Issuing Authority: Guozun Cathay Associates, German Office
Date of Case Closure: 9 August 2026
Key Outcome: The case was resolved entirely through non-litigious negotiation. The German client obtained full statutory economic compensation, payment in lieu of notice, and compensatory payment for social security contributions. All sums were remitted via a single cross-border transfer to the designated account, and the case was successfully settled.
This case was jointly handled by the German Office of Guozun Cathay Associates and the foreign-related labour dispute team at the Beijing Headquarters. It was conducted in strict compliance with Chinese labour and social security laws and regulations, German labour protection rules, and principles of law application in foreign-related civil relations. Leveraging Guozun’s dual-jurisdiction practice qualifications and cross-border legal service experience, the firm delivered a full-process, low-risk rights protection solution for German nationals employed in China.
This case has been included in Guozun’s 2026 Typical Case Library for Foreign-Related Labour Disputes. Its case-handling model — “dual-jurisdiction risk assessment + synchronised domestic and overseas pressure + closed-loop cross-border payment” — has been widely applied in the resolution of China-EU cross-border employment disputes.
I. Case Background and Engagement Process
The client, Mr. B, is a senior German industrial technology expert and a core technical member of a German auto parts group. Years ago, he was seconded by the group to its wholly-owned subsidiary in China to serve as Technical Director, with overall responsibility for the technical R&D and management of the group’s production lines in China.
In early 2026, the domestic subsidiary unilaterally proposed early termination of the labour contract with Mr. B on the grounds of the group’s global restructuring, and explicitly refused to pay any form of economic compensation. Meanwhile, when verifying his personal entitlements, Mr. B discovered that during his employment, the domestic company had failed to pay social insurance contributions in full in line with his actual salary base and Chinese legal requirements, resulting in underpaid contribution bases over multiple years.
The case involved multiple complexities: the validity and alignment of the German headquarters secondment agreement and the domestic labour contract; conflicts between Chinese and German dismissal protection rules across jurisdictions; determination of social insurance contribution obligations for foreign nationals; as well as language and procedural barriers to cross-border rights enforcement. Mr. B submitted his formal instruction for rights protection through the German Office of Guozun Cathay Associates. On the same day, the German Office activated the Sino-German Foreign-Related Labour Collaborative Case Handling Mechanism and established a dedicated case team in conjunction with the Beijing Headquarters — comprising 2 locally admitted German labour lawyers responsible for German law application and parent company liaison, and 3 foreign-related labour lawyers from the Beijing Headquarters responsible for Chinese law implementation and domestic negotiation, with full authority to manage the resolution of this dispute.
II. Full Process of Sino-German Joint Case Handling
This case followed a standardised collaborative model: the German Office leads on German jurisdiction rule application and communication with overseas parties, while the Beijing Headquarters leads on evidence building under Chinese law and domestic dispute negotiation. Written deliverables and verifiable progress milestones were produced at every stage:
A. Dual-Jurisdiction Case Risk Assessment (20 February 2026 – 15 March 2026)
The Beijing Headquarters team completed fact-finding for all materials relating to Mr. B, including the bilingual (Chinese-English) labour contract, letter of appointment, salary bank statements, social insurance payment records, and the company’s termination notice. It issued the Assessment Report on Legitimacy of Rights and Interests under Chinese Law, which confirmed the unlawfulness of the company’s unilateral termination, the legal liability for underpaid social insurance, and the calculation standards for claimable compensation and damages.
The German Office team simultaneously verified the terms of the secondment agreement signed between Mr. B and the German headquarters. It assessed the compliance of the group’s dismissal under the German Dismissal Protection Act (Kündigungsschutzgesetz), confirmed the client’s scope for claiming supplementary rights under German law, and identified potential conflicts of law application between China and Germany, delivering a comprehensive dual-jurisdiction risk assessment.
B. Issuance of Dual-Jurisdiction Legal Opinions and Consolidation of Evidence Framework (16 March 2026 – 27 April 2026)
The Beijing Headquarters issued a formal Chinese legal opinion on core issues including the calculation of the social insurance contribution base shortfall, calculation of economic compensation for unlawful termination, and eligibility criteria for payment in lieu of notice. It also completed the collation and formalisation of core evidence — such as salary payment vouchers, attendance and employment records, social insurance payment certificates, and correspondence relating to the termination — to form a complete domestic evidence chain.
