the people's court shall not support it, except where it can prove on the basis of new evidence that the other party's claim right has exceeded the limitation period for arbitration.

The people's court shall not support a party's application for a retrial or a retrial defense on the grounds that the arbitration limitation period has expired if it fails to raise a defense against the limitation of arbitration in accordance with the provisions of the preceding paragraph.

(Article 2 and 3)

In a nutshell, a statute of limitations defense has only one chance and no more if it is missed. From December 23 to 24, 2015, the Supreme People's Court pointed out in the sixth opinion of the minutes of the eighth National Conference on Civil and Commercial Trials held in Beijing: “42. If the party does not file a defense that exceeds the period of arbitration application at the arbitration stage, and the labor and personnel arbitration institution makes an entity award, the party's defense at the litigation stage on the grounds that the arbitration period exceeds the limitation period shall not be supported. 43. If the labor and personnel arbitration institution makes a decision not to accept the arbitration application on the ground that the arbitration application of the party has exceeded the statutory limitation period, and the party brings a lawsuit, it shall examine whether the arbitration application of the party has exceeded the statutory limitation period, except that the party has not defended the arbitration application by exceeding the statutory limitation period during the litigation.”

In the similar cases we have handled, especially in the stage of labor arbitration, we have found that in some cases awarded by the arbitration Commission (when calculating the amount of some claims), it will take the initiative to apply the limitation of arbitration and exclude the amount exceeding the limitation of arbitration. In fact, it is an act of overreaching and sabotaging the parties' rights of arbitration litigation. This interpretation emphasizes and makes clear this point again. It should be taken seriously in future cases.

In addition, in litigation, some courts hold that the defense of limitation of arbitration has not been raised at the arbitration stage, and those who raise the defense of limitation of limitation at the litigation stage will still be examined. However, most courts held that if no limitation defense was filed at the arbitration stage, it would not be examined at the litigation stage, similar to the provisions of the above minutes of the Supreme People's Court.

The provisions of the second and third articles of this judicial interpretation are also consistent with the opinions of the minutes of the Supreme People's Court, which can be said to eliminate the past differences.

Article 4 Where an employer fails to conclude a written labor contract with a worker for a fixed period of time or a labor contract for the completion of a certain task, and the worker requests the employer to pay the second time of the unconcluded labor contract, the provisions of Paragraph 1 of Article 27 of the Labor Dispute Mediation and Arbitration Law shall apply to the limitation period of arbitration. It shall be counted from the next day after the completion of one month from the date on which the employing unit shall conclude the labor contract.

Where an employing unit fails to conclude a written open-ended labor contract with a laborer according to law, and the laborer requests the employing unit to pay the second time of the salary not concluded in the labor contract, the limitation period of arbitration shall be governed by paragraph 1 of Article 27 of the Labor Dispute Mediation and Arbitration Law, which shall be calculated from the next day when the employing unit shall conclude the labor contract.

Comments from lawyers:

In practice, opinions of different regions are also in the state of “a hundred flowers bloom” on the issue of the limitation of double wage arbitration. Take the limitation of double wages without a written labor contract as an example:

The Zhejiang Provincial High Court held that the limitation of arbitration should be calculated from the date when the employer and the employer conclude the labor contract or the date when the two parties are deemed to have concluded the labor contract with no fixed term. (People's Court No. 1 of Zhejiang Higher People's Court “Answers to Some Difficult Questions on the Trial of Labor Dispute Cases”)

The Jiangsu Provincial High Court held that one year began from the day after the end of the illegal act of not signing a written labor contract; If the laborer has been working in the employing unit for one year, the limitation for the laborer to apply for arbitration shall be one year from the next day after the expiration of one year. (Guiding Opinions of Jiangsu Provincial Labor and Personnel Dispute Arbitration Commission of Jiangsu Higher People's Court on Hearing Labor and Personnel Dispute Cases (II))

The above view actually regards the double wage difference as a whole, and the limitation of arbitration starts from the date when the employer and the worker conclude the labor contract or the date when the two parties are deemed to have concluded the labor contract with no fixed term.

The Beijing High People's Court held that the limitation of time can be calculated one year ahead from the date of claiming the right, and the double wage actually paid shall not exceed 12 months, and the double wage shall be calculated according to the standard of the wage normally paid by the employer at the corresponding time when the labor contract is not concluded. (Minutes of Seminar of Beijing Higher People's Court and Beijing Labor Dispute Arbitration Commission on the Application of Law in Labor Dispute Cases (II))

The Shanghai High People's Court holds that the limitation of arbitration shall be calculated on a monthly basis from the second month when a written labor contract has not been signed. (Shanghai High People's Court No. 34 [2010]).

According to the opinions of the Beijing and Shanghai High courts, it is actually held that the double salary is calculated on a monthly (day) basis, that is, the arbitration limitation period of one year is calculated separately on a monthly (day) basis, and the difference of double salary exceeding one year is not supported.

The judicial interpretation of this article shall be in agreement with the opinions of the Beijing and Shanghai High courts, and the limitation of arbitration for the difference of double wages shall be calculated on a daily basis from the date of the occurrence of double wages. The limitation of arbitration shall be one year, and the limitation of arbitration may be determined by one year forward from the date of claiming rights.

Article 5 The People's court shall support a laborer's claim that the limitation of arbitration of the employer's payment of unpaid annual leave pay and overtime pay shall be subject to the provisions of Paragraph 4 of Article 27 of the Labor Dispute Mediation and Arbitration Law.

Comments from lawyers:

According to the Labor Dispute Mediation and Arbitration Law, the limitation period for applying for arbitration of labor disputes is one year, which can be divided into two categories according to the starting limitation period of arbitration:

1. Limitation of general arbitration. The limitation period of arbitration shall be calculated from the date when the parties know or should know that their rights have been infringed. In case of termination of the labor contract, the limitation period of compensation or compensation shall be calculated from the date of resignation. The limitation of the one-time disability employment grant arising from work-related injury is one year, starting from the commencement of resignation; If the company has not paid social insurance, the medical expenses incurred by the employees may be required to be paid by the Company, but there is a limitation of time, which shall be counted for one year from the date of actual occurrence.

2. Limitation of special arbitration. Where there is a dispute arising from the delay in payment of labor remuneration during the duration of the labor relationship, the laborer's application for arbitration shall not be subject to the limitation period of arbitration stipulated in the first paragraph of this Article. However, if the labor relationship is terminated, such notification shall be made within one year from the date of such termination. In short, due to labor compensation disputes, if the employee does not leave the company, there is no limitation; If the employee dimission, the limitation period is one year from the dimission. Labor compensation includes salary, bonus, performance, overtime pay and so on.

This explanation has no small shock for employers in Shanghai area. The reason is that Shanghai has always adhered to the general arbitration limitation for annual leave salary in the past. Article 1 of the Minutes of the Seminar on Opinions on Difficult Issues of Labor and Personnel Disputes in “Three Provinces and One City” in the Yangtze River Delta Region (2019) also has similar provisions. “Paying workers for unpaid annual leave is a legal compensation obligation that employers should perform. The labor and personnel dispute arbitration COMMISSION shall accept A laborer's REQUEST for the employer to pay the unpaid annual leave if it is within the scope of accepting cases as stipulated in Article 2 of the Labor Dispute Mediation and Arbitration Law of the People's Republic of China. The effect of the right of claim shall be calculated from January 1 of the year following the annual leave in accordance with the provisions of paragraph 1 of Article 27 of the Labor Dispute Mediation and Arbitration Law of the People's Republic of China; If the employer, with the consent of the laborer, has arranged the laborer to take annual leave in different years due to the needs of production or work, the limitation of the right of request shall be postponed to January 1 of the next year. If the labor relationship has been dissolved or terminated, it shall be counted from the date of such dissolution or termination.”

However, in recent years, the view of arbitration limitation on annual leave has changed, and special arbitration limitation has been gradually used. If the judicial interpretation is finally implemented, workers in Shanghai can theoretically claim the annual leave pay not taken 10 years ago, and employers need to retain evidence to prove whether employees enjoyed the annual leave 10 years ago, which poses a challenge to employers. It remains to be seen whether this interpretation is retained in the final draft.

Article 6 Protection of rights and interests of laborers who have reached the statutory retirement age but have not yet enjoyed the basic endowment insurance treatment Laborers who have reached the statutory retirement age but have not yet enjoyed the basic endowment insurance treatment shall provide labor to the employing unit. The people's court shall support a laborer's request to handle disputes over remuneration, working hours, rest and vacation, labor protection, protection against occupational hazards and treatment of work-related injury insurance with reference to applicable labor laws and regulations.

