China / Labor Force / Politics

How Does China Define Labor Relations in Rising Car-Hailing Services?

uber-in-chinaOn June 28, the Chinese Ministry of Transportation issued a new regulation declaring that online car-hailing services in China can operate lawfully, which took effect on Nov. 1.

In China, strict governmental rules repeatedly trip up local and foreign internet companies. Before this new regulation, local governments in major cities restricted the registration and use of vehicles operated by “unlicensed and private drivers.”[1] In 2015, local law enforcement raided an Uber office in the southern Chinese city of Guangzhou.

With this new regulation, the Chinese government took a big step forward in signaling that the government will encourage the development of a sharing economy and online car booking.[2] Liu Xiaoming, vice minister of transportation, said that China is the world’s largest online car-hailing market and expects the regulation to further boost car-hailing services in the long term, promote the development of sharing economy, ease traffic congestion in cities and reduce air pollution.[3]

In addition, the new regulation also mandated that car-hailing companies ensure that drivers practice with qualifications and sign various forms of labor contracts or agreements contingent on the number of working hours, service frequency and other characteristics.

This seemingly strict rule actually shows that the Chinese government is taking an open attitude toward the labor relations between car-hailing companies and drivers. Specifically, the regulation allows car-hailing companies to choose between signing either service contracts or employment contract with drivers. With this option, most companies decide to sign service contracts with drivers to save on labor costs.

In China, the difference between service contracts and employment contracts has legal implications. The former applies to the civil law while the latter applies to the labor law, which requires more substantial labor protections. Workers who sign service contracts are called “temporary workers” in China and are more subject to labor violations than workers who sign employment contracts.

Admittedly, the Internet-based business model throws out a big challenge in forming labor relations worldwide. In the industrial age, individual workers depend on collective production and traditional jobs rely on employment contracts with companies. In the information age, workers have unprecedented liberation and freedom to provide services and labor on their own terms. More and more workers have become self-employed or entrepreneurial, which is not addressed well by labor law.

With the rising gig economy, there is a need for reform in current labor law not only in China but also other countries.[4] [5] However, in my opinion, relevant labor law should adhere to the basic principles initiated many years ago: to secure basic labor rights, including but not limited to fair labor income, health insurance, and freedom of unionization among other rights.[6]

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