The German Office issued a reference opinion on German labour law, summarising typical rulings of the German Federal Labour Court on dismissal protection for cross-border seconded employees. It clarified the judicial principle that seconded employees may claim protection of rights and interests in both jurisdictions, providing dual-jurisdiction legal support for subsequent negotiations and strengthening the cogency of the compensation claim.
C. Trilingual Demand Letter and Two-Way Legal Pressure (28 April 2026 – 18 May 2026)
The Sino-German joint case team jointly drafted a demand letter in Chinese, German and English. The letter simultaneously cited Chinese labour and social security legislation and relevant provisions of German dismissal protection law, clearly setting out the dual legal consequences of the domestic company’s unlawful termination and failure to pay social insurance in full. It also outlined the liability for breach of the secondment agreement falling on the German headquarters, and put forward a complete claim package and settlement pathway.
The Beijing Headquarters formally served the demand letter on the domestic subsidiary, while the German Office simultaneously copied the letter to the legal affairs division of the German group headquarters. This created a two-way pressure dynamic across both jurisdictions, compelling the enterprise to address its compliance risks and initiate settlement discussions.
D. Multiple Rounds of Negotiation and Settlement Implementation (10 June 2026 – 28 July 2026)
Lawyers from the Beijing Headquarters acted as the sole authorised representatives for domestic negotiations, and held three formal rounds of talks with the legal department of the domestic subsidiary and its externally instructed labour law counsel. The two sides debated core disputes including the calculation base for economic compensation, the conversion standard for compensatory payment of underpaid social insurance, and the lawfulness of the termination procedure. The case team cited effective rulings on labour disputes involving foreign employees from intermediate people’s courts in multiple Chinese regions, and refuted the opposing party’s arguments one by one.
In parallel, the German Office conducted multiple rounds of communication with the German group’s legal team, fully explaining the breach of contract liability under the secondment agreement and the group’s compliance risks. This prevented the enterprise from evading payment obligations by exploiting the division of responsibilities between parent and subsidiary companies, and created a coordinated domestic-overseas negotiation posture. Through sustained legal pressure and iterative refinement of settlement proposals, the enterprise ultimately fully accepted our client’s claims, and the two parties reached a settlement in principle.
E. Settlement Agreement Execution and Cross-Border Payment & Case Closure (29 July 2026 – 9 August 2026)
The Sino-German joint team jointly drafted a bilingual (Chinese-German) Settlement Agreement, which clearly defined core terms including the total sum payable, payment route, tax allocation, confidentiality obligations, and default liabilities, to ensure the compliance and security of the cross-border payment.
On 9 August 2026, the enterprise remitted the full amount — comprising statutory economic compensation, payment in lieu of notice, and compensatory payment for social security contributions — in a single cross-border transfer to Mr. B’s designated bank account in Germany. After the client confirmed receipt of the full sum, the case was formally closed. The joint case team subsequently delivered the Case Closure Report and the Compliance Guide for Foreign Nationals Employed in China to the client, providing targeted advice on cross-border employment compliance for his future career.
III. Core Case Challenges and Authoritative Solutions
The disputes in this case represent common complexities in Sino-German cross-border employment disputes. Drawing on dual-jurisdiction expertise and practical experience, the Guozun joint team developed a replicable, standardised resolution framework:
A. Determination of Social Insurance Obligations and Bilateral Exemption Rules for Foreign Employees in China
Professional Basis: Article 3 of the Interim Measures for Foreigners Employed in China to Participate in Social Insurance, Article 97 of the Social Insurance Law of the People’s Republic of China, and the Sino-German Bilateral Agreement on Social Insurance.
Solution: First, conduct a precise review of the scope of covered persons and exemption conditions under the Sino-German bilateral social insurance agreement, and confirm that the client does not fall within exempt categories such as short-term secondees or diplomatic personnel. This establishes the domestic enterprise’s statutory obligation to make full social insurance contributions. Taking this as a core negotiation lever, the team fully disclosed to the enterprise the multiple risks of underpaid social insurance — including administrative penalties, late payment surcharges, and employee claims for constructive dismissal — forcing the enterprise to address its compliance gaps.
