[Q&A] Legal Status of Employees Working for Associated Firms

2025. 8. 29

Question: How is the employment relationship determined in the case of a worker engaged in multiple roles within associated enterprises?

Answer: Article 3 of the "Supreme People's Court's Interpretation on Several Issues Concerning the Application of Law in the Trial of Labour Dispute Cases (II)" (FaShi [2025] No. 12) (effective from 1st September 2025) stipulates: "Where a worker is employed successively or simultaneously by multiple associated enterprises and requests confirmation of an employment relationship, the People's Court shall handle the matter separately according to the following circumstances:

(i) Where a written labour contract has been concluded and the worker requests confirmation of the employment relationship based on that labour contract, the People's Court shall support this in accordance with the law.

(ii) Where no written labour contract has been concluded, the employment relationship shall be determined based on the act of employing the worker, comprehensively considering factors such as working hours, job content, payment of remuneration, and contribution to social insurance.

Where a worker requests that the relevant enterprises specified in the preceding paragraph (ii) bear joint and several liability for the payment of labour remuneration, welfare benefits, and other treatments, the People's Court shall support this in accordance with the law. However, this shall not apply if the relevant enterprises have reached an agreement in accordance with the law regarding the worker's labour remuneration and welfare benefits, and have obtained the worker's consent."

Based on the above provisions, where a worker is employed successively or simultaneously by multiple associated enterprises (i.e., is a worker engaged in multiple roles within associated enterprises) and a written labour contract has already been concluded, if the worker requests confirmation of the employment relationship based on that labour contract, the employment relationship should be determined based on the labour contract. If no written labour contract has been concluded with any of the associated enterprises, the employment relationship should be determined based on the act of employing the worker, comprehensively considering factors such as working hours, job content, payment of remuneration, and contribution to social insurance. Furthermore, regarding the subject of liability in the absence of a written labour contract, the worker may request that multiple enterprises bear joint and several liability; however, if the multiple enterprises have reached an agreement in accordance with the law regarding the worker's labour remuneration and welfare benefits, and the worker has consented, they don’t need to bear joint and several liability.

Additionally, at the press conference for the issuance of the "Supreme People's Court's Interpretation on Several Issues Concerning the Application of Law in the Trial of Labour Dispute Cases (II)", six typical cases were released. Case No. 2 is relevant to the provisions of the above-mentioned Article. In that case, the court of trial held the opinions that a certain digital company (Company A) and a certain technology company (Company B) were associated enterprises, their business scopes overlapped, Mr. Liang was both the shareholder and legal representative of this two companies, and it was not easy for Ms. Wang to discern her actual employing company. Although Ms. Wang was recruited and entered employment under the name of Company B, her workplace bore the branding of Company A, the communication software used for business contacts was prefixed with the name of Company A, and her job content included the business of Company A. Therefore, it was held that Ms. Wang had reasonable grounds to believe she was employed by Company A. The court of trial, in its judgment, supported Ms. Wang's claim for confirmation of an employment relationship with Company A and her claim for payment of unpaid wages, amongst other things.

Our recommendation: To avoid being determined as a worker engaged in multiple roles in the associated enterprises and consequently bearing legal liability, enterprises should promptly execute a written labour contract with the worker and ensure that the entity responsible for paying wages, contributing to social insurance, and managing the employment of the worker is consistent with the entity that concluded the labour contract. If it is necessary for a worker to handle the business or tasks of multiple enterprises simultaneously, it is advisable for the multiple enterprises to clearly agree upon matters such as the worker's wage remuneration, welfare benefits, and employment management, and to obtain the worker's consent.