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Risk Control of Accepting Units in Labor Dispatch

When the rights and interests of laborersare harmed, it is a concerned question that how to allocate the subsequentlegal liabilities between accepting units and labor dispatching companies.TheAmendment to the Employment Contract Law of PRC and the Interim Provisions onLabor Dispatch enforced in March 2014 formulated detailed regulations on theliability distribution between accepting units and labor dispatching companies.Well, we find out that all these regulations offer a weak protection foraccepting units. Hence, this newsletter will try to discuss the risk control ofaccepting units in labor dispatch.

1. Perfecting Labor Dispatching Agreements

• It is a civil relationship between accepting units and labordispatching companies. Both parties sign a labor dispatching agreement tospecify the rights and obligations between them. Labor dispatching companiesprovide qualified dispatched laborers pursuant to the requirements of acceptingunits and accepting units pay service fee to labor dispatching companies.

• Article one of the Interim Provisions on Labor Dispatch regulatesthat when dispatching laborers, labor dispatching companies shall conclude labordispatching agreements with accepting units and the nature of the agreementsare civil agreements. In the said labor dispatching agreements, the dispatchingpost, number of dispatched laborers, period, remuneration, social security,payment way and violation liability shall be available, which will bebeneficial for the clarification of obligations and rights between acceptingunits and labor dispatching companies. Furthermore, it will avoid the situationwhere accepting units and labor dispatching companies shift responsibility ontoothers when a dispute arises, which could protect the lawful rights ofaccepting units and safeguard the interests of dispatched laborers as well.

2. Lawful Operation of Accepting Units

• Both the Amendment to the Employment Contract Law of PRC and theInterim Provisions on Labor Dispatch have put forwarded specific requirementsregarding lawfully using the dispatched laborers such as meeting therequirement of temporary, auxiliary and substitutable post, equal benefits forequal work and ratio of dispatched laborers, etc. At the same time, there arespecified and detailed regulations on the conditions of returning thedispatched laborers by accepting units to labor dispatching companies andaccepting units shall abide by these regulations to avoid unnecessary legalrisks.

3. Choosing Good Labor DispatchingCompanies

• Once, an accepting unit finds out that the labor dispatchingcompany mistakenly agrees on the probation period, fails to sign employmentcontract with the dispatched laborers or to pay the salary and social securitycontribution of the dispatched laborers on time, and illegally terminates theemployment relationship with the dispatched laborers, etc., which leadscorresponding liabilities of the accepting unit. Hence, choosing a good labordispatching company is very critical by comprehensively assessing thequalification, brand, professional skills, management level and serviceconsciousness.

Case Study: If Accepting Units Do NotViolate Laws or Regulations, They Shall Not Bear Joint and Several Liabilities

WANG established the employmentrelationship with a labor service company (hereinafter

referred to as the dispatching company) on6 August 2012, and he was dispatched to a company(hereinafter referred to as theaccepting unit) as a waitress, with monthly salary of RMB 3000 paid by thedispatching company in cash. WANG did not sign an employment contract with thedispatching company or the accepting unit, but the dispatching company and theaccepting unit signed a labor dispatching agreement agreeing that thedispatching company provides waitresses to the accepting unit and the acceptingunit shall pay the service fee, employee salary and social securitycontribution. The accepting unit shall fulfill the obligation of the labordispatching agreement.

On 13 November 2012, WANG fell over on hisown time off work after drinking and was seriously hurt so that he could notcome back to work. On 11 March 2013, WANG applied for a labor arbitrationrequesting for 1.sick leave salary between 13 November 2012 and 12 February2013 by the dispatching company; 2.double salary for failing to sign anemployment contract between 6 August 2012 and 13 February 2013 by thedispatching company; 3.damages of medical insurance for failing to pay socialsecurity by the dispatching company; 4.the accepting unit shall bear joint andseveral liabilities. The arbitration commission did not support WANG’s requestsand then WANG sued at the People’s Court. After trial, the court supported thefirst three requests of WANG except the last one, holding that if acceptingunits do not violate laws or regulations, they shall not bear joint and severalliabilities.

Therefore, we are in the opinion that inthis case the accepting company chooses a nonstandard labor dispatchingcompany. The reason why the accepting unit shall not bear joint and severalliabilities is the existence of the dispatching agreement and the fulfillmentof the obligations therein. Besides, the accepting unit does not violate lawsor regulations regarding labor dispatch, or it may bear joint and severalliabilities with the labor dispatching company.

DaCheng Law Offices

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