Does an employer owe double wages if they don't renew a contract after three signed terms?

Attention, business owners! Think you're safe just because a contract expires? Watch out for the "open-ended labor contract"—the sword of Damocles hanging over your company!

1. What is an open-ended labor contract?

Article 14 of the Labor Contract Law stipulates that when an employer and employee have concluded two consecutive fixed-term labor contracts, and the employee has not committed any statutory violations or been deemed incompetent, a open-ended labor contract shall be entered into upon renewal if the employee proposes or agrees to renew.

In short: After two fixed-term contracts, if an employee requests a permanent contract for the third time, the employer must sign it.

II. Consequences of Not Signing: Double Wages

If an enterprise violates regulations by failing to enter into an open-ended labor contract with a worker, it must pay double wages for each month from the date the contract should have been concluded. The "double wages" can be claimed for up to 11 months.

III. Typical Cases

Xiao Li signed two consecutive fixed-term labor contracts with a company (2019 to 2022, 2022 to 2025). When the 2025-year contract expired, the company offered only a one-year renewal. Xiao Li requested an open-ended contract but was denied. The arbitration tribunal ruled that the company must pay double wages for the period during which no open-ended contract was signed.

IV. Key Corporate Compliance Points

1. Maintain the labor contract ledger and track renewal deadlines.

2. Assess whether the second contract expiration triggers conditions for an open-ended term.

3. If you truly do not wish to renew, the contract must be terminated legally before its second expiration (economic compensation is required).

4. Improve the performance appraisal system to provide a basis for lawful termination.

Compliance in employment practices is the foundation for an enterprise's long-term development. If you have any questions regarding labor law, please consult Fujian Ciji Law Firm's corporate legal advisory team.