24 May 2018

Which Is It for Online Taxi Drivers? Employment or Labor Service?

This article was written byJunlu Jiang(Partner) and Chenkun Li(Associate assistant).

Jiang Chai is an online taxi driver. He became a staff member of Beijing Changxing Traffic Co., Ltd. (hereinafter as “Changxing Company”) in 2014 and fulfilled orders allocated by a taxi-booking mobile application operated by Beijing Cheyun Technology Co., Ltd. (hereinafter as “Cheyun Company”). The car he drove was provided by Changxing Company, and he paid cash deposit for the vehicle. Jiang Chai worked 6 days per week and did not need to work on traffic control days. Jiang Chai must log onto the platform at 7 a.m. every day, start driving the vehicle before 7:30 a.m., and shall not stop working before 9:30 p.m. He attended meetings on a weekly or monthly basis, and the meeting locations were either unfixed sites or the premise of Cheyun Company. Jiang Chai’s salary was paid by Cheyun Company based on the profits of the taxi-booking mobile application platform. Changxing Company did not enter into employment contract with Jiang Chai or pay social insurance for him. Changxing Company and Cheyun Company are affiliated companies.

Jiang Chai applied for labor arbitration to the labor dispute arbitration committee and claimed for the confirmation of the existence of employment relationship with Changxing Company and double wages due to Changxing Company’s failure to conclude a written employment contract. The arbitral award upheld the claims of Jiang Chai. Changxing Company was not satisfied with the arbitral award and filed a lawsuit with the people’s court. The court of first instance held that there was no employment relationship between the two parties, and thus Changxing Company was not obliged to pay Jiang Chai the double wages he claimed. Jiang Chai was not satisfied with the first-instance judgment and appealed to the Beijing First Intermediate Court. It was held that the appeal is dismissed and the original judgment is upheld. Jiang Chai found it difficult to understand why the court issued such a judgment.

The dilemma Jiang Chai is facing is not uncommon.

With the continuous development of "Internet Plus", new industries such as online taxi-booking and webcast services that use network platforms to operate have been emerging. Employees working in new industries are different from employees in traditional standardized employment relations in terms of job duties, occupational characteristics, etc., and differences are also seen in enterprises’ labor management. Then, in practice, how does the court identify existence of employment relationship in new industries such as online taxi-booking services, and what factors will be considered primarily when determining?

Court Judgment

In judicial practice, the “three-factor” standard set out in the Notice on Issues relating to Confirmation of Employment Relationship by the former Ministry of Labor and Social Security is generally used to determine the existence of employment relationship between an entity and an individual: (1) the employer and the employee possess qualifications of a subject in accordance with the provisions of laws and regulations; (2) the employee is subjected to the employer’s rules and regulations, under the management of the employer, and obtains remuneration for his/her work; (3) the work provided by the employee constitutes part of the employer’s business. If the entity and the individual fully meet the abovementioned standards, the labor dispute arbitration committee and the court are usually inclined to confirm the existence of an employment relationship between the two parties. In such situation, they shall be subjected to relevant employment laws and regulations. 

However, considering the facts discovered by the court in limited cases, we noticed that the employment pattern of the online taxi-booking platform usually did not fully match the abovementioned three traditional factors. Taking the labor dispute between Jiang Chai and Changxing Company for example, when analyzing whether employment relationship exists between Jiang Chai and Changxing Company, the court mainly considered five factors, including the conclusion of contract, business composition, labor management, operation income and remuneration distribution, premise, and social insurance contribution.

First, with respect to the conclusion of contract, neither of the parties submitted evidence to prove that Jiang Chai had entered into employment contract or labor service contract with Changxing Company. Jiang Chai was not subjected to the employment rules and regulations of Changxing Company.

Second, with respect to business composition and labor management, Jiang Chai provided transport service for passengers via the taxi-booking mobile application platform. The work he engaged in constitutes part of the platform operator’s business. Jiang Chai performed his work through the orders allocated by the platform system; and he worked 6 days per week and needed to log onto and log out of the platform on time every day. The subject that issued work orders and conducted attendance management is the operator of the platform, i.e. Cheyun Company, rather than Changxing Company.

