Foreigner's Contract Terminated Without Compensation — Why?

Source: OT-Team(G),上海市静安区总工会

  On July 4th, the Jing'an District Federation of Trade Unions in Shanghai posted a labor dispute case involving a foreign employee.

  Basic Case Details

  Mr. J, a foreign employee, joined Company Y as a Chief Financial Officer on April 10, 2021. Both parties signed an employment contract effective from April 10, 2021, to April 9, 2023. On the same day, Company Y secured a work permit for Mr. J.

  On April 9, 2023, Company Y decided not to renew Mr. J's contract, terminating their employment relationship. Mr. J demanded an economic compensation of 64,329.52 yuan from Company Y in accordance with the Labor Contract Law. However, Company Y insisted that, as per their employment agreement, no compensation was owed to the employee regardless of the reason for contract termination.

  In May 2023, Mr. J filed for arbitration with the Labor Dispute Arbitration Committee, seeking the economic compensation of 64,329.52 yuan. The committee ruled in favor of Mr. J, ordering Company Y to pay the compensation.

  Dissatisfied with the arbitration ruling, Company Y appealed to the court, requesting a judgment that no compensation was required. The court found that Mr. J, as a foreign worker, was not entitled to economic compensation upon termination of his employment under Chinese labor standards. Furthermore, the labor contract between Mr. J and Company Y did not stipulate any such rights or obligations. Consequently, the court ruled that Company Y was not obligated to pay Mr. J the economic compensation of 64,329.52 yuan.

  Court Judgment

  The court ruled that according to the "Rules for the Administration of Employment of Foreigners in China" and the "Answers to Several Issues on the Trial of Labor Dispute Cases by the Shanghai High People's Court," foreign employees working in China are subject to Chinese labor standards concerning minimum wage, working hours, rest and leave, labor safety and hygiene, and social insurance. These aspects are supported by Chinese labor standards. Other labor rights and obligations may be determined based on the terms of the contract or the actual performance of the contract. Beyond these, any additional labor standards and treatment requirements requested by the parties to the labor contract are not applicable.

  In this case, since both parties had agreed in the contract that no economic compensation would be required upon termination of the labor contract, Mr. J's claim for economic compensation lacks legal and contractual basis. Therefore, the court does not support Mr. J's claim for economic compensation upon termination of the labor contract.