Construction Company Ordered to Pay 15,000 RMB in Wages to Migrant Worker in Subcontractor Wage Dispute

Construction Company Ordered to Pay 15,000 RMB in Wages to Migrant Worker in Subcontractor Wage Dispute

CASE OVERVIEW

A Chinese civil court in Northern China ruled that a construction company must pay 15,000 RMB in unpaid wages to a migrant worker, Mr. Zhang, even though the worker was directly hired by subcontractors. The court applied the principle that a general contractor bears employer responsibility when it subcontracts work to individuals or entities lacking proper employment qualifications.

CASE BACKGROUND AND FACTS

The plaintiff, Ningbo XX Company, was the winning bidder for the construction of the Dafeng Real Estate Shuian Xincheng project. On August 3, 2009, the company entered into an internal construction contract with a third party, Mr. Dong, who acted as the project manager. The contract stated that Mr. Dong was responsible for hiring workers, collecting payroll records, signing labor contracts, and paying wages directly. It also provided that any wage disputes or economic consequences arising from subcontractor arrangements would be borne by Mr. Dong.

On August 28, 2009, Mr. Dong, acting on behalf of the company’s project department, signed a subcontract agreement with Mr. Xiang for the reinforcement steel work. The following day, Mr. Dong signed a similar subcontract with Mr. He for the scaffolding work. Both subcontractors were engaged on a materials-and-labor basis.

The defendant, Mr. Zhang, was one of 16 workers hired by Mr. Xiang and Mr. He to perform reinforcement work on the site. By May 10, 2010, construction had ceased, and Mr. Zhang was owed 15,000 RMB in unpaid wages. The workers filed a complaint with the local labor arbitration commission, which ruled that the company, Mr. Xiang, and Mr. He should bear joint liability for the unpaid wages. The company then filed a lawsuit seeking to avoid this liability, arguing that it had no direct employment relationship with Mr. Zhang.

COURT PROCEEDINGS AND EVIDENCE

The court held hearings on December 28, 2010, and January 11, 2011. The company presented evidence including the internal contract with Mr. Dong and the subcontract agreements with Mr. Xiang and Mr. He. It argued that Mr. Zhang was employed by the subcontractors and that the company should not be responsible for wage payments. The company also submitted payment records and ledgers to show that it had already paid amounts exceeding the contract value to the subcontractors.

Mr. Zhang argued that the company, as the general contractor, had a legal duty to ensure wages were paid because it had subcontracted work to parties without proper employment qualifications. Mr. Dong testified that he paid wages on behalf of the company and that the true employment relationship existed between Mr. Zhang and the company. Mr. Xiang and Mr. He both denied direct responsibility, stating that their accounts had been settled with Mr. Dong.

During trial, all parties except the company confirmed that Mr. Zhang was still owed 15,000 RMB. The court accepted this fact based on the internal contract system, under which Mr. Dong was responsible for verifying and approving wage amounts.

COURT FINDINGS AND JUDGMENT

The court found that migrant workers’ wages must be paid promptly. It applied Article 5 of the Notice of the Ministry of Labor and Social Security on Issues Concerning the Establishment of Labor Relations, which states that when a construction company outsources work to an organization or individual without employer qualifications, the outsourcing party bears the employer responsibility for workers hired by that organization or individual.

The court held that although the company and Mr. Dong signed an internal contract, Mr. Dong acted in the company’s name in all external dealings. His civil liability therefore fell on the company. The subcontract agreements signed by Mr. Dong with Mr. Xiang and Mr. He did not relieve the company of its employer responsibility. The court also noted that Mr. Zhang was a reinforcement worker and had no legal relationship with the scaffolding team.

The court ruled that the company must pay Mr. Zhang 15,000 RMB within three days of the judgment taking effect. The company’s claim to avoid liability was dismissed. The court ordered the company to bear the litigation costs of 5 RMB. If the company failed to pay on time, it would be subject to double interest on the debt for the period of delay.

KEY LEGAL PRINCIPLES

Under Chinese labor law, when a construction company subcontracts work to an unqualified entity or individual, the company retains employer responsibility for the wages of workers hired by that subcontractor. This principle protects migrant workers who may not have a direct contractual relationship with the general contractor. The court emphasized that internal contractual arrangements between the company and its project manager do not affect the company’s external liability to workers.

PRACTICAL INSIGHTS

Construction companies should exercise due diligence when selecting subcontractors and ensure that subcontractors have proper employment qualifications. Including indemnity clauses in internal contracts may allow the company to recover losses from project managers or subcontractors, but does not eliminate the company’s direct liability to workers. Companies should also maintain clear payroll records and verify that wages are paid directly to workers to avoid disputes.

LEGAL REFERENCES

Labor Law of the People’s Republic of China, Article 50
Notice of the Ministry of Labor and Social Security on Issues Concerning the Establishment of Labor Relations, Article 5
Civil Procedure Law of the People’s Republic of China, Article 64, Paragraph 1

DISCLAIMER

This article is for informational purposes only and does not constitute legal advice. Laws and regulations may vary by jurisdiction. Readers should consult a qualified attorney for advice on specific legal matters.