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Why Foreign Companies Should Follow O2O Model in China

O2O ModelIt has been observed by the China lawyers that, there are so many foreign companies try to project the relationship with their partner, independent contractor and agent as an employer-employee relationship. It is quite acceptable that hiring a Chinese employee is a costly business. But business owners need to keep in mind that it will cost them more if they try to improperly get around in China.

To give you hope, Chinese authorities have opened the door a crack to allow independent contractor like relationships “online to offline” (O2O) world. In China especially, O2O also covers all manner of services that might not be cost effective to offer in Western markets, including pick-up dry cleaning, home haircuts or wholesale and fresh market delivery services. For a simpler meaning, O2O business model is anything digital which brings people to shop offline.

In different cases involved by the online taxi services provider such as Lyft, Uber and Didi, Chinese courts have hailed the verdict that the cab drivers of these ride-hailing service providers are not employee. It has been noted that, both the company and the driver have agreed upon an e-ride-hailing driver cooperation agreement.

If you study a case decided in 2015, you could boost your knowledge of the complex employee-employer rule of China. A ride hailing driver from Beijing claimed that he was an employee of that company with an RMB 4000($600) per month. His allegations were:

1. His company did not pay social insurance payments
2. Held back his salary without any valid reason
3. Abruptly terminated his employment without cause

He claimed a labor arbitration against his company. But he lost all his cases in the court and in the intermediate court. In identifying whether there is any employment relationship existed between the parties, the court has taken three aspects into the consideration-

First: Whether the employer and the employee qualified as employer and employee for purposes of the Chinese labor and employment laws

Second: Whether the employee was subject to the employer’s rules and regulations and the labor management of the employer and undertook work arrangements from the employer for remuneration

Third: The employee’s services constituted a part of employer’s business.

Based on this aspects, the honorable court has found the driver has worked on his flexible hours and the company did not pay him a fixed salary per month, that’s why no employment relationship is existed between the driver and the company. In a new provisions published by China, ride hailing companies can form different kinds of cooperation agreements or labor contracts with the drivers.

According to the China lawyers, because of this rule foreign companies don’t need to worry that they have to treat every individual work for them as an employee. It is quite obvious that China will continue to support individual against the company. But the introduction of O2O has changed the entire scenario. Chinese courts are longer treating all situations where employee-like individuals had independence and flexibility as traditional employees. The concept of “independent contractor” is entirely different comparing to the USA.

About Michael Wong

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