High risks in paying social insurance on behalf of others; labor relationship is the foundation

[2] Compiled from: Shandong High Court

 

Case review
[1] Employee A worked as a customer service manager at Hotel A without a signed labor contract, with an actual monthly salary of 5,000 yuan.
 
[2] Hotel A and Human Resources Company B had previously signed a "Human Resources Entrustment Contract," agreeing that Company B would handle social insurance payments for Hotel A's employees. After Employee A joined, Company B paid social insurance at the minimum level (60%).
 
One day in 2019, Employee A was involved in a traffic accident on the way home from work. Subsequently, Company B, a human resources firm, fabricated a labor dispatch contract and an employment contract in Employee A's name and applied for a work-related injury determination. The Municipal Human Resources and Social Security Bureau issued a work-related injury determination decision, and the Labor Ability Appraisal Committee assessed the disability as Grade 9.
 
Because Employee A believed he was entitled to economic compensation, double wages, and that the calculation base for the "three funds" in work-related injury insurance benefits did not match his actual wage level, negotiations with Hotel A and Company B regarding the work-related injury benefits failed. He then terminated the labor contract with both companies under Article 38 of the Labor Contract Law and applied for labor arbitration, demanding that both companies jointly bear the work-related injury insurance benefits, economic compensation, and double wages.
 
 
Focus of Dispute : If a labor relationship has been confirmed during the work-related injury determination process, can a contrary determination be made in labor arbitration?
 
[1] Viewpoint One
[2] The Supreme People's Court, in its "Reply on Whether Labor Administrative Departments Have the Authority to Determine Labor Relations in the Process of Work-Related Injury Identification" ([2009] Xing Ta Zi No. 12)
According to Article 9 of the Labor Law and Articles 5 and 18 of the Work-Related Injury Insurance Regulations, the labor administrative department has the authority to determine whether a labor relationship exists between an injured employee and the enterprise during the work-related injury identification process.
 
Work-related injury identification, as an administrative confirmation act, has presumptive validity and binding force. That is, once established, it is presumed to be lawful and has the legal effect of requiring all organs, organizations, or individuals to respect, comply with, and obey it, unless it is revoked through legal procedures.
 
According to this view, in this case, Company B, a human resources company, applied for work-related injury identification to the Human Resources and Social Security Bureau as an employer, and did not file an administrative reconsideration or administrative lawsuit against the work-related injury identification decision to revoke it. Therefore, the work-related injury identification certificate in this case has presumptive validity and binding force.
 
Viewpoint Two
Notice of the Ministry of Labor and Social Security on Issues Concerning the Establishment of Labor Relations (Ministry of Labor and Social Security Document No. [2005] 12)
Article 1 Where an employer hires a worker without concluding a written labor contract, but the following conditions are simultaneously met, a labor relationship is established.
(1) The employer and the worker meet the subject qualifications stipulated by laws and regulations;
(2) The various labor rules and regulations lawfully formulated by the employer apply to the worker, who is subject to the employer's labor management and engages in paid labor arranged by the employer.
(3) The labor provided by the worker is an integral part of the employer's business operations.
 
To determine whether a labor relationship exists between the plaintiff and the defendant, an analysis should be conducted based on the substantive elements of a labor relationship, including whether the employer and the worker meet the subject qualifications stipulated by laws and regulations, whether the worker is actually subject to the employer's management, direction, or supervision, whether the various labor rules lawfully formulated by the employer apply to the worker, and whether the labor provided by the worker is an integral part of the employer's business operations.
 
(4) According to this view, in this case, based on evidence submitted by the employee, such as the work badge, attendance records, pay slips, bank statements, rules and regulations, and performance appraisal records, it can be fully confirmed that a de facto labor relationship exists between the employee and Hotel A. However, according to the "Human Resources Entrustment Contract" signed between Hotel A and Human Resources Company B, Company B does not have a labor contract relationship with the employee; it merely acts on behalf of Hotel A to pay social insurance for Hotel A's employees.

 

 
[1] The author's perspective
[1] The author tends to agree with the second viewpoint mentioned above.
 
[2] According to the provisions of the "Notice on Matters Concerning the Confirmation of Labor Relations," even if the Human Resources and Social Security Bureau has issued a work-related injury determination, this determination is only one piece of evidence to be considered in confirming the labor relationship and does not automatically prove its existence. Once other evidence emerges that can overturn this evidence, the labor relationship cannot be confirmed solely based on the work-related injury determination. Moreover, if it is determined that Company B, a human resources firm, has an actual labor relationship with Employee A, then Company B may be liable for work-related injury compensation, double wages for failing to sign a written labor contract, economic compensation, etc., which would also be unfair to Company B, which has not established an actual labor relationship. However, if it is determined that the actual labor relationship with Employee A exists with Hotel A, this not only respects reality but also serves to combat the chaos of "fake outsourcing, fake dispatch, and fictitious labor relationships."
 
Currently, "social security proxy payment" is common, with even professional agencies offering this service, yet many are unaware of its significant risks. The Social Insurance Law stipulates that the prerequisite for paying and receiving social security benefits is that the worker is employed by an employer with a labor relationship; those without such a relationship or in part-time work can participate in flexible employment or urban-rural resident pension insurance. Additionally, with the implementation of "social security tax integration," judicial perspectives are gradually shifting, further reducing the scope for "social security proxy payment" services.