Comments from lawyers:

Reach legal retirement age, but the laborer that has not enjoyed basic endowment insurance treatment, commonly known as “half retire personnel”. In practice, the semi-retired personnel and the employer can establish either a labor relationship or a labor service relationship. However, with the increasing aging and postponing retirement on the agenda, the rights and interests of retirees and semi-retired people are bound to be protected. This Article protects the benchmark labor rights and interests of such personnel to a certain extent, stipulating that labor remuneration, working hours, rest and vacation, labor protection, occupational hazard protection and industrial injury insurance treatment and other rights and interests are no longer based on labor or labor service relations, but uniformly regulated in accordance with labor laws and regulations.

The content of this ARTICLE is similar to the provisions of special relations in the Notice of Shanghai Labor and Social Security Bureau on Issues related to Special Labor Relations (Shanghai Labor Protection Guan Fa (2003) No. 24), which can be used for reference.

Article 7 Where a contractor qualified as a labor subject subcontracts or subcontracts the contract business to an organization or individual not qualified as a labor subject, and the laborer hired by the organization or individual requests confirmation that the contractor is the unit responsible for the labor subject and bears the labor subject responsibilities such as paying wages and providing work-related injury insurance benefits, The people's court shall support it.

Article 8 Where an organization or individual that does not have the qualification of an employer is affiliated with other units for external business, and a worker recruited by the organization or individual requests confirmation that the affiliated unit is the employer responsible for paying wages and providing work-related injury insurance benefits, the people's court shall support the request.

(Articles 7 and 8) Lawyer's comments and analysis:

The situation explained in Article 7 and Article 8 exists in the fields of construction, processing and installation for a long time, and the interpretation makes it clear that the liability of the employer is not based on the existence of labor relations. Similar views are also mentioned in Article 3 of the Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Administrative Cases of Work-related Injury Insurance. However, it should be noted that in this interpretation, in addition to assuming the liability for work-related injury, Responsibility for the payment of wages was also made clear.

Article 9 Where a laborer who is employed alternately or at the same time by multiple employing units requests confirmation of labor relations, the following circumstances shall be handled separately:

(1) Where a written labor contract has been concluded and a laborer requests to confirm the labor relationship in accordance with the labor contract, the people's court shall support it;

(2) Where no written labor contract has been concluded and a laborer requests confirmation of labor relations, the people's court may make such confirmation based on factors such as employment management behavior, working hours, work content, payment of wages and remuneration, and payment of social insurance.

Where a laborer requests that the employer jointly bear the liability, the people's court shall support it, except where the employer has made an agreement on the salary, remuneration and welfare treatment of the laborer according to law and the laborer has agreed to it.

Comments from lawyers:

Workers who are alternately employed by multiple employers or at the same time will face two questions: whose employee am I? Who should I turn to for protection?

Therefore, the interpretation of this Article stipulates that, in principle, the written labor contract shall prevail, and in the absence of a labor contract, the confirmation shall be made according to the employment behavior. However, the worker may request the employing unit to jointly bear the responsibility, except for the agreement made in special circumstances. In practice, alternate, cross or simultaneous employment often occurs between affiliated companies, or between enterprises that have no affiliated relationship but have a cooperative relationship. Due to the complexity and confusion of employment arrangements, it is difficult for workers to protect their rights in case of any behavior that damages the rights and interests of workers. This Article is interpreted to avoid similar situations and is clearly stipulated.

Article 10 A lawfully established resident representative office of a foreign enterprise may be a party to a labor dispute case.

Where a party applies to add a foreign enterprise as a party according to law, the people's court shall support it.

Comments from lawyers:

According to the Regulations on the Registration and Administration of the Resident Representative Offices of Foreign Enterprises, the resident representative offices of foreign enterprises refer to the offices established in China by foreign enterprises in accordance with the provisions of the Regulations to engage in non-profit activities related to the business of the foreign enterprise. It is generally believed that representative offices do not have the status of legal persons and should be recruited through external service agencies, rather than directly recruiting Chinese workers. For example, Article 5 of the Regulations of Beijing Municipal People's Government on the Employment of Chinese Employees by the Permanent Representative Offices of Foreign Enterprises stipulates: “The recruitment of Chinese employees by the permanent representative offices of foreign enterprises must be handled by foreign affairs service units, and the recruitment of Chinese employees by the permanent representative offices of foreign enterprises shall not be conducted without authorization or by entrusting other units or individuals.” Paragraph 1 of Article 8 states: “Foreign service units shall conclude labor contracts with Chinese employees in accordance with the provisions of the Labor Law and pay social insurance fees for Chinese employees in accordance with the law.” Article 10 of the Regulations of Shanghai Municipality on the Administration of the Resident Representative Offices of Foreign Enterprises (for Trial Implementation) stipulates: “Where a resident representative office employs Chinese staff, it shall entrust a foreign affairs service unit or other units designated by the Chinese government to handle the situation. Resident representative offices shall not recruit employees within the territory of China on their own.”

On the subject of labor cases, the interpretation of this article is in accordance with the opinion of Shanghai High People's Court. Article 22 of Opinions of Shanghai High People's Court on Several Issues Concerning the Application of Labor Contract Law (Shanghai High People's Court (2009) No. 73) stipulates that if an overseas company sets up an office in Shanghai, the office has legally gone through registration procedures and recruited workers through foreign service agencies in accordance with relevant laws and regulations. If a laborer has a dispute with the office over relevant labor rights and obligations, the office may act as a party to the labor dispute; If the office fails to recruit workers through foreign service agencies in accordance with relevant laws and regulations, and the workers have disputes with the office over remuneration payment and other issues, the dispute shall be handled as a civil dispute, and the office may be a party to the civil lawsuit. If the foreign enterprise is the actual unit of the laborer, it may, with reference to the relevant provisions on labor dispatch, determine its qualification as the subject of litigation according to law.

Article 11 Under any of the following circumstances, the People's Court shall not support a request by a foreigner or stateless person to confirm the existence of a labor relationship with the employing unit:

(1) failing to obtain employment certificates according to law;

(2) continuing to work in the employing unit beyond the term of use of the employment certificate;

(3) having been disqualified for residence by a Chinese public security organ for violating Chinese laws;

(4) failing to change or apply for a new employment certificate according to law after changing the work unit, employment area or occupation;

(5) other circumstances prescribed by laws and administrative regulations.

Foreigners who have obtained the permanent residence qualification and those who meet the requirements for exemption from employment permits and employment permits shall be excluded from the circumstances specified in Item 1, Item 2 and Item 4 of the preceding paragraph.

Comments from lawyers:

In judicial practice, the situation of no employment certificate, expiration of employment certificate, and inconsistency between employment certificate and actual employment unit is generally recognized as illegal employment because of violation of mandatory laws and regulations, and foreigners and stateless persons have not established labor relations with employers.

The interpretation of this Article has added a situation in which “the residence qualification of the Chinese public security organ has been cancelled due to violation of Chinese laws”. Because there is no residence qualification in the country, of course, can not continue to maintain labor relations with the employer.

Article 12 Where a resident of the Hong Kong Special Administrative Region, the Macao Special Administrative Region or the Taiwan region enters into a Labour contract with an employer on the Mainland before July 28, 2018 without obtaining an employment certificate according to law, and a worker requests to confirm the existence of a Labour relationship with the employer before July 28, 2018, the People's Court shall not support it; If a worker requests to confirm the existence of a labor relationship with the employer after July 28, 2018, and the legal relationship between the two parties meets the constitutive requirements of a labor relationship, the people's court shall support it.

Article 13 Where an employing unit has not concluded a written labor contract with a laborer according to law, the second time of wage to be paid to the laborer shall be calculated on a monthly basis. If it is less than one month, it shall be calculated on the payroll day of that month.

Comments from lawyers:

In the past, some regions (Zhejiang, Shandong, Jiangsu, Chongqing, etc.) held that the time effect of double wage should be calculated as a whole. If the worker's claim for paying double wage for up to 11 months conforms to relevant laws and regulations, and the claim for double wage for the last month does not exceed the limitation of arbitration, it should be fully supported. The interpretation of this article makes it clear that there is no written labor contract in which the calculation method of the second time wage is calculated on a monthly basis, so the arbitration limitation of the second time wage is calculated on a monthly basis, rather than the view of “calculated as a whole” as recognized in some regions in the past.

Article 14 Where a laborer requests an employer to pay the second time of wage without a written labor contract because a written labor contract has not been concluded under the following circumstances, the people's court shall not support:

(1) it has not been concluded due to force majeure;

(2) it has not been concluded due to the reasons of the laborer himself;

(3) Due to the circumstances specified in Article 45 of the Labor Contract Law, Article 17 of the Regulations on the Implementation of the Labor Contract Law and Article 19 of the Trade Union Law, the labor contract has not been concluded within the period of expiration and extension;

(4) other circumstances prescribed by laws and administrative regulations.

