China’s Supreme People’s Court (SPC) issued Judicial Interpretation II on labor disputes, effective 30 October, offering long-awaited clarity on how courts should confirm employment relationships involving foreign nationals. Article 4 explicitly states that courts may recognise a labour relationship if the foreigner holds permanent residency, a valid work permit with lawful residence, or has completed “other lawful procedures” under national rules.
The guidance overturns the narrower stance of Judicial Interpretation I (2021), which excluded most claimants lacking a Foreign Expert Certificate. Employers and assignees had faced uncertainty, as some local courts refused to hear disputes where paperwork was incomplete, even if a signed contract existed. The new rules harmonise judicial practice with administrative reforms that have simplified China’s work-permit system since 2017.
For multinational corporations the change reduces litigation risk. HR teams must still keep meticulous documentation—courts retain discretion and will look at substantive factors such as control and remuneration—but assignees with proper permits now have stronger standing to sue for unpaid wages or wrongful termination. Representative offices of foreign companies can also be named directly in labour suits, closing a loophole that forced claimants to pursue parent entities overseas.
Compliance advisors recommend an immediate audit of expatriate files to ensure work-permit renewals, residence permits and payroll tax records align; gaps could weaken an employer’s defense. The SPC’s move also dovetails with government talent-attraction goals, signalling that foreign professionals enjoy fuller legal protections—a message likely to resonate with senior hires weighing relocation packages.
Looking ahead, practitioners expect local labour bureaus to issue companion guidelines, and some provinces may pilot fast-track mediation for disputes involving high-end foreign talent to reinforce the new judicial posture.
The guidance overturns the narrower stance of Judicial Interpretation I (2021), which excluded most claimants lacking a Foreign Expert Certificate. Employers and assignees had faced uncertainty, as some local courts refused to hear disputes where paperwork was incomplete, even if a signed contract existed. The new rules harmonise judicial practice with administrative reforms that have simplified China’s work-permit system since 2017.
For multinational corporations the change reduces litigation risk. HR teams must still keep meticulous documentation—courts retain discretion and will look at substantive factors such as control and remuneration—but assignees with proper permits now have stronger standing to sue for unpaid wages or wrongful termination. Representative offices of foreign companies can also be named directly in labour suits, closing a loophole that forced claimants to pursue parent entities overseas.
Compliance advisors recommend an immediate audit of expatriate files to ensure work-permit renewals, residence permits and payroll tax records align; gaps could weaken an employer’s defense. The SPC’s move also dovetails with government talent-attraction goals, signalling that foreign professionals enjoy fuller legal protections—a message likely to resonate with senior hires weighing relocation packages.
Looking ahead, practitioners expect local labour bureaus to issue companion guidelines, and some provinces may pilot fast-track mediation for disputes involving high-end foreign talent to reinforce the new judicial posture.
