Question 25: May Employers further sign a definite LC until the expiry of the enterprise’s operation license with Employees who have twice entered into previous definite LCs?


Under the labour law, if an LC expires and the two parties wish to sign another LC as the definite one, they are only allowed to do this one time. After that, if an Employee continues to work, a definite LC must be signed[1]. Apart from the aforesaid provisions, the labour law has no further provisions on the exception of compulsory non-conversion of the type of LC in case of expiry of the company’s operation license. Therefore, in principle, any following LC with Employees who have twice entered into definite LCs must be the indefinite LC. The term of a business/operation license such as an enterprise registration certificate or investment registration certificate, will not affect the conversion of the type of LC in accordance with the labour law. At the same time, this is not considered a valid legal basis for an Employer to refuse to sign an indefinite LC with any Employee in this case.

You should further note that based on the cases of LC termination regulated by the law, the LC will be terminated if any Employer as an individual dies, is declared by the court as losing civil capacity, missing or dead; any Employer as an entity terminates its operations[2]. Accordingly, in the event the company terminates its operation due to the license expiry, the LC between the enterprise and all Employees working there will be evidently terminated regardless of the type of LC signed with Employees.

[1]Article 22.2 Labor Code

[2]Article 36.7 Labor Code