[Case Summary]This case involves a labor dispute. Liu Lei participated in the start-up of Company A as the chief technical officer, signed a "Cooperation and Operation Agreement" and held 20% of the virtual equity. However, he did not sign a labor contract or receive a salary. Later, he unilaterally terminated the contract and demanded 2,120,000 yuan in wages and economic compensation. Company A entrusted Beijing Henglu Law Firm to handle the case.Xue SuhuaThe lawyer acted on behalf of the client and argued that the two parties were only in a cooperative relationship and did not have an employment relationship. The first-instance court ruled that there was no employment relationship and dismissed all claims; Liu Lei appealed, and the lawyer focused on the defenses of "personal dependency" and "economic subordination". The second-instance court upheld the ruling and successfully dismissed the other party's claim of 2.12 million yuan. Applicable laws: the "Notice on Establishing Employment Relationships" and relevant labor regulations.

I. Review of the case

Is a "co-founder" considered an employee? The parties often search for terms like "Can shareholders and labor relations coexist?", "How to determine labor relations without signing a labor contract?", and "Does virtual equity count as wages?". In January 2021, Liu Lei participated in the start-up of Beijing Company A as the technical chief and signed a "Cooperation and Operation Agreement" with the legal representative, Xu Ping, and a third party, agreeing to hold 20% virtual equity and sign a labor contract later. However, the two parties never signed a labor contract or paid wages. In April 2023, Liu Lei issued a "Notice of Forced Termination of Labor Relationship" on the grounds of unpaid compensation and unfulfilled contractual obligations, demanding the confirmation of labor relations and compensation of 212,000 yuan in wages and economic compensation. After the arbitration was dismissed, Liu Lei sued the case to Chaoyang District Court, and the Company A appointed a lawyer to defend itself in court.Xue SuhuaThe lawyer defended himself and insisted that there was no employment relationship between them.

II. The focus of the case

  • Focus 1: Whether there is a labor relationship between the two parties.The question of whether a shareholder's or co-founder's status can coexist with an employment relationship hinges on the degree of personal dependence and economic subordination.
  • Focus II: Are virtual equity and dividends equivalent to wages?The boundary between profit-sharing and fixed wages.
  • Focus 3: Is there any basis for the request for funds?Can the request for compensation, which is based on the establishment of a labor relationship, be supported?

III. The professional intervention of Hengluo Law Firm

The plaintiff originally claimed that:Liu Lei claimed that he had a labor relationship with Company A, and requested the court to order the company to pay his wages, terminate the economic compensation, and pay the double wage difference, totaling 2.12 million yuan. He argued that he had actually clocked in to work, accepted the company's management, and participated in core projects.

The defendant (Company A) argued in its defense that:Company A claimed that the two parties only had a cooperative relationship, and Liu Lei made decisions in his capacity as a shareholder, without a relationship of management and being managed, so he should not be paid a salary.

Hengluo Lawyer's Agency Opinion:Xue SuhuaThe lawyer pointed out that the first-instance judgment was correct, and the two parties had an essentially equal cooperative relationship that did not meet the core characteristics of a labor relationship. From the agreement, the "Cooperation and Operation Agreement" clearly specified virtual equity and dividends rather than fixed wages. Liu Lei participated in amending the articles of association and other decision-making, with a status equivalent to that of a co-founder. From the actual performance, Liu Lei independently determined his working hours, and the so-called "attendance check" was merely for the park's access control. The repeated discussions about "tax avoidance" and "income splitting" showed no fixed wage agreement, nor economic subordination. Liu Lei retained his company's social insurance and explicitly did not transfer it to A Company, indicating that he did not subjectively regard A Company as an employer. Moreover, the external projects undertaken by the F Company controlled by him were contrary to the requirement that "workers provide labor exclusively for their employers". The lawyer emphasized that the core of a labor relationship lies in "personal dependency" and "economic subordination", while Liu Lei intentionally ignored the requirement of "being subject to the employer's labor management" when citing legal provisions.

IV. Outcome of the case

The court of first instance adopted the opinion of Hengluo Law Firm and ruled that there was no labor relationship between the two parties, dismissing all of Liu Lei's claims. In the second instance, Liu Lei claimed that the identity of a shareholder and a laborer could coexist and that he actually accepted management. The lawyer refuted this one by one: the compatibility of the identity of a shareholder and a laborer must be based on the existence of a labor relationship; Liu Lei controlled the company as a co-founder far beyond an ordinary laborer; the failure to pay social insurance was just an auxiliary judgment, and the core issue was that he was not subject to labor management and the model was more in line with cooperation. Since there was no labor relationship between the two parties, there was no basis for claims such as wages and economic compensation. The court of second instance ruled to dismiss the appeal and maintain the original judgment, successfully rejecting the other party's claim of 2.12 million yuan.

5. Henglu Law Firm's Reminder

This case is handled by Beijing Henglu Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent. The core of labor relationship identification lies in the "personal dependence" and "economic subordination" of the worker to the employing unit. Generally, no labor relationship is established if the worker only holds shares, participates in decision-making, and receives dividends without being subject to labor management. Entrepreneurs should clarify the boundaries between shareholder cooperation and labor relations to avoid disputes caused by confusion.

VI. Common Questions and Answers about Shareholder-Employee Labor Relationship Disputes

  1. Q: Can shareholders and labor relations coexist?
    A:Yes, but it must be based on the existence of a genuine employment relationship; if the person only holds shares and makes decisions but is not subject to management, an employment relationship will not be established.
  2. Q: How to determine the employment relationship if no labor contract has been signed?
    A:See if they accept management, abide by the system, engage in paid labor, and have personