Employer Can Choose to Renew Open-ended Labour Contract or not?
An open-ended labour contract refers to a labour contract for which the employer and the employee have agreed that the date of termination is not fixed. According to section (3) of Article 14 of the Labour Contract Law of the People's Republic of China, where a fixed-term labour contract has been concluded for twice consecutively and the employee does not fall under any of the circumstances as stipulated in Article 39, the first and second paragraphs of Article 40 of the Labour Contract Law which allow the employer to terminate the labour contract, and the labour contract will be renewed, the employer shall enter into an open-ended labour contract with the employee, unless the employee proposes to enter into a fixed-term labour contract.
In case that the employee has signed two consecutive fixed-term labour contracts, and the employer has no intention to renew the labour contract, can it choose to terminate the labour contract upon expiration and not to enter into an open-ended labour contract with the employee? There are two different opinions in judicial practice regarding this issue:
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Upon the expiration of the second fixed-term labour contract, the employer has the right to decide whether to renew the labour contract with the employee. If it is not willing to renew the labour contract, it can unilaterally terminate the labour relationship. An open-ended labour contract must be concluded only when both parties agree to renew the labour contract.
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Upon the expiration of the second fixed-term labour contract, the employer has no right to choose whether to renew the fixed-term labour contract. Unless the employee proposes to enter into a fixed-term labour contract, the employer must conclude an open-ended labour contract with the employee.
Currently, most regions of China such as Beijing, Tianjin, Shanghai, Shenzhen, Guangdong Province, Sichuan Province, Jiangsu Province and Zhejiang Province adopt the second opinion in judicial practice. That is, if the employer and the employee have entered into two consecutive fixed-term labour contracts, upon the expiration of the second fixed-term labour contract, as long as the conditions for concluding an open-ended labour contract are met, the employee has the right to choose to enter into an open-ended labour contract. The employer must enter into an open-ended labour contract with the employee regardless of its willingness to renew the labour contract. If the employer unilaterally terminates the labour contract, it shall be deemed as an illegal termination of the labour contract and shall bear corresponding legal consequences and liabilities in accordance with Article 48 of the Labour Contract Law of the People's Republic of China.
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