China Update: Practical Analysis of the Issue of Reaching the Statutory Retirement Age

Introduction

On July 21, 2024, Xinhua News Agency issued the “Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization”, which pointed out that “in accordance with the principle of voluntariness and flexibility, the reform of gradually delaying the statutory retirement age will be promoted in a steady and orderly manner.” On the same day, major social media platforms frantically spread the news that “people born after 1990 (including 1990), regardless of gender, will be adjusted to retire at the age of 65”, although this statement has no official basis, and there is no relevant official channel to respond or certify, but the topic of retirement has once again rushed to the hot search and returned to the public eye.

In practice, although China has a clear law on the retirement age, men must be at least 60 years old, female workers must be at least 50 years old, and female cadres must be at least 55 years old. However, labor disputes arising from the issue of retirement age are still not uncommon, and these disputes often involve conflicts of rights and interests between employees and employers, such as whether the labor contract can be terminated when the statutory retirement age is reached, whether the statutory retirement age in China is applicable to foreign employees, and how to determine the retirement age of female employees. This article will provide a practical analysis of the retirement age issues that have attracted much attention in these areas of labor law, in order to provide reference.

1. Whether the enterprise can terminate the labor contract if the employee only meets the statutory retirement age

According to Article 44, Paragraph 2 of the Labor Contract Law and Article 21 of the Regulations for the Implementation of the Labor Contract Law, the termination of the labor contract is the result of an employee’s enjoyment of basic pension insurance benefits and reaching the statutory retirement age. Under most normal circumstances, the above two situations occur at the same time, and the enterprise handles the retirement of the employee smoothly and there is no legal risk in terminating the labor contract. However, it is not natural that you can enjoy basic pension insurance benefits when you reach the statutory retirement age. According to Article 16 of the Social Insurance Law, individuals who participate in the basic pension insurance and have paid contributions for 15 years when they reach the statutory retirement age shall receive the basic pension on a monthly basis. Therefore, under special circumstances, if the employee only meets the statutory retirement age but cannot enjoy the basic pension insurance benefits, whether the enterprise can terminate the labor contract in accordance with Article 21 of the Regulations for the Implementation of the Labor Contract Law has become a controversial issue in practice.

In the People’s Court case database released by the Supreme People’s Court in 2024, the (2022) Xin Min Zai No. 229 case reflects the current mainstream adjudication view, that is, whether the termination of the labor contract under Article 21 of the Regulations for the Implementation of the Labor Contract Law can be directly applied needs to determine whether the reason why the employee cannot enjoy the basic pension insurance benefits is caused by the fault of the employer.

The court held that if Article 44, Paragraph 2 of the Labor Contract Law were applied separately and whether the employee was entitled to basic pension insurance benefits as the sole criterion for judging whether the employment contract was terminated, if the employee reached the statutory retirement age and did not go through the retirement formalities and did not receive the basic pension insurance benefits, the employer might have to maintain the employment relationship with the employee until the employee died or the employer cancelled the employment, which would be unfair to the employer in these circumstances. Therefore, according to Article 44, Paragraph 6 of the Labor Contract Law, which stipulates that there are “other circumstances stipulated by laws and administrative regulations”, and combined with the provisions of Article 21 of the Regulations for the Implementation of the Labor Contract Law, the above two provisions do not conflict, but are complementary and perfect. However, if the employee reaches the statutory retirement age and directly gives the employer the right to terminate the labor contract, it will also cause damage to the legitimate rights and interests of the employee to a certain extent, so the review of the application of Article 21 of the Regulations for the Implementation of the Labor Contract Law should also specifically examine whether the reason why the employee cannot enjoy the basic pension insurance benefits is related to the employer.

In addition to this, there are two different points of view:

1. Represented by Beijing and Guangdong

All of them support the termination of labor contracts by enterprises in accordance with Article 21 of the Regulations for the Implementation of the Labor Contract Law, believing that as long as the employee reaches the statutory retirement age, the employment of both parties is a labor relationship. For example, in the case (2022) Jing 03 Min Zhong No. 9611 and (2022) Yue 01 Min Zhong No. 7267, the local judicial caliber also has relevant supporting provisions^[1]。

2. Represented by Jiangsu

In principle, enterprises are recognized to have the right to terminate the employment relationship when the employee has reached the statutory retirement age, such as the case (2019) Su 01 Min Zhong No. 8405. However, when the employee reaches the statutory retirement age and does not enjoy the basic pension insurance benefits, and the employee continues to work at the original employer, and the employment situation between the two parties meets the characteristics of the labor relationship, even if the statutory retirement age is exceeded, the existence of an employment relationship between the two parties will still be deemed to be a “special labor relationship”^[2], such as the case (2020) Su 01 Min Zhong No. 2160.

It is worth mentioning that Article 6 of the Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (II) (Draft for Comments), which has been solicited from the public not long ago but has not yet been officially released, obviously prefers to be handled in accordance with the caliber of Jiangsu, and does not exclude the right of enterprises to terminate labor contracts in accordance with Article 21 of the Regulations for the Implementation of the Labor Contract Law, which also solves the basic labor rights and interests protection of such personnel to a certain extent. We are also waiting for the Supreme People’s Court’s Judicial Interpretation (II) to be issued as soon as possible to unify the application issues in various localities.

2. Whether the statutory retirement age in China is applicable to foreign employees

Among the issues of whether the labor contract can be terminated when the statutory retirement age is reached, there is the issue of the application of the law to a special category of personnel, that is, foreign employees. Since foreigners who hold permanent residency status in China enjoy the same rights and obligations as Chinese citizens in China, the termination of the employment relationship between such personnel and enterprises can be applied with reference to the first part of this article, and the second part of this article only analyzes the situation of foreign employees who do not hold permanent residence qualifications in China.

