Key Updates Under Judicial Interpretation II

Double wage rules in China have been clarified under Judicial Interpretation II, reducing ambiguity for employers. The new interpretation explains when double wages apply, clarifies exemptions, and standardizes calculation methods. This article provides practical compliance guidance for HR teams. (Also see our series article: China’s New Judicial Interpretation II on Labor Disputes: Key Themes at a Glance)

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On August 1, 2025, China’s Supreme People’s Court (SPC) issued the long-awaited Judicial Interpretation II on the Application of Law in Labor Dispute Cases (Fa Shi [2025] No. 12, hereinafter “Judicial Interpretation II” or Interpretation II”), along with a set of illustrative cases. Both took effect on September 1, 2025.

This interpretation aims to unify judicial standards in labor disputes and clarify several long-standing ambiguities under the PRC Labor Contract Law, including the controversial “double wage” rule for failing to sign written labor contracts.

Under Article 82 of the Labor Contract Law, employers who do not conclude a written labor contract within one month of employment must pay the employee double wages for each month without a contract. While this rule is designed to protect employees, its application has often been inconsistent, creating compliance risks for foreign-invested enterprises (FIEs). Judicial Interpretation II addresses these gaps by:

• Defining when double wage liability applies and when it does not.
• Introducing clear exceptions, such as delays caused by force majeure, or the employee’s intentional refusal or gross negligence.
• Clarifying calculation standards and the cut-off point for liability once a contract is signed.

For HR teams and compliance managers, understanding these updates is critical to avoid costly disputes and ensure smooth labor relations. This article explains when double wages must be paid, how to calculate them, and what the exemptions mean for employers under the latest judicial guidance.

When must employers pay double wages?

Under Article 82 of the PRC Labor Contract Law, employers who fail to conclude a written labor contract within one month from the employee’s start date must pay the employee double wages for each month without a contract, up to a maximum of 11 months. Similarly, if an employer fails to enter into an open-ended labor contract when legally required, double wages apply from the date such obligation arises.

However, the original law did not specify any exceptions to this rule, which often led to disputes and inconsistent judgments. In practice, circumstances can be complex, placing all liability on the employer may be unfair when delays result from factors beyond their control. Judicial Interpretation II addresses this gap by introducing clear exemptions and calculation standards, reducing uncertainty for both employers and employees.

No double wage liability when the employer is not at fault

In practice, courts have recognized that not all failures to sign a written labor contract should automatically result in double wage liability. For example, the Shanghai High People’s Court Opinions on Applying the Labor Contract Law state that if an employer has fulfilled its good-faith obligations, and the failure to sign was due to force majeure, unexpected circumstances, or the employee’s refusal, such cases do not constitute “failure to conclude a written labor contract” by the employer.

Building on these regional practices, Judicial Interpretation II (Article 7) now provides nationwide clarity by adopting a more restrictive and fair approach. It specifies that when an employee claims double wages for lack of a written contract, courts will not support the claim if the employer can prove any of the following:

• Force majeure caused the failure to sign;
• The employee acted with intentional refusal or gross negligence; and
• Other circumstances prescribed by law or administrative regulations.

This provision emphasizes substantive review of the reasons behind the failure to sign. If the employer can show evidence that it delivered a written or electronic contract and had no deliberate intent to avoid signing, it may be exempt from double wage liability, even if the contract was ultimately not signed. This demonstrates the importance of documenting contract delivery and communication efforts as part of HR compliance.

Force majeure situations

Force majeure, recognized under civil law as a ground for exemption from liability, also applies in labor contract disputes. If an employer cannot sign a contract due to force majeure, and there is a direct causal link between the event and the failure to sign, the employer bears no fault and is exempt from paying double wages. However, the burden of proof lies with the employer to establish this causal connection.

 Employee fault

When the failure to sign is due to the employee’s intentional act or gross negligence, the employer is not required to pay double wages. Judicial practice supports this principle: if the employer has fulfilled its good-faith obligation to conclude the contract, and the responsibility lies entirely with the employee, courts typically reject double wage claims.

For example, in Illustrative Case No. 3 released alongside Interpretation II, the employer repeatedly urged the employee to renew the contract, but the employee refused, hoping to claim double wages by citing company dissolution rumors. The court ruled that the employee’s intentional refusal absolved the employer of liability. Similarly, for employees in HR or managerial roles responsible for contract administration, failure to sign may often be attributed to their own gross negligence or intent, and courts will allocate responsibility accordingly.

Notably, during the drafting process, the exemption clause evolved from “due to the employee’s own reasons” to “due to the employee’s intentional act or gross negligence,” reflecting a more precise and rigorous standard focused on employee fault.

No double wage when the contract is extended automatically

Article 8

Where the term of a labor contract expires and any of the following circumstances applies, the people’s court shall determine that the term of the labor contract is automatically extended in accordance with the law, and it shall not be deemed as a failure by the employer to conclude a written labor contract: (1) The employer is prohibited from terminating the labor contract as provided in Article 42 of the Labor Contract Law; (2) The service period has not yet expired as provided in Article 17 of the Implementation Regulations of the Labor Contract Law; (3) The term of office has not yet expired as provided in Article 19 of the Trade Union Law.

Judicial Interpretation II (Article 8) confirms that when a labor contract expires but is automatically extended by law, the employer is not liable for double wages during the extension period. This aligns with mainstream judicial practice and addresses situations where employers cannot renew contracts due to statutory restrictions.

