Applicable rules for employing foreign nationals in China

With an increasing number of persons with foreign nationalities seeking employment in China, determining the existence of an employment relationship between a domestic enterprise and a foreign employee and whether relevant provisions of the Employment Contract Law apply have become focal points of employment dispute cases. This column briefly analyzes the foregoing in light of judicial practice in Beijing and Shanghai.

When an overseas enterprise assigns an employee with foreign nationality to serve in a Chinese enterprise, is an employment relationship constituted between the foreign national and the Chinese enterprise?

The current common practice is that the overseas enterprise has established an employment relationship with the foreign national, and then assigns the foreign national to serve in its affiliate or subsidiary in China. To complete the procedures to receive an employee work permit and for tax planning, the domestic enterprise will execute a pro forma Employment Contract with the employee, and submit it to the local labour authority for the record.

However, if a dispute arises between the foreign national and the affiliate or subsidiary in China, the court will not characterize the dispute between the parties as an employment contract dispute simply on the basis that the foreign national has an Employment Contract or a work permit.