In the case of a foreign employee whose Foreigner’s Work Permit is still valid but has reached the statutory retirement age, whether an enterprise can terminate the employment contract in accordance with Article 21 of the Regulations for the Implementation of the Labor Contract Law is divided into two completely different schools of view, led by Beijing and Shanghai, and different adjudication standards apply.

Point 1

In most regions, it is tended that the provisions of China’s statutory retirement age apply to foreign employees, and enterprises can terminate the employment contracts of foreign employees.

After searching and confirming, the courts in Beijing, Jiangsu, Guangdong, Chengdu and other regions all hold the above views, and the relevant cases can be referred to (2017) Jing 03 Min Zhong No. 4875, (2021) Su 02 Min Zhong No. 4015, (2021) Yue 0391 Min Chu No. 4742, and (2019) Chuan 01 Min Zhong No. 2372.

The court held that the law of the place where the employee works shall apply to the employment contract. The foreign employee’s place of work is in China, so the law of the People’s Republic of China is applicable to this case. According to the provisions of the relevant normative legal documents, foreigners can establish labor relations with employers in China, but there is no special provision that they can be exempted from the restrictions on retirement age in China’s current laws, and the company will serve a notice of termination on the foreign employees on the grounds that they have reached the statutory retirement age, and the company shall terminate the labor contract relationship with foreign employees in accordance with the law, and there is no need to pay economic compensation for the termination of the labor contract.

In this view, even if the Foreigner’s Work Permit is still valid, when the foreign employee reaches the statutory retirement age, the labor contract relationship is formed with the company.

Point 2

In Shanghai, for example, there is a tendency to believe that the statutory retirement age in China does not apply to foreign employees, and enterprises cannot terminate the employment contracts of foreign employees.

In the case (2011) Hu Er Zhong Min San (Min) Zhong Zi No. 1119, the Shanghai No. 2 Intermediate People’s Court held that China’s current laws do not expressly prohibit foreigners over the age of 60 from employing in China, and the Foreigner’s Employment Permit valid until October 29, 2012 handled by the company for Wang Moumou also indicates that Wang Moumou can legally work in China within the above-mentioned period, so there is no basis for the company to terminate the labor contract on the grounds that Wang Moumou reached the statutory retirement age on April 13, 2010. The court of first instance agrees with the disposition of this section.

The above views are also supported by relevant documents in Shanghai^[3]The term “general” is used in the regulations on the employment age of foreign employees, which can be understood to mean that Shanghai does not completely prohibit the employment of foreign male employees over the age of 60 and foreign female employees over the age of 55. Since the term of the Foreigner’s Work Permit and the term of the labor contract signed by both parties are expressions of intent made by the enterprise and the foreign employee after the agreement between the two parties, and the judicial practice in Shanghai generally respects the choice of the autonomy of the two parties, the enterprise is clearly aware of and can fully predict the fact that the foreign employee will reach the statutory retirement age in China during the performance of the labor contract. Fully understand the local judicial caliber, sign a labor contract of the corresponding period and apply for a license according to the company’s own employment situation and the age factor of the foreign employee, so as to avoid being in a passive state in the later stage.

3. Recognition of the retirement age of female employees

When discussing whether an employment contract can be terminated on the grounds of retirement age, the determination of the retirement age of female employees is also a high-risk area of controversy. When an enterprise believes that a female employee should retire at the age of 50, while a female employee believes that she is a cadre and should retire at the age of 55, and is unwilling to cooperate with the retirement procedures, it becomes a difficult problem whether the enterprise can terminate the labor contract in accordance with Article 21 of the Regulations for the Implementation of the Labor Contract Law, and whether the termination can be legally determined depends on the determination of the statutory retirement age of the female employee.

According to the provisions of the Ministry of Labor [1995] No. 309 document^[4]In the case of a change in position, it shall be determined according to the nature of the position of the female employee before retirement in accordance with national regulations. Cases published in recent years show that in recent years, the standard of female employees’ positions before retirement has gradually become the mainstream practice for determining the retirement age of female employees. As for distinguishing whether it is a managerial and technical position, the enterprise can establish the nature and circumstances of the position or the corresponding rank of the post through the last written labor contract signed with the female employee, the signing of the job responsibilities agreement, or the formulation of clear rules and regulations. Considering that at the practical level, the retirement procedures are actually operated by the local human resources and social security departments, while the human resources and social security departments in some regions will still determine the statutory retirement age for female employees according to the combination of status and position. For controversial cases, it is recommended that the enterprise adjust the personnel file of the female employee in advance through the street where the household registration is located, the industry competent center or the former enterprise, or apply to the local social security system to check the registration status to confirm the original identity of the female employee.

In addition, it should also be noted that if there is a significant difference between the identity information recorded in the personnel file of a female employee and the nature of the position before retirement, there are also corresponding requirements for the time spent in the post before retirement, such as the requirement in Guangdong, the current position should be subject to the position determined in the labor contract, and those who have worked in the current position for more than one year shall be identified by the current position. Zhejiang requires that if a non-managerial technical post is transferred to a managerial technical post for five consecutive years and retires in the post, the retirement age is 55 years old; The retirement age is 50 years old. Due to the differences in the rules from place to place, it is not possible to list them all in this article. It is recommended that enterprises understand the local retirement policy of the employer in advance and intervene in the employment management in advance, so as to avoid the lack of basis for the enterprise’s claim on the nature of the female employee’s position in the event of a dispute, or the inability to terminate the labor contract according to the expected time of the enterprise due to the fact that the female employee’s working time does not meet the policy requirements, thereby increasing additional employment costs.

Anjie Broad, China, a Transatlantic Law International Affiliated Firm.  

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