Under the Labor Contract Law and related regulations, automatic extension applies in the following cases:

• Article 42 of the Labor Contract Law: The employer is prohibited from terminating the contract, such as when the employee is:
  • Undergoing medical treatment for illness or non-work injury;
  • Pregnant, on maternity leave, or in breastfeeding period;
  • In the statutory medical treatment period or work injury recovery period;
  • Diagnosed or suspected of occupational disease;
  • Within five years of the statutory retirement age after 15 years of continuous service.
• Article 17 of the Implementing Regulations of the Labor Contract Law: The agreed service period has not yet expired.
• Article 19 of the Trade Union Law: The employee serves as a full-time chairperson, vice-chairperson, or committee member of a grassroots trade union, and the term has not ended.

In these scenarios, the law deems the contract extended, even if the employer does not sign a new written contract. Because the employee’s rights remain protected, there is no need to impose double wage liability. This rule prevents employers from being penalized for circumstances beyond their control, such as statutory prohibitions or ongoing obligations.

No double wage liability under deeded open-ended contracts

Article 9

Where there is evidence to prove the existence of circumstances as specified in Paragraph 3 of Article 14 of the Labor Contract Law, i.e., “it shall be deemed that the employer has concluded an open-ended labor contract with the laborer,” and the laborer requests to conclude a written labor contract with the employer, the people’s court shall support such claim in accordance with the law; where the laborer requests the employer to pay double wages for the period deemed as an open-ended labor contract on the grounds that the employer failed to timely supplement the written labor contract, the people’s court shall not support such claim.

Judicial Interpretation II (Article 9) narrows the scope of double wage claims in cases involving open-ended labor contracts. Under Article 14(3) of the Labor Contract Law, if an employer fails to sign a written contract for one year from the employee’s start date, the law deems that an open-ended labor contract has been established. In such cases, the employee may request the employer to supplement the written contract, but cannot claim double wages for the deemed period.

This clarification reinforces the punitive nature of double wage liability. It is intended to encourage timely contract signing, not to create windfall gains for employees. By limiting claims, the rule prevents abuse of rights and strikes a balance between protecting employees and avoiding excessive penalties for employers.

How to calculate double wages

Judicial Interpretation II (Article 6) provides a clear calculation method for double wages, resolving inconsistencies in past practice. The rule clarifies that if an employer fails to conclude a written labor contract in accordance with the law, double wages shall be calculated on a monthly basis; if the period is less than one month, calculation shall be based on the actual working days of that month.

This change standardizes the approach for partial months, ensuring precision and fairness. For example, if an employee works 20 days without a written contract and their monthly salary is RMB 5,000, the double wage should be calculated based on the actual working days, not an estimated or “blurred” formula.

“Payable days” vs “actual working days”

The final text of Interpretation II replaces the draft term payable days (“计薪日”) with actual working days (“实际工作日”) as the basis for calculation. This distinction matters because:

• Payable days include statutory holidays as paid days.
• Actual working days exclude statutory holidays and count only days when the employee actually worked.

For example, in October 2025 (31 days), with nine weekend rest days (including adjusted rest days) and four statutory holidays (three days National Day holiday + 1 day Mid-Autumn Festival):

• Payable days = 31 days – 9 weekends = 22 days.
• Actual working days = 31 days – 9 weekends – 4 holidays = 18 days

Of course, the above discussion is based on normal circumstances. In special cases, such as when an employee works on rest days or statutory holidays, those days are naturally counted as actual working days as well.

20.67 days vs. 21.75 days

One common misunderstanding is confusing the “payable days” and “actual working days” mentioned in Judicial Interpretation II with the monthly averages defined in the Ministry of Human Resources and Social Security (MOHRSS) notice on wage conversion standards (MOHRSS Notice [2025] No. 2). The MOHRSS document specifies:

• Average monthly working days: (365 days − 104 weekends − 13 holidays) ÷ 12 = 20.67 days/month
• Average monthly payable days: (365 days − 104 weekends) ÷ 12 = 21.75 days/month

These figures are annual averages used for standardizing wage calculations (for example, converting a monthly salary to a daily or hourly rate). They smooth out variations in month length and holiday distribution. By contrast, Judicial Interpretation II refers to the actual number of working days in a specific month, not an annual average. This distinction is critical for calculating double wages accurately.

Natural month or rolling month?

Judicial Interpretation II states that double wages for a full month should be calculated by month. But what does “month” mean in this context?

In judicial practice, “by month” is generally understood as a natural month (calendar month, from the first day to the last day of the same month. This interpretation ensures clarity and operational consistency. If “month” were treated as any arbitrary 30 or 31-day period, calculation start and end points would become confusing and prone to disputes.

Based on our understanding, Article 6 of Judicial Interpretation II supports this reading:

• Full month: A complete natural month (for example, all of June), calculated based on the monthly salary.
• Partial month: Any incomplete natural month, such as the month of entry (not starting on the first day) or the month of departure (not ending on the last day), calculated based on actual working days.

Practical compliance tips for employers

For employers, preventing double wage disputes starts with proactive compliance and thorough documentation. First and foremost, companies should establish a standardized contract management process to ensure written labor contracts are signed within the statutory one-month period.

When delays occur due to circumstances beyond the employer’s control, such as force majeure or the employee’s refusal to sign, it is critical to retain evidence. This includes official emergency notices, disaster alerts, and written or electronic communication records (emails, SMS, chat logs) showing repeated attempts to conclude the contract. Such documentation demonstrates good-faith efforts and can exempt the employer from liability under Judicial Interpretation II.

Employers should also be aware of automatic extension scenarios. Before a labor contract expires, HR teams must verify whether a statutory extension applies, such as during maternity leave, medical treatment, or union duties. In these cases, issuing a written extension notice that specifies the extended term helps prevent misunderstandings and disputes.

Finally, HR professionals should be trained on the correct calculation rules for double wages. Calculations should always be based on the actual working days in the specific month. By combining timely contract execution, clear communication, and meticulous record-keeping, employers can significantly reduce compliance risks and protect their interests.