Comments from lawyers:

The original purpose of the legislation on double the salary without written labor contracts is to increase the signing rate of written labor contracts between employers and workers and curb the illegal employment behaviors of employers without signing labor contracts with workers. However, in the judicial practice of labor dispute cases, if the fault and reason are not asked, Adopting a one-size fits all approach to require the employer to pay twice the salary of the unsigned written labor contract, on the one hand, it violates the legislative intention of the unsigned written labor contract, on the other hand, it may be used by some "ulterhearted" workers to find various excuses not to sign the labor contract, and become a tool for their profits, resulting in the damage to the legitimate rights and interests of the employer.

This article makes clear provisions on the circumstances under which the employer does not pay twice the salary of the unsigned labor contract, so that the payment of twice the salary can better conform to its legislative intention in the judicial judgment of labor dispute cases. If the second item of this article is not stipulated due to the reasons of the worker himself, the non-payment of double wages is the highlight of this article and deserves attention. Article 3 of the Minutes of the Seminar on Opinions on The Trial of Difficult Labor and Personnel Disputes in “Three Provinces and One City” in the Yangtze River Delta Region (2019) also has similar provisions. The conclusion of labor contracts is the legal obligation of employers and workers. If the employers have evidence to prove that they have actively performed the obligation of concluding labor contracts, However, if the laborer refuses to conclude a labor contract or the laborer deliberately does not conclude a labor contract by taking advantage of the authority of being in charge of personnel, or the employer cannot conclude a labor contract with the laborer in time due to other objective reasons, the laborer therefore claims that the employer should pay twice the salary, it shall not be supported.

In addition, the third item of this article is also worth paying attention to. This item clearly excludes the “extension period of labor contract due to legal reasons” stipulated in the Labor Contract Law, the Regulations on the Implementation of Labor Contract Law, the Trade Union Law and other laws and regulations from the payment of double salary. In this way, when the employee has the situation of three periods, work-related injury and medical treatment period, the employer does not need to be the same as in the past. To send instructions or notices to employees about the disappearance of special circumstances that do not renew the contract but cannot be extended in order to avoid double wage liability.

Article 15 The People's Court shall not support the case in which a laborer requests the employer to pay the second time wage for the period in which the employer is deemed to have concluded the open-ended labor contract with the laborer on the grounds that the employer has not timely concluded the written labor contract under the circumstances specified in paragraph 3 of Article 14 of the Labor Contract Law.

Comments from lawyers:

The interpretation of this Article makes it clear that if a written labor contract is not concluded for more than one year, the legal consequence is that the employer and the worker have concluded an open-ended labor contract, and the second time salary is no longer supported. Article 20 of Opinions of the Supreme People's Court of the Ministry of Human Resources and Social Security on Issues Related to the Connection Between Arbitration and Litigation of Labor and Personnel Disputes (I) (Issued by the Ministry of Human Resources and Social Security (2022) No. 9) has similar provisions. If an employer fails to conclude a written labor contract with a worker for one year from the date of employment, It shall be deemed that an open-ended labor contract has been concluded with the worker on the date of one year from the date of employment. The Labor and personnel dispute arbitration commission and the people's court shall not support a laborer who requests the employer to pay the second time of salary after one year from the date of employment on the ground that the employer has not concluded a written labor contract under the circumstances mentioned in the preceding paragraph. This interpretation reaffirms this view.

Article 16 Where a laborer who meets the conditions for concluding an open-ended labor contract and the employing unit conclude a fixed-term labor contract through consultation, and the laborer requests the employing unit to pay the second-time wage for an open-ended labor contract, the people's court shall not support it.

Comments from lawyers:

The interpretation of this Article clarifies that when a laborer meets the circumstances of concluding a labor contract with no fixed term, the employer and the laborer have not concluded a labor contract with no fixed term but have concluded a labor contract with no fixed term, and the employer does not need to bear the legal responsibility of not concluding a labor contract with no fixed term, that is, it does not need to pay twice the salary of the labor contract with no fixed term. This article essentially respects the principle of autonomy of will between the worker and the employer. Even if the worker is eligible for the conclusion of an open-ended labor contract, if the fixed term labor contract is the expression of the true will of both parties and the employer does not commit fraud, coercion or take advantage of others, the fixed term labor contract shall have legal effect. Binding on both parties. If a laborer claims to pay twice the salary of a labor contract without a fixed period to the employer afterwards, it is against the principle of good faith and should not be supported.

Article 17 Where a laborer claims that he has concluded two consecutive fixed-term labor contracts with the employing unit under any of the following circumstances, the people's court shall support him:

(1) The extension of the term of the labor contract through negotiation between the employer and the laborer has reached a cumulative period of more than one year, and the extension period has expired;

(2) The employer and the laborer have agreed that the labor contract will be automatically renewed after the expiration of the term, and the extension period has expired;

(3) the laborer is still working at the original workplace or post, and the parties have entered into a Labour contract again by changing the name of the employer alternately, and the term has expired;

(4) entering into a labor contract again by other evading acts in violation of the principle of good faith, and the time limit has expired.

Comments from lawyers:

The interpretation of this Article clarifies the specific circumstances that can be regarded as “the conclusion of two consecutive fixed term labor contracts,” especially the second and third provisions are worthy of attention. If the interpretation of this Article is finally implemented, it will play an effective role in curbing the evasion of violating the principle of good faith and better protect the legitimate rights and interests of workers who can sign open-ended labor contracts according to law.

Article 18 Where an employer and senior management personnel, senior technical personnel and other personnel under confidentiality obligations agree on a non-competition clause during their employment, and a laborer requests to confirm that the non-competition clause is invalid on the grounds that the non-competition clause shall not be agreed upon during their employment or that they have not paid economic compensation, the People's Court shall not support it.

Comments from lawyers:

According to the general theory, due to the existence of personal dependence, workers have the duty of loyalty to the employer during the period of employment, so of course, they should not engage in the behavior that conflicts with their own work. The interpretation of this article clarifies the validity of the non-competition clause during the term of office, which can be said to be a response to the above views. Prior to this, Article 23 and Article 24 of the Labor Contract Law stipulate that the period of competition restriction is “after the termination or termination of the labor contract,” without explicitly stipulating that the period of employment is included. In practice, some employers and workers have agreed on the terms or agreements of non-competition during the term of office, requiring the workers to perform the content of non-competition during the term of office. In case of labor disputes arising from the lack of clear provisions in the law, there are both supporting and not supporting cases in the judgment of such cases, and the referee shall examine the necessity of non-competition according to the specific situation. To make a different judgment. The judicial interpretation of this Article actually supports the implementation of competition restriction during the term of office, and adjusts the performance period of competition restriction from “after the termination or termination of the labor contract” to “during the term of office” and “after the termination or termination of the labor contract.” We believe that compliance with non-competition agreements or terms during employment is actually in line with the purpose of legislation.

Article 19 The scope, region, period and other contents of the competition restriction stipulated in the competition restriction clause shall be in accordance with the trade secrets and confidential matters related to intellectual property rights that the worker knows and comes into contact with, and the commercial value and competitive advantage that the worker has formed. Where a laborer violates the non-competition agreement and the employing unit requires the laborer to return the economic compensation and pay liquidated damages paid during the period of violation of the non-competition agreement according to the agreement, the people's court shall support it.

Comments from lawyers:

As one of the few petitions that employers can initiate on their own initiative, non-competition cases have become a particularly important type of labor dispute cases. We have observed in practice that non-competition cases have an unhealthy trend of abnormally high amount and generalized restrictions. Many non-competition cases often agree on liquidated damages of millions of levels and sign non-competition agreements for all employees without distinction. The adjudication authority does not examine the reasonableness or necessity of such agreements, resulting in the abuse of competition restrictions and becoming a tool to combat competitors and restrict the flow of talents, which seriously deviates from the original intention of the legislation. It is clearly explained in this Article that the non-competition clauses shall be in accordance with the contents that the laborers know and contact, and shall not be expanded. In addition, non-competition can be stipulated to return the compensation for non-competition, which is a response and correction to the above chaos. We hope that in the future judicial practice, non-competition should be restored to its original nature and become a guarantee mechanism to protect the business secrets of employers, rather than become a tool to attack competitors and seek high compensation.

Article 20 Where a laborer has a labor dispute arising from the employer's unilateral adjustment of the job post or place of work, the employer shall bear the burden of proving the legality of the adjustment of the job post or place of work.

