What happens when elderly workers in China legally cease to be workers?

27 June 2019

When workers in China reach the statutory retirement age they are no longer technically workers. Under Chinese law, they are deemed not to have an “employment relationship” (劳动关系) and are instead categorized as labour service providers (劳务关系), similar to domestic helpers etc.

This means they are no longer automatically entitled to the employee benefits and protections enshrined in China’s labour laws, such as overtime, severance pay, pension and medical insurance. Labour service providers are in a much more vulnerable position than formal employees and, in the event of a dispute with their employer, cannot seek redress through labour arbitration. Instead, they would have to file a much more expensive and time consuming civil lawsuit in order to obtain redress.

The rationale for this distinction is understandable; theoretically, once a worker reaches retirement age they should already have a pension and medical insurance, and as such continued employment should be seen as means of supplementing income rather than the primary source of income.

However, the reality in China is of course is very different.  Tens of millions of low-paid factory workers, construction workers and those in the service industry have been denied pensions and medical insurance by their employers in open defiance of the law.

Local government officials have largely stood by and let it happen. And in some cases, it is local governments themselves who are the worst offenders. Gu Jianqing, for example, worked 11 years as a janitor at a local social security bureau in Chongqing without receiving a single social security contribution from his employer. Gu was lucky because after the Chongqing Evening News ran his story, the social security bureau promised to pay up.

But millions of workers end up with nothing. What’s more, they have no savings to fall back on and have to continue working just to make ends meet. And by and large the only jobs they can find are low-paid, dirty and arduous jobs, such as street cleaning, that no one else is willing to do.

On 31 July, a 72-year-old street cleaner, Ji Chunbo, who had been working throughout the heat of the day, collapsed and died. Ji had no pension and savings of just 1,492 yuan. Once again, it was only after the local media reported the case that the government stepped in and provided his family with an undisclosed compensation deal.

The plight of elderly sanitation workers has been in the news a lot over the last couple of years and generally the response of the public has been sympathetic, even when street cleaners have gone on strike and left garbage pilling up on the streets for days on end. Several students, especially in Guangzhou, have lobbied on behalf of the sanitation workers and as a result local governments have often sought to improve the pay and conditions of those workers.

However, the problem of their designation as labour service providers rather than as actual workers remains unsolved. Lawyers in a recent arbitration case in Foshan argued that a group of sanitation workers who had passed the statutory retirement age should still be considered as workers because they had not actually “retired” and started receiving a pension. The arbitration committee took a different view.

It is clear, given the extent of the problem, that courts and labour arbitration committees need to take a much more pragmatic and humane approach towards vulnerable elderly workers and accept that until workers actually get a pension, they should still be classified as workers. But more importantly, local governments must ensure that all the employees in their jurisdiction are making the legally mandated social security contributions to all their employees. Because only when all workers are guaranteed a pension when they reach the age of retirement will the problem finally be resolved.

And in an encouraging development, a court in the central province of Jiangxi has ruled that a 70-year-old worker who had been continuously employed at a school in Anfu county since 1999 should be considered as an employee not a labour service provider, as the school had claimed.

Baker & Mackenzie’s China Employment Law Update reports that the Anfu County People’s Court ruled on 12 August the employee was entitled to severance pay after he was terminated in March 2013 because the school failed to file a retirement application for him to receive a pension when he reached the retirement age of 60 and instead arranged for him to continue working.

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