Third, with respect to the operation income and remuneration distribution, Jiang Chai provided transport services for passengers via the taxi-booking mobile application platform. The platform operator i.e. Cheyun Company authorized extraction and distribution of corresponding income and provided accounts used to do so.  

Fourth, with respect to the premise, different from employees who work in their offices, the nature of the work Jiang Chai engaged in resulted in that his working place is not fixed. Jiang Chai attended meetings on a weekly or monthly basis, and the meeting location is sometimes at the premise of Cheyun Company.

Fifth, with respect to the social insurance contribution, neither Changxing Company nor Cheyun Company contributed social insurance for Jiang Chai.

Taking all five factors into consideration, current evidence cannot prove that: (1) various employment rules and regulations of Changxing Company applied to Jiang Chai; (2) the service provided by Jiang Chai was within the scope of Changxing Company’s business composition; (3) Jiang Chai were under the labor management of Changxing Company; (4) the work Jiang Chai engaged in was remunerated work arranged by Changxing Company; (5) Changxing Company preformed the obligations as employers such as contribution of social insurance and housing funds to Jiang Chai. Therefore, the court held that the legal elements necessary to constitute the employment relationship between Jiang Chai and Changxing Company were not in place, Jiang Chai and Changxing Company did not establish employment relationship, and Changxing Company was not obligated to pay Jiang Chai double wages due to Changxing Company’s failure to conclude written employment contracts

Current Legislation on and Future Prospect of Online Taxi-booking Platform in China

Regarding labor management under the online taxi-booking platform, at the legislation level, the Ministry of Transport published the Interim Measures on the Management of Operation and Services of Online-booking Taxis (Draft for Solicitation) and the Guiding Opinions on Deepening the Reform and Promoting Healthy Development of the Taxi Industry (Draft for Solicitation) on 10 October 2015, which require taxi-booking platforms enter into employment contracts with drivers. The recognition of employment relationship between platforms and drivers by this regulation means that taxi-booking platforms need to perform various obligations as employers, such as salary payment, holiday guarantee, social insurance and housing funds contributions, etc., which would push up human resource costs for platform operators dramatically. The promulgation of the abovementioned drafts for solicitation led to heated discussion among the general public. Many people opposed to bringing taxi-booking platforms and drivers into the scope of employment relationship management, contending that the recognition of employment relationship would largely increase the economic burden of taxi-booking platform companies and contradicted to the concept of the sharing economy and the flexible employment commonly seen in the new “Internet Plus” format.

On 1 November 2016, the final official version of the abovementioned two documents came into effect. The Interim Measures on the Management of Operation and Services of Online-booking Taxis requires online-booking platforms to “enter into various forms of employment contracts or agreements with drivers based on characteristics such as working hours and service frequencies”. These “agreements” can be civil agreements as well as employment contracts, depending on the management needs of online taxi-booking platforms. It removes the stipulation in the 2015 Draft for Solicitation that online-booking platforms need to enter into employment contracts with drivers, to meet the need for flexible employment of online taxi-booking platforms. “Internet Plus” has become a major trend in the development of the market economy. The online booking platforms, which combine the Internet and traditional industries, will definitely change people’s life style and employment form gradually. Given the circumstances, it is impractical to impose traditional determination standards of employment relationship on taxi-booking platforms and other online-booking platforms, or to define the relationship between platforms and drivers in uniformity. In practice, various factors such as online booking platforms’ management style, remuneration pattern, and requirements on working hours for the service providers determine the legal relationship between the two parties and the legal responsibilities and obligations of online-booking platforms. The authors of this article believe that when formulating relevant policies, relevant authorities should not follow the traditional system mechanically, to avoid restricting the development of new economic model. It is necessary to fully consider the employment characteristics of online-booking platforms, make breakthroughs on the basis of the existing employment law system, and balance interests of relevant parties to adapt to the ideas of "Internet Plus." If no clear conclusion can be reached after extensive research, we might as well “let the bullets fly for a while.”

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