Where a laborer's claim to adjust his position or place of work violates the law, the people's court shall determine it under any of the following circumstances:

(1) it does not conform to the provisions of the labor contract or the rules and regulations of the employing unit;

(2) it is not objectively necessary for the production and operation of the employing unit;

(3) there is an adverse change in the wages and other working conditions of the laborer and the necessary assistance or compensation measures are not provided;

(4) the laborer is objectively incompetent for the job post after adjustment;

(5) discriminatory or insulting circumstances exist;

(6) violating laws, administrative regulations and other provisions.

The people's court shall support the employer's request for termination of the labor contract and payment of economic compensation on the grounds that the employer does not provide working conditions.

Comments from lawyers:

This interpretation is actually a unified view of the past involving the adjustment of jobs and working places, which caused many labor disputes. We found that in practice, some labor contracts have unclear provisions on the job position and working place, or have a large range of provisions, such as “working place Shanghai”, and the employer has the right to unilaterally adjust the job position and working place. Such provisions lead to some employers using the adjustment of the job position and working place to force the worker to rescission or terminate the labor contract. In order to achieve layoffs or avoid illegal termination, employers have greater initiative, and workers are in a relatively disadvantaged position on this issue, which is easy to cause labor disputes. Therefore, this article interprets the appropriate restrictive adjustment of the legality of the employer's adjustment of work posts and work places, and requires the employer to bear the burden of proof, so as to avoid the abuse of rights by the employer.

The interpretation of this Article confirms that employers may lawfully and reasonably adjust jobs and places according to specific production and operation conditions, and at the same time protect the legitimate rights and interests of workers and balance labor-capital relations according to law. This Article makes clear provisions on the circumstances under which the adjustment of work post or work place is suspected to be illegal, and emphasizes that the worker has the right to terminate the labor contract based on the above circumstances on the grounds of Item (1) of Article 38 of the Labor Contract Law “failing to provide labor protection or working conditions as agreed in the labor contract”, and requires the employer to pay economic compensation. In other words, this interpretation supplements the scope of application of unprovided Labour conditions. The employer has a higher duty of care for the legitimacy of the adjustment when adjusting the job position and place in the future.

Article 21 After an employer illegally rescinds or terminates a labor contract, under any of the following circumstances, it may be deemed that “the labor contract can no longer be performed” as stipulated in Article 48 of the Labor Contract Law:

(1) The labor contract has expired in the course of arbitration or litigation and there is no circumstance that the labor contract should be renewed or extended according to law;

(2) the worker has reached the statutory retirement age;

(3) laborers begin to enjoy basic old-age insurance benefits according to law;

(4) the employing unit is declared bankrupt;

(5) dissolution of the employing unit, except where such dissolution is necessary due to merger or division;

(6) a laborer has established a labor relationship with another employing unit, which seriously affects the completion of the work tasks of the employing unit, or refuses to terminate the labor contract with another employing unit upon the request of the employing unit;

(7) there are other circumstances under which the labor contract cannot be objectively performed.

Comments from lawyers:

It is not easy for workers to appeal for the restoration of labor relations, except for female employees in phase III and employees with work-related injuries. This judicial interpretation has further clarified the specific circumstances under which labor relations cannot be restored, and there is Article (7) to help. On the whole, it will be more difficult for workers to get support for the restoration of labor relations.

In combination with practice, there are the following common reasons that will lead to the labor contract is regarded as unable to continue to perform: post or department is cancelled, post is replaced, no trust basis may affect the normal operation of the enterprise. Although it is difficult to support the request for the restoration of labor relations, many workers still choose to use it as the request. The reason is that the compensation is limited by three times the social salary, and the salary level of senior managers is often much higher than the amount of three times the social salary, so the amount of compensation is low. Therefore, the workers negotiate with the company for the restoration of labor relations. Often can obtain higher separation compensation.

Article 22 Where the employer fails to organize the pre-departure occupational health examination for the worker engaged in the operation exposed to occupational disease hazards in accordance with the provisions of the work safety supervision and administration department and the public health administration department under The State Council, and the worker requests to continue to perform the labor contract after both parties reach an agreement through consultation to terminate the labor contract, The people's court shall support it, except under any of the following circumstances:

(1) Before the conclusion of the debate in the first-instance court, the employer has organized the worker to have an occupational health examination and the worker has not suffered from any occupational disease after the examination;

(2) The employer organizes a worker to undergo an occupational health examination, but the worker refuses the examination without justifiable reasons.

Comments from lawyers:

The interpretation of this article is to strengthen the protection of occupational hazards, even if the negotiation is terminated, if the employer fails to fulfill the legal obligation of occupational disease protection, the labor relationship can still be resumed. However, while protecting the rights and interests of workers, it is also necessary to avoid the abuse of special protection by workers, who refuse to carry out occupational health examinations related to occupational diseases, and exempt the employer from the responsibility. In addition, it also gives the employer the opportunity to remedy. If the employer does not suffer from occupational disease after inspection before the end of the first instance court debate, it can be determined that the termination of negotiation is legal and effective.

It should be noted that the circumstances under which the interpretation of this Article applies are different from those stipulated in Item (1) of Article 42 of the Labor Contract Law. Item (1) of Article 42 of the Labor Contract Law stipulates that the employer may not terminate the labor contract in accordance with the provisions of Article 40 and Article 41 of this Law.

The important significance of this interpretation is to remind employers and workers to pay more attention to occupational hazards, strengthen health examination, and fully protect the legitimate rights and interests of workers in special positions.

Article 23 The agreement between the employer and the laborer concerning the non-payment of social insurance premiums shall be invalid.

If laborer AND unit OF choose and employ persons agree NOT TO pay social INSURANCE premium, laborer asks to pay economic compensation by reason OF unit OF choose and employ persons NOT paying social insurance premium according to law, people's court should give support.

The people's court shall support the employer who requests the laborer to return the social insurance compensation already paid after making up the social insurance premium.

Comments from lawyers:

First of all, there are different views on whether the worker can appeal to be forced to terminate the labor contract after the two parties agree not to pay social security. The first view holds that workers violate the principle of honesty and credit, and do not support economic compensation; The second view holds that the payment of social insurance is a legal obligation. The interpretation of this article makes it clear that no matter whether there is an agreement to give up social security, the worker has the right to claim economic compensation. We believe that the employer and the worker agree to avoid paying social security is essentially a violation of laws and regulations, which should be invalid. The interpretation of this article is in essence a further emphasis on the legal obligation of paying social security.

In addition, in practice, social security supplement is the obligation of both sides of laborer and unit of choose and employ persons, supplement pay cost is divided into unit of choose and employ persons should pay and individual should pay these two parts. When workers file complaints about supplementary payment of social security, they may not be clear about the existence of personal payment, or even unwilling to pay personal payment, resulting in the failure to continue to promote the supplementary payment of social security, and the employer may passively evade the responsibility of supplementary payment. However, the interpretation of this article appears to give the employer the relevant right to recover the discount of social security on the surface, but in the future implementation process, whether it will increase the responsibility of the unit in a disguised way, resulting in the subsequent regulatory authorities blindly requiring the employer to bear the individual supplementary payment in advance in the practical process, and transfer the responsibility of recovery in a disguised way, which is worth thinking about and remains to be seen.

Article 24 If, after the expiration of the labor contract, the laborer is still working in the employing unit, and the employing unit has not expressed any objection for more than one month, the people's court may deem that both parties have renewed the labor contract on the original terms, and the employing unit shall conclude a written labor contract with the laborer.

If it is in accordance with the conclusion of an open-ended labor contract, the people's court may regard the existence of an open-ended labor contract relationship between the two parties and determine the rights and obligations of the two parties based on the original labor contract.

Where an employing unit terminates a labor contract and a laborer requests the employing unit to bear the legal consequences of the termination according to law, the people's court shall support it.

Comments from lawyers:

Compared with Article 30 of the Judicial Interpretation on Labor Disputes (1), the statement of “If one party proposes to terminate the labor relationship, the people's court shall support it” is deleted, and the statement is changed to “If the employer terminates the labor contract, and the worker requests the employer to bear the legal consequences of the termination of the labor contract, the people's court shall support it.” The change in the interpretation of this article is more in line with the legislative spirit and operational determination of the Labor Contract Law, that is, it excludes the employer's arbitrary termination right, and the user unit cannot maliciously extend the use time of the termination right granted by paragraph 1 of Article 44 of the Labor Contract Law, which should be a change to put things right.