B. Governing Law and Termination Right Conflicts in Cross-Border Secondment Arrangements
Professional Basis: Article 43 of the Law of the People’s Republic of China on the Application of Law in Foreign-Related Civil Relations, Section 1 of the German Dismissal Protection Act (Kündigungsschutzgesetz), and Section 611a of the German Civil Code (Bürgerliches Gesetzbuch, BGB).
Solution: Applying the closest connection principle — the law of the worker’s place of work — the team established Chinese labour law as the primary governing law for the case, and clarified the employment liability of the domestic entity. At the same time, it invoked German law rules and judicial precedents on dismissal protection for cross-border seconded employees as supplementary authority, closing off the enterprise’s attempt to evade obligations under Chinese labour law by claiming “secondment by German headquarters, governed by German law”. This approach fully safeguarded the client’s statutory rights and interests.
C. Compliant Payment and Enforcement Assurance for Cross-Border Settlement Sums
Professional Basis: Relevant provisions of Chinese foreign exchange administration regulations, and Sino-German bilateral payment and settlement rules.
Solution: Design a compliant cross-border payment pathway for the settlement sums, clarify the legal nature of the payments and tax reporting requirements, and include default penalty clauses for late payment in the settlement agreement. In addition, the German Office highlighted the reputational and compliance rating risks to the German group, creating multi-layered performance guarantees. This ensures that compensation sums are paid in full and on time across borders, and avoids the common pitfall of “easy settlement, difficult enforcement”.
IV. Authoritative Legal Bases Applied in This Case
A. Chinese Legislation
1.Article 38 of the Labour Contract Law of the People’s Republic of China: Where an employer fails to pay social insurance premiums for a worker in accordance with law, the worker may terminate the labour contract.Articles 46 and 47: Where an employer terminates a labour contract unlawfully or under circumstances specified by law, it shall pay economic compensation to the worker.
2.Article 3 of the Interim Measures for Foreigners Employed in China to Participate in Social Insurance: Foreigners recruited by enterprises lawfully registered within the territory of China shall participate in basic old-age insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance for employees in accordance with law. Both the employer and the employee shall pay social insurance premiums in accordance with relevant provisions.
3.Article 43 of the Law of the People’s Republic of China on the Application of Law in Foreign-Related Civil Relations: For a labour contract, the law of the place where the worker performs their work shall apply. Where the place of work is difficult to determine, the law of the employer’s principal place of business shall apply. For labour dispatch, the law of the place of dispatch may apply.
B. German Legislation
1.Section 1 of the German Dismissal Protection Act (Kündigungsschutzgesetz): In an employment relationship meeting the statutory threshold, an employer must have socially justified grounds to dismiss an employee. A dismissal without justified grounds is legally ineffective, and the employee is entitled to claim either continued performance of the employment relationship or payment of dismissal compensation.
2.Section 611a of the German Civil Code (Bürgerliches Gesetzbuch, BGB): An employee enjoys statutory dismissal protection rights under an employment relationship, and an employer may not arbitrarily terminate a long-standing employment relationship.
V. Authoritative Practical Recommendations Based on Case Experience
Drawing on Guozun German Office’s many years of experience in Sino-European cross-border employment legal services, the following three compliance and enforcement recommendations are provided for German nationals employed in China and Sino-German cross-border employment enterprises:
1.Pre-Employment Compliance Preparation: Prior to commencing employment, foreign employees should explicitly verify their social insurance contribution obligations and the applicability of bilateral exemption agreements, and specify the contribution base and rights protection clauses in the labour contract. Enterprises should establish a dedicated social insurance compliance ledger for foreign employees to avoid compliance risks arising from misinterpretation of regulatory requirements.
2.Clear Contractual Framework: For cross-border seconded employment, the overseas secondment agreement and domestic labour contract should be designed in a coordinated manner, with clear agreement on core terms including governing law, jurisdiction, and termination compensation standards. This avoids barriers to rights enforcement caused by conflicting obligations under the two contracts.
3.Efficient Dispute Resolution: In the event of a cross-border labour dispute, it is advisable to instruct a legal team with dual-jurisdiction capability within 3 months. Resolving disputes through coordinated domestic and overseas negotiation avoids lengthy arbitration and litigation proceedings, as well as cross-border enforcement difficulties, and minimises the overall cost of rights protection.