Judicial Interpretation II Impact on Foreign Employment Rights in China: What Changed in 2025 and What to Expect in 2026

On September 1, 2025, China's Supreme People's Court (SPC) implemented Judicial Interpretation II on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases. This landmark legal document has significantly clarified the employment rights and protections for foreign nationals working in China, addressing long-standing ambiguities in labor law application.

Overview of Judicial Interpretation II

Judicial Interpretation II provides comprehensive guidance on labor dispute resolution and clarifies the legal status of foreign employees in China. The interpretation specifically addresses three scenarios under which foreign nationals can have their employment relationships legally recognized by Chinese courts:

• Foreign nationals with permanent residency in China
• Those holding valid work permits and lawfully residing in China
• Individuals who have completed relevant legal procedures as per national regulations

Key Provisions Affecting Foreign Employment Rights

The interpretation introduces several important changes for foreign employees:

1. Clarification of Employment Relationship Recognition

The interpretation establishes clear criteria for when foreign nationals can be recognized as employees under Chinese labor law:

• Foreign nationals with permanent residency status are entitled to full labor protections
• Those with valid work permits and legal residence have recognized employment relationships
• Individuals who have completed all required legal procedures are covered by labor law

2. Labor Rights and Protections

Foreign employees are now entitled to:

• Minimum wage protections
• Working hour regulations and overtime compensation
• Statutory holidays and leave entitlements
• Work injury compensation
• Termination protection and severance rights
• Access to labor arbitration and court systems

3. Social Insurance and Benefits

The interpretation clarifies social insurance obligations:

• Foreign employees must participate in China's social insurance system
• Employers are required to contribute to pension, medical, unemployment, work injury, and maternity insurance
• Foreign employees can access social insurance benefits according to Chinese law

Impact on Foreign Employees

The new interpretation brings both benefits and challenges for foreign workers:

Enhanced Legal Protections

Foreign employees now have clearer legal standing:

• Access to formal labor dispute resolution mechanisms
• Protection against arbitrary termination
• Entitlement to statutory benefits and compensation
• Clearer rights regarding working conditions and compensation

Increased Compliance Obligations

Foreign employees must ensure:

• Maintaining valid work permits and residence status
• Compliance with local employment regulations
• Proper tax and social insurance contributions
• Adherence to Chinese labor law requirements

Impact on Employers

Chinese employers of foreign nationals face new obligations and responsibilities:

Employer Compliance Requirements

Employers must:

• Ensure foreign employees have valid work permits and residence permits
• Provide the same labor protections as for Chinese employees
• Make required social insurance contributions
• Follow proper termination procedures with foreign employees
• Maintain compliance with all applicable labor regulations

Legal Liability Considerations

Employers face increased liability for:

• Improper termination of foreign employees
• Inadequate social insurance contributions
• Violation of working hour and wage regulations
• Discrimination in working conditions or benefits

Dispute Resolution Mechanisms

The interpretation clarifies dispute resolution procedures:

Arbitration Process

Foreign employees can now pursue:

• Mediation through local labor dispute mediation committees
• Arbitration through local labor arbitration committees
• Court litigation for complex disputes

Jurisdiction and Applicable Law

Disputes involving foreign employees are governed by:

• Chinese labor law as the applicable legal framework
• Local jurisdiction where the employment relationship exists
• Specific provisions regarding foreign-related employment disputes

Representative Office Considerations

The interpretation addresses employment through representative offices:

• Representative offices have enhanced legal accountability
• Foreign employees of representative offices have clearer rights
• Liability for representative offices has been clarified

Practical Implications for Foreign Workers

Foreign employees should understand their rights and responsibilities:

Know Your Rights

Foreign workers now have:

• Clear legal protection against unfair dismissal
• Right to minimum wage and overtime compensation
• Access to social insurance benefits
• Right to statutory leave and holidays
• Protection against workplace discrimination

Maintain Proper Documentation

Essential documentation includes:

• Valid work permit and residence permit
• Properly executed employment contract
• Records of salary and benefits
• Social insurance contribution records

Employer Best Practices

Employers should implement the following practices:

1. Comprehensive Employment Contracts

Contracts should clearly specify:

• Terms and conditions of employment
• Compensation and benefits
• Termination procedures and requirements
• Compliance with Chinese labor law

2. Proper Documentation and Compliance

Employers must maintain:

• Valid work permits for all foreign employees
• Proper social insurance registration
• Accurate employment records
• Compliance with all labor law requirements

3. Regular Compliance Audits

Conduct regular reviews of:

• Foreign employee documentation status
• Employment contract compliance
• Benefits and social insurance contributions
• Working condition standards

Common Issues and Disputes

Foreign employment disputes commonly involve:

• Termination and severance compensation
• Working hour and overtime disputes
• Salary and benefits disagreements
• Work injury and compensation claims
• Discrimination and harassment complaints

Legal Remedies and Protections

Foreign employees have access to various remedies:

Administrative Remedies

Options include:

• Filing complaints with labor inspection authorities
• Seeking intervention from labor administrative departments
• Requesting investigation of labor law violations

Legal Remedies

Foreign employees can pursue:

• Mediation services
• Labor arbitration
• Court litigation

Challenges and Limitations

Despite the improvements, some challenges remain:

• Language barriers in legal proceedings
• Different legal concepts and procedures
• Enforcement of foreign employee rights
• Complexity of cross-border employment issues

Looking Ahead: 2026 and Beyond

Several trends are expected to continue:

• Further clarification of foreign employment regulations
• Enhanced protection for foreign workers
• Improved dispute resolution mechanisms
• Greater alignment with international labor standards

Practical Steps for Foreign Employees

Foreign workers should take the following steps:

1. Review Your Employment Contract: Ensure it complies with Chinese labor law
2. Verify Documentation: Confirm work permit and residence status
3. Understand Your Rights: Learn about your legal protections
4. Document Everything: Keep records of employment terms and compensation
5. Seek Legal Advice: Consult with employment law specialists if issues arise

Practical Steps for Employers

Employers should:

1. Review Employment Practices: Ensure compliance with new requirements
2. Update Employment Contracts: Revise contracts to reflect current law
3. Implement Compliance Systems: Establish monitoring procedures
4. Train HR Personnel: Educate staff on foreign employment requirements
5. Consult Legal Counsel: Work with specialists on complex issues

Conclusion

Judicial Interpretation II represents a significant step forward in clarifying the rights and protections of foreign employees in China. While it provides greater legal certainty and protection for foreign workers, it also increases compliance obligations for employers.

Both foreign employees and employers must understand and adapt to these changes to ensure compliance and protect their respective interests. As the interpretation continues to be implemented and interpreted by courts, additional guidance and precedents will likely emerge, further clarifying the rights and obligations of foreign workers in China.

Given the complexity of these changes and their potential impact on employment relationships, both foreign employees and employers should seek experienced legal counsel to navigate the evolving landscape of foreign employment rights in China in 2026 and beyond.