At the same time, it should be noted that the employer has the right to raise objections within one month, but we believe that whether the result of objection can be regarded as an appropriate extension of the right of termination still needs further discussion, because the original judicial interpretation also stipulates that the unit has the right of objection, and the interpretation of this article is a reduction of the above right. Can it be understood that the meaning of the above objection is only a clear expression of whether the unit has clearly proposed to terminate and no longer accept the actual work of the worker? If the objection is successful, it is considered that the employer has successfully terminated the labor relationship with the employee according to paragraph 1 of Article 44 of the Labor Contract Law, and no longer bears the relevant obligations of the employer. On the contrary, it should be deemed that both parties agree to continue to perform labor relations under the original conditions, and the unit has no right to terminate at will.

Article 25 Where an employer's decision to terminate or terminate a labor contract is confirmed to be illegal and the labor contract can continue to be performed, and the laborer requests the employer to pay the wages from the time when the aforesaid decision is made to the period of arbitration or litigation, The employing unit shall pay the wages of the aforesaid period to the laborer according to the wage standard when the laborer provides normal labor. If both parties are at fault, they shall bear their respective liabilities accordingly.

The people's court may comprehensively determine the degree of fault of the employing unit and the laborer on the basis of such factors as the laborer's delay in applying for arbitration and instituting litigation, and the laborer's provision of labor to other employing units during the dispute period.

Comments from lawyers:

Taking Shanghai practice as an example, the starting date of wages during arbitration or litigation shall be calculated according to the time when the worker submits the arbitration application to the arbitration institution (whether the people's mediation is arranged before arbitration no longer affects the time calculation, only the submission time shall prevail), and shall be calculated from the time when the non-employing unit illegally terminates.

As for the calculation of the amount of wages, this time gives a certain amount of discretion to the judicial institutions. In the arbitration or litigation to restore labor relations, because the worker did not provide labor, once the judgment is resumed, it will have a greater impact on the employer. From the perspective of balance of interests, this article explains that it is beneficial to relieve social contradictions and make both sides have better acceptance by giving judges the space to exercise their discretion properly.

Article 26 In addition to paying normal labor remuneration to the worker, the employing unit agrees with the worker on the term of service and provides the worker with special treatment such as housing. If the worker violates the provisions of the labor contract and terminates the labor contract in advance and does not conform to the circumstances stipulated in Article 38 of the Labor Contract Law, Where the employing unit requests the laborer to make a discount to compensate for the part of the apportion of the service period not fulfilled or for the losses caused by the compensation, the people's court may order the laborer to bear corresponding liabilities.

Comments from lawyers:

The interpretation of this article has been widely stated in Shanghai, and has been clarified in “Shanghai High Court Law [2009] No. 73” of Shanghai High Court in 2009. As we all know, China's labor law focuses on protecting the interests of workers, and does not support units to claim liquidated damages to workers except for violating competition restrictions and service period agreements. In the past, such as arranging workers to settle down, providing office cars and other benefits, once labor disputes occur, it is difficult for employers to defend and claim back the above rights and interests. The interpretation of this Article makes it clear that the employing unit may claim compensation against the laborer for losses, and essentially gives the employing unit the right to claim compensation against the laborer in addition to the liquidated damages. In terms of the explanation itself, the extra expenditure of the unit, such as housing subsidy, can also be claimed as a loss with a high probability. As for the scope of other special treatment, it needs to be further clarified. However, it is worth paying attention to that the scope of application of the interpretation of this Article should be strictly limited and shall not be abused to prevent it from becoming a disguised means for employers to squeeze workers.

Article 27 [Implementation Time] This interpretation shall come into force as of X, XXXX.

This interpretation shall apply to cases that have not been finalized after the implementation of this interpretation.

This interpretation shall not apply to cases whose trial has been final before the implementation of this interpretation, and after the implementation of this interpretation, the parties apply for retrial or decide to retrial in accordance with the trial supervision procedures.

In case of any inconsistency between the judicial interpretation previously issued by the Supreme People's Court and this interpretation, this interpretation shall prevail.

02

Evolution of legislation

The content of the reservation contract was first seen in Article 4 and Article 5 11 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the Law to the Trial of Disputes over the Sale Contract of Commercial Housing (Interpretation of the Law (2003) No. 7) in 2003. Although the expression of “reservation contract” is not used in these two provisions, the deposit penalty for violating the subscription contract, order book and other reservation contracts is essentially stipulated. And the distinction between the appointment contract and this contract. In 2020, the judicial interpretation was amended, and the original expression was still retained.

Released in 2012 the Supreme People's Court about business contract dispute case applicable law issues of interpretation method of (8) [2012] of the article 2 for the first time in 12 “make an appointment contract”, provides for breaking the appointment contract for breach of contract and breach of contract remedies. In 2020, the judicial interpretation was amended, and this article was deleted because part of the content was absorbed in Article 495 13 of the Civil Code of the People's Republic of China.

03

Elements of composition

(1) The legal components of the establishment of the appointment contract

1. An appointment contract shall first meet the requirements for contract establishment.

According to paragraph 1 of Article 3 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the General Provisions of the Civil Code of the People's Republic of China (hereinafter referred to as the Judicial Interpretation of the General Provisions of the Civil Code of the People's Republic of China) 14, generally speaking, if the name, subject matter and quantity of the parties can be determined, the appointment contract is established.

(1) On the positive side, as long as the appointment has the elements of “the name of the party, the subject matter and the quantity”, the appointment is established.

Appointment contract independently, that is, independent of contract, has been described above are outside here, but in practice may will take effect about must be approved by the examination and approval condition same as booking contract comes into force, the understanding against the independence of the appointment contract, basically has the following situation, should attach importance to it.

(1) The appointment contract of equity transfer of foreign-invested enterprises involving the negative list shall come into force without approval

The Supreme Court of the retrial China baoan group co., LTD., shenzhen heng real estate development co., LTD. And China baoan group co., LTD., shenzhen heng real estate development co., LTD., equity transfer, such as dispute, the message clear “foreign investment enterprise equity transfer contract shall become effective without the examination and approval” an appointment 15.

Article 4 of the Judgment Guidelines of Hainan High People's Court on Hearing Cases of Disputes over Pre-sale Contracts of Commercial Housing (Trial) (issued on January 14, 2022) stipulates that 16 the pre-sale subscription agreement, subscription agreement and other pre-sale contracts signed by the developer without obtaining the pre-sale license of commercial housing are valid.

(2) On the other hand, if any element of “the name of the party, the subject matter and the quantity” is lacking, the appointment cannot be established.

In the dispute case of construction land use right between AoChina Asset Management Co., Ltd. and the Management Committee of Yangpu Economic Development Zone, the term Sheet was determined to be a consultation and negotiation document rather than an appointment because the “subject matter and quantity” of the term sheet was uncertain and the parties lacked the intention to be bound by it. The case specific reason, the referee is as follows: the investment letter of intent agreed main content is the construction of high-grade hotels, involved in the terms of the land and qinlan management committee expressed as “qinlan administration support in qinlan investment in construction of high-grade hotels, sino company agreed to coordinate replacement land”, in addition no other about “qinlan management committee” to “land” replacement “compulsory” conventions. If the “land” as one of the letter of intent of the subject matter, described in the “land” there is no essential elements such as four, area, and should not be regarded as the “target, determine the number of standards, even if will be” sino company will place replacement to eastern living area and building new English bay coast hotel “this is more like a unilateral willingness to understand the expression of desirable for both sides, ” “Eastern” living areas and new English bay coastal area has not been a clear space position, obviously can not reach standard of “target, determine the number”, do not have the possibility of performance directly. 17

2. The appointment contract shall stipulate that the contract shall be concluded within a certain period of time in the future, or the deposit shall be paid to guarantee the conclusion of the contract within a certain period of time in the future.

If the subject, subject and quantity of the contract can be determined to guarantee the deposit to be paid within a certain period of time in the future, the appointment shall be determined to be established. The provisions of this article are basically consistent with Article 2 of the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Disputes over Sales Contracts (Interpretation No. 8, 2012).

(2) The legal components distinguishing between appointment and this Contract

First of all, both the appointment and the contract are of the nature of a contract, so both shall have the elements for the establishment of the contract, that is, the contents of Part 4 (1) above, which is the due meaning of the provisions. Secondly, the third paragraph of Article 6 of the Judicial Interpretation of Contract Preparation stipulates two differentiated situations, and the constitutive elements of the two differentiated situations are related to “the conclusion of a contract within a certain period of time in the future”.

1, to make an appointment with this about the distinction between decide whether to contract “in the future a certain period of time shall be separately conclude this about” as the standard, rather than a desirable terms of multifarious perfection

The distinction between an appointment and this Agreement is that an appointment is made if there is a clause of “entering into a contract separately within a certain period of time in the future”, and the distinction between an appointment and this Agreement is not made by the distinction of the perfection of the agreed clause.

As mentioned above, if the parties do not agree to conclude a contract within a certain period of time in the future, as long as the content of the contract has the subject, object, quantity and other necessary elements for the establishment of the contract, the content of the contract should be identified as the nature of the contract, rather than as an appointment because the content of the contract is too simple.

2. Transformation of appointment to this agreement 18

If the parties conclude the subscription book, order books, book conventions such as the “contract separately in the future a certain period of time”, shall be deemed to be generally make an appointment, but the contracting party has been implemented for covered by this about to perform the behavior and the contracting parties to accept, so at this time will be held to the contract is established.

(3) Determining the legal components of breach of reservation contract

1, the first appointment contract should be established and effective

Please refer to (I) Legal constitutive elements of the establishment of appointment contract above for details. Although an appointment contract generally becomes effective upon its establishment, it cannot be ruled out that in some transactions, there are appointment contracts with effective conditions agreed by the contracting parties. In this case, it should be noted that the determination of breach of appointment contract shall be based on the premise of the effectiveness of the appointment contract, and the determination of breach of contract shall be made only after the effective conditions agreed in the appointment contract are reached.

2, the contracting party refuses to conclude this about, or in consultation to conclude the us at the same time contrary to good faith principle lead to failed to conclude the following contract

First of all, it should be clear that the object of the appointment contract is the conclusion of this contract, so the violation of the appointment contract generally refers to the artificial failure to conclude this contract.

ZhiYan, make an appointment contract default form has two kinds, one kind is refused to conclude the following about the rejected may be positive, express declined to conclude a contract, may also be negative, implied conclude refused to cooperate with this covenant. The other is a consultation contract breach of good faith principle and make this about failed to conclude.

The determination of violation of the principle of good faith shall be based on whether we try our best to promote the conclusion of this agreement, that is, on the one hand, the conditions put forward during the consultation are compatible with the provisions of the appointment contract without obvious deviation, on the other hand, the parties still reasonably adhere to the consultation when they have differences.

For example:

Parties to a temporary price in the contract of commodity house business reservation for 6000 yuan per square meter, but in the commercial housing sale contract, because the prices soaring to $ten thousand per square metre L2, the developer claims made in market price of commodity house business contract, is the proposed condition is plainly an appointment contract, because although the clear price is the tentative appointment contract, However, it also defines a general price range for the conclusion of this Contract. If the parties seriously deviate from this price range while negotiating the conclusion of this Contract, it shall naturally be deemed that the conclusion of this Contract without reasonable efforts...... Of course, if the parties fail to agree on the price of this contract in the appointment contract, it shall be understood that the parties take the market price or the government-guided price as the price of this contract. At this point, the party that offer significantly deviate from market prices or government guidance prices, also should be considered in violation of the obligation of good faith negotiations. 19

(4) against the law of appointment contract responsibility constitutive requirements

The bearing of the liability for breach of contract clearly should be on the premise of default and breach of the cognizance of the reservation, please see the above constitutive requirements (3) the appointment of a breach of contract law.

2. May claim liability for breach of contract or compensation for losses

If the liability for breach of contract is stipulated in the appointment, the liability clause for breach of contract shall apply; If liability for breach of contract is not stipulated, the breaching party may be required to compensate for losses.

According to the understanding of the Supreme Court, the compensation for the loss of the breach of the appointment contract does not mechanically take the reliance interest or performance interest as the single determination path, but is determined between the performance interest and reliance interest according to the completeness of the terms of the appointment contract and the achievement of the conditions of the conclusion of this contract.

If the terms of the appointment contract are infinitely close to or even completely equivalent to the completeness of the terms of this contract, the loss compensation shall be determined in accordance with the performance interests of this contract, while if the appointment only agrees on the basic terms of the contracting party, subject matter and quantity, the loss compensation shall be determined in accordance with the reliance interests of this contract. If part of the signed reservation system because of the conditions about signing is not yet mature, according to conclude the following about the liability for breach of contract undertake condition level of achievement, in the performance of this about the interests and trust between discretion. 20

January 14, 2022, issued by the Supreme Court in hainan on commodity house appointment contract dispute cases the referee guidance (trial) "is different from the above point of view is expressed, but essentially all have a certain degree of similarity, the guidance conditional acceptance on the basis of the contract to the discretion of the damages. The stipulated in article 5: liability for breach of contract to buyers claim sellers undertake booking agreement including direct loss and can get profit loss, which can get profit loss for resale profit loss and provide the basis in fact, the court shall be supported. Prepare for... The scope of compensation by the breaching party shall be limited to the loss of reliance interests hereunder. The compensation for the reliance interest shall not exceed the performance interest. The loss of trust interests usually includes the loss and loss of interests, including the cost of contracting, the cost of preparation for performance, the interest of money paid, etc. In practice, how to determine the loss of trust interests needs to consider multiple factors, which is at the discretion of the court; The lost benefits, that is, the losses caused by lost opportunities, are more difficult to judge and measure in practice.

(1) The type of loss of available interests is loss of production profit or loss of operating profit. In view of the fact that in practice, to judge the existence of the available interest loss of production profit loss or operating profit loss, in addition to strictly following Article 113 of the Contract Law and the four rules determined in the Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes Under the Current Situation, the performance of the contract signed by both parties (i.e., this Agreement) should also be considered. If this Agreement has not been signed by both parties, let alone the performance of this Agreement, and the non-breaching party does not have the basis to generate production profits or operating profits, it shall be determined that the compensation scope for loss of appointment does not include loss of available interests;

(2) The type of loss of available interests is loss of resale profits. In view of the social reality that the housing price has been rising steadily in recent years, and the housing has both residential and investment attributes, if the buyer in the commercial housing purchase and sale contract has evidence to prove that he has signed a housing purchase and sale contract sufficient to generate resale profits with the next buyer for the target house at the time of signing the purchase and sale contract, In the case of the seller's breach of the reservation contract (especially when the housing price suddenly rises sharply), it is relatively mechanical to deny the non-breaching party's claim of loss of available interests.

3. It is not clear whether the liability for breach of contract includes compulsory contracting, 21 and the judicial mainstream holds a negative attitude

It should be noted that the academia holds a positive attitude towards the mainstream view of whether the appointment contract can be enforced, that is, the compulsory conclusion of this contract is recognized. The Supreme People's Court also holds different views on this issue. According to the opinion of the Judicial Interpretation Understanding and Application of the General Provisions of the Civil Code of the Supreme People's Court (1), it does not recognize the theory of compulsory contracting, but according to the opinion of the Understanding and Application of the Civil Code of the People's Republic of China (1), it should be determined by the circumstances, and the application of compulsory contracting should be cautious and modest: “When one party violates a simple appointment or a typical appointment, it can be ordered to continue the consultation, and if it violates a complete appointment, it can be ordered to make a compulsory contract according to the circumstances. It should be noted that the autonomy of meaning is the basic principle of civil and commercial activities, and the court cannot directly express the meaning on behalf of the parties. Although the appeal for compulsory contracting can be supported, it should be applied prudently. Exceptionally, if the reservation contract has included detailed terms of this contract, the parties have reached an agreement on the main terms of this contract, and some or most of the terms have been performed, then the contract may be forced by order. That is, we should be cautious about the high intensity of judicial intervention and maintain due modesty.”

On January 14, 2022, Hainan High People's Court's Judgment Guidelines on Hearing Cases of Disputes over Commercial Housing Reservation Contract (Trial) adopted a denial attitude towards “compulsory contracting theory”. Article 3 of the guidelines stipulates that “If the buyer claims that the reservation contract is valid and the seller should perform its obligations in accordance with the contents of the formal commercial housing sale contract, the court shall judge whether to support the appeal according to the contents of the performance of obligations. The appointment contract only generates the contractual obligations of this formal contract, and only assumes the liability for breach of contract in the appointment contract; If the parties are at fault, they only bear the liability for negligence in making a contract, but they do not have to conclude a formal contract. The conclusion of formal contracts still follows the basic principle of freedom of contract, which can only be concluded by mutual agreement between the two parties. No one has the right to force others to conclude contracts, including judicial organs. In the case of disputes over the sale of commercial housing, if both parties only conclude pre-purchase agreement, subscription agreement, subscription agreement, pre-sale agreement and other pre-sale contracts without signing a formal sale contract, the people's court generally recognizes it as pre-purchase contract, and rules that either party has no right to require the other party to perform the substantive transaction terms in the sale contract such as payment, delivery of housing and transfer of property rights. Only a reservation contract is established, and the parties have no right to force them to perform the rights and obligations of a formal contract.”

In general, the judicial practice mostly holds a negative attitude towards the appointment compulsory performance, and even those who hold a positive attitude also say that it should be applied with great caution.

04

Legal effect and judicial case

(I) The distinction between appointment and this Agreement

1. Case 1: typical cases related to the house lease contract dispute between a property management Co., Ltd. and a research institute: Interpretation of Several Issues concerning the Application of the General Provisions of the Civil Code of the People's Republic of China

【 Key points 】22

In the tendering and bidding procedure, if one party fails to perform the obligation to conclude a written contract after the notice of winning the bid is served, and the other party requests confirmation that the contract is established when the notice of winning the bid reaches the winning bidder, the people's court shall support it. The provisions of paragraph 1 of Article 46 of the Bidding Law of the People's Republic of China are the written confirmation form required by law, not a new contract.

(II) Transformation of appointment to this Agreement

1. Case 1: Cases of Chengdu Xunjie Communication Chain Co., LTD., Sichuan Shudu Industrial Co., LTD., and Sichuan Youli Investment Holding Co., LTD., and typical cases related to Interpretation of Some Issues Concerning the Application of the General Rules of Contract Compilation of the Civil Code of the People's Republic of China

【 Key points of judging 】

The basic criterion to judge whether the contract concluded between the parties is this contract or an appointment should be whether the parties intend to enter into a new contract in the future to finally clarify the rights and obligations between the parties. Even if the parties agree on the subject matter, quantity, price, etc., if it is agreed that a separate contract must be concluded for a certain period in the future, the agreement shall be deemed to be an appointment rather than this agreement. If the parties have performed such performance acts as delivery of the subject matter or payment of the price after signing the reservation contract, it shall be deemed that the parties have entered into the contract in the form of acts.

(3) Determination of violation of appointment

1. Case 1: Dai Xuefei v. Huaxin Company commercial housing purchase agreement deposit dispute case bulletin case

【 Key points of judging 】

The buyer expresses satisfaction to the model board room of the developer, and the developer signed an ordering agreement and delivered the deposit to it, and agreed that the two sides conclude the pre-sale contract of commercial housing on a certain day. After the developer to provide the commercial housing presale format contract has a model room for reference only and other unfavorable to the homebuyer terms, the homebuyer objections to the format terms to delete, the developer can not immediately give a reply, so that the commercial housing presale contract is not concluded on the date agreed in the ordering agreement, As stipulated in Article 4 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the Law to the Trial of Disputes over the Sale Contract of Commercial Housing, the developer shall return the deposit collected to the home buyer.

2. Case 2: Bulletin case of contract dispute case of Zhong Chongqing v. Shanghai Jinxuan Dati Real Estate Project Development Co., LTD

【 Ref excerpt 】

The letter of intent involved stipulates that Jinxuan Dati Company shall give priority to informing Zhong Chongqing to subscribe within the agreed time limit when subscribing for the real estate project developed by Jinxuan Dati Company. The letter of intent involved is a legal and valid appointment contract, and both parties shall perform the provisions of the letter of intent according to law...... The parties to a contract shall not only exercise their contractual rights in accordance with the principle of good faith, but also perform their contractual obligations in good faith and shall not evade the obligations agreed in the contract. Jinxuan Dati Company failed to fulfill its notification obligation as agreed, and sold out all the shops. As a result, the fundamental purpose of signing the shop sale contract formally agreed by both parties in the letter of intent involved in the case could not be realized, and even claimed that the letter of intent signed by both parties was invalid when the dispute occurred, which violated the principle of good faith to be followed in civil activities and should be regarded as breach of contract.

3. Case 3: Bulletin case of dispute over pre-sale contract of commercial housing between Zhang Li and Xuzhou Tongli Chuangzhan Real Estate Co., LTD

【 Ref excerpt 】

After the original and the defendant signed the commercial housing reservation form, the construction date of the commercial housing was delayed due to the demolition and resettlement of the land for the construction of the commercial housing. In this process, The State Council and Xuzhou Municipal government successively issued relevant administrative regulations on the floor area, construction technology and materials of the new commercial housing, and the new demolition and resettlement situation appeared. The change of commercial housing construction plan, the change of area and the increase of construction cost shall be unanticipated circumstances and shall not be regarded as the intentional breach of the reservation contract between the defendant and Lichuang Zhan Company.

However, the defendant has not obtained the pre-sale license of commercial housing that has not yet started construction of commercial housing for sale in violation of relevant laws and regulations, its behavior is illegal; At the same time, when signing the commercial housing subscription form with the plaintiff Zhang Li, he underestimated the above situation, and then placed the room number listed in the subscription form to another person, which caused both parties to lose the possibility of further negotiation and signing this contract, and the commercial housing subscription form signed by both parties was terminated, and the defendant shall bear corresponding liabilities for this result.

(4) Damages for breach of the appointment

1. Case 1: Bulletin case of contract dispute case of Zhong Chongqing v. Shanghai Jinxuan Dati Real Estate Project Development Co., LTD

【 Ref excerpt 】

The first-instance court held that Jinxuan Dati Company violated the obligations agreed in the appointment contract and should compensate the appellant Zhong Chongqing for the corresponding loss, which was not wrong. However, the compensation amount of 10,000 yuan determined by the first-instance judgment could not compensate the actual loss of the non-breaching party. In order to urge the civil subjects to perform their civil obligations in good faith, maintain the safety and order of the transaction, and fully protect the civil rights and interests of the non-defaulting parties, Jinxuan Dati Company is determined to compensate Zhong Chongqing RMB 150,000 on the basis of comprehensive consideration of the development trend of the real estate market in Shanghai in recent years and the actual situation of both parties.

Zhong Chongqing requested Jinxuan Dadi Company to compensate for its economic losses at the price of 15,000 to 20,500 yuan per square meter of floor area of the shops. However, since the evidence submitted by Jinxuan Dadi Company could not fully prove the exact situation of the shops mentioned in the letter of intention involved in the case, and according to the multiple pre-sale contracts of Jinxuan Dadi Company to sell the shops to external parties, Shop prices vary from time to time and from person to person. In addition, although Zhong Chongqing paid the intention money as agreed, the appointment contract signed by both parties is different from the formal sales contract in legal nature. Therefore, the amount of compensation advocated by Zhong Chongqing cannot be fully supported.

(5) If the appointment is violated, whether the contract can be concluded by direct order

1. Case 1: The case of commercial housing reservation contract dispute between appellant Chen and appellee Sanya Investment and Development Co., LTD., a typical case of Hainan High Court on the trial of commercial housing reservation contract dispute

【 Key points of judging 】

The conclusion of the contract should follow the principle of autonomy of the parties. If one party to the subscription agreement refuses to sign a formal commercial house sales contract, the people's court cannot force both parties to conclude a commercial house sales contract.

2. Case 2: The case of commercial housing reservation contract dispute between Yu and a real estate company in Hainan, a typical case of Hainan High Court on the trial of commercial housing reservation contract dispute

【 Key points of judging 】

In the case of disputes over the sale of commercial housing, if both parties only conclude a reservation contract without signing a formal sale contract, they have no right to force the parties to perform the rights and obligations of signing a formal contract.

05

Other application scenarios of reservation contracts

(1) Labor - Offer letter

1. Case 1: Boehringer Ingelheim Animal Health (Shanghai) Co., Ltd. v. Zhou Contract dispute case 2425

【 Key points of judging 】

1. The behavior of the applicant who refuses to conclude the labor contract after signing the employment notice not only constitutes the negligence in making the contract, but also constitutes the breach of the appointment contract. The people's court shall determine the cause of action according to the claims of the parties.

2. If the employer requires the applicant to bear the liability for breach of contract on the grounds of violating the appointment contract, it belongs to the category of civil dispute rather than labor dispute, and shall be adjusted by the contract law and other legal norms.

3. As for the amount of damages for breach of contract, the people's court shall follow the following ideas: if both parties have an agreement on the amount of damages for breach of contract, such agreement shall prevail; If there is no agreement or the agreement is unclear, the amount of damages for breach of contract shall be comprehensively determined based on the association between the appointment contract and the contract, limited by the benefits of performance hereof.

(2) Maritime -- deposit for contracting cruise ships

Ten typical cases of Shanghai Maritime Court in 2019 on the application of deposit penalty in disputes over deposit for cruise ship charter

【 Key points of judging 】

If the deposit is agreed upon in order to ensure the conclusion of the subsequent cruise ship charter contract, and the parties agree on this intention and the deposit is actually delivered, the deposit contract shall be established and come into force. Because of the reason for not attributable to both parties make subsequent failure to conclude the main contract, shall not apply to the deposit penalty.

Notes

1 Wang, L. Commentary on Chinese Civil Code: Contract Edition (Volume 1), 0312

2 Huang Wei, Editor-in-Chief, Guide to Interpretation and Application of the Civil Code of the People's Republic of China (Middle)

3 Chief Editor, People's Court Publishing House, The Complete Collection of Understanding and Application of Judicial Interpretation. Contract Volume 2

According to the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the Law to the Trial of Disputes over the Sale Contract of Commercial Housing, Article 2 The pre-sale contract of commercial housing concluded between the seller and the buyer without obtaining the pre-sale license certificate of commercial housing shall be deemed invalid, but if the pre-sale license certificate of commercial housing is obtained before the lawsuit is filed, it may be deemed valid

5 The same view is held on page 104-105 of the Judicial Interpretation Understanding and Application of the General Provisions of the Civil Code of the Supreme People's Court

6 Wang, L. Commentary on Chinese Civil Code: Contract Edition (Volume 1), 0312

7 Chief Editor of the Leading Group for the Implementation of the Civil Code of the Supreme People's Court, Understanding and Application of the Civil Code of the People's Republic of China (1)

8 Leading Group for the Implementation of the Civil Code of the Supreme People's Court, Understanding and Application of the Civil Code of the People's Republic of China (1)

Article 158 Conditions may be attached to civil juristic acts of the People's Republic of China, except where conditions may not be attached according to their nature. A civil juristic act with effective conditions shall become effective when the conditions are fulfilled. A civil juristic act with conditions for rescission shall become invalid when the conditions are fulfilled.

10 QIAN, H. THE Wisdom of Judges. Commercial Volume, 0028

11 Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Law to the Trial of Disputes over the Sale Contract of Commercial Housing (Interpretation No. 7, 2003) Article 4 Where the seller accepts the deposit from the buyer as a guarantee for concluding the sale contract of commercial housing by means of subscription, ordering or reservation, if the sale contract of commercial housing cannot be concluded due to the reasons of one of the parties, It shall be handled in accordance with the provisions of the law on deposit; If the commercial house sales contract fails to be concluded due to reasons not attributable to both parties, the seller shall return the deposit to the buyer.

Article 5 If the agreement on subscription, ordering and reservation of commercial housing has the main contents of the commercial housing sales contract stipulated in Article 16 of the Measures for the Administration of Commercial Housing Sales, and the seller has accepted the purchase money according to the agreement, the agreement shall be identified as the commercial housing sales contract.

12 Interpretation of the Supreme People's Court on Issues concerning the Application of Law to the Trial of Disputes over Sales Contracts (Interpretation No. 8, 2012) Article 2 When the parties sign a subscription, order, reservation, letter of intent, memorandum and other reservation contracts, they agree to conclude a sales contract within a certain period of time in the future, and if one party fails to perform the obligation to conclude a sales contract, Where the other party requests it to bear the liability for breach of the reservation contract or requests to terminate the reservation contract and claims damages, the people's court shall support it.

13 Article 495 of the Civil Code of the People's Republic of China where the parties agree to conclude a contract within a certain period of time in the future, a subscription, order or reservation shall constitute a reservation contract. If one party fails to perform its contractual obligations under the appointment contract, the other party may request it to bear the liability for breach of contract.

14 Article 3, Paragraph 1 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the General Provisions of the Civil Code of the People's Republic of China on Contracts, if the parties have a dispute over whether a contract is established, and the people's court is able to determine the name, subject matter and quantity of the parties, the contract shall generally be determined to be established. However, unless otherwise provided by law or otherwise agreed by the parties.

The GIST of THE JUDGMENT IS CHANGED IN accordance WITH THE law IN force. This case is a retrial case in 2015. According to Article 3 of Several Provisions on Equity Change of Investors of Foreign-invested Enterprises (invalid), equity change of investors of foreign-invested enterprises shall be approved by the examination and approval authority and registered by the registration authority in accordance with the provisions, and equity change without approval of the examination and approval authority shall be invalid. However, according to the provisions of Article 23 of the Law of the People's Republic of China on Foreign-Funded Enterprises, which came into effect on October 1, 2017, the equity transfer and other matters of foreign-invested enterprises that do not involve the implementation of special management measures for access stipulated by the state will not be examined and approved, but will be subject to record management. Therefore, the gist of the trial of this case can now be understood as that the validity of the advance contract for the equity transfer of foreign-invested enterprises involving the negative list does not need to be approved to take effect (the original gist of the judgment was “the advance contract for the equity transfer of foreign-invested enterprises does not need to be approved to take effect”).

Judgment Guidelines of Hainan High People's Court on Hearing Cases of Disputes over Commercial Housing Reservation Contract (Trial) (Issued on January 14, 2022) 4. The court shall determine the validity of the subscription agreement for the developer not to obtain the pre-sale permit of commercial housing. In many cases, developers are signed subscription agreements with home buyers without obtaining the pre-sale license of commercial housing. Regarding the conditions for pre-sale of commercial housing, Article 2 of the Interpretation of the Supreme People's Court on Several Issues concerning the Application of the Law to the Trial of Disputes over Commercial Housing Sales Contracts (hereinafter referred to as the Interpretation of Commercial Housing Sales Contracts) : “The seller has not obtained the pre-sale license certificate of commercial housing, and the pre-sale contract concluded with the buyer shall be deemed invalid, but if the pre-sale license certificate of commercial housing is obtained before the prosecution, it may be deemed valid.” For the subscription agreement, subscription agreement and other reservation contracts signed for the pre-sale of commercial housing, if the seller does not obtain the pre-sale license certificate of commercial housing, the determination of the validity of the reservation contract shall not be affected.

17 Guo Wei, Legal Nature and Validity of “Letter of Intent” : The Dispute Case of Construction Land Use Right between Aohua Asset Management Co., Ltd. and Yangpu Economic Development Zone Management Committee, edited by Jing Hanchao and Sun Huapu, Judicial Supervision Division of the Supreme People's Court: Judicial Supervision and Guidance, Series 52, People's Court Publishing House (2016), 129-131.

18 This expression draws on the Understanding and Application of Judicial Interpretation of the General Rules of the Civil Code of the Supreme People's Court (1), which is inaccurate but easy to understand to a certain extent.

19 Leading Group for the Implementation of the Civil Code of the Supreme People's Court, Understanding and Application of the Contract Compilation of the Civil Code of the People's Republic of China (I)

20 Leading Group for the Implementation of the Civil Code of the Supreme People's Court, Understanding and Application of the Contract Formulation of the Civil Code of the People's Republic of China (I)

21 Paragraph 1 of Article 494 of the Civil Code of the People's Republic of China does not contain compulsory contracting of this Contract.

Paragraph 1 of Article 494 of the Civil Code of the People's Republic of China where the State assigns state ordering tasks or mandatory tasks in accordance with emergency rescue and disaster relief, epidemic prevention and control or other needs, contracts shall be concluded between the relevant civil subjects in accordance with the rights and obligations prescribed by the relevant laws and administrative regulations.

22 In most judicial practices, it has been determined that the service of bidding notice constitutes a reservation contract. For example, Zhang Jikun and Liu Qiqi of Beijing Chaoyang District People's Court wrote that the tender-inviter shall bear the Liability for Breach of the Reservation Contract if he fails to sign a contract with the winning bidder, People's Justice (Case),2022, page 35. In tendering and bidding activities, the contract between the two parties will be established after the notice of winning the bid issued by the tenderer reaches the winning bidder, which is a reservation contract in nature. If one party fails to perform its obligations under this contract, the other party may claim that the other party shall be liable for breach of contract.

For example, in the civil case of contract dispute between Shanghai Hepu Automation Engineering Co., Ltd. and Hengxin Software Engineering (Wuxi) Co., LTD., the contract involved in the case was recognized as an appointment in the first and second instance, while the contract involved in the case was recognized as this contract in (2021) Shanghai 02 Minzai 76, so as to protect the interests of the first party to the maximum extent.

The tenderer and the winning bidder shall conclude a written contract in accordance with the bidding documents and the bidding documents of the winning bidder within 30 days from the date of issuance of the bid-winning notice in paragraph 1 of Article 46 of the Law of the People's Republic of China. The tenderer and the winning bidder may not enter into any other agreement that deviates from the substantive content of the contract.

Shanghai Jing 'an District People's Court of First Instance (2019) Shanghai 0106 Early Republic of China 45939

The Second instance of Shanghai No. 2 Intermediate People's Court (2020) Hu 02 Min Zhong No. 3126

25 Alpha Excellent Case Evaluation and analysis database includes cases and analysis content of “Selected Cases of People's Courts” and “Annual Excellent Case Analysis of National Court System”. This database is compiled by the expert team of the China Institute of Applied Law of the Supreme People's Court from the excellent cases submitted by courts all over the country after careful selection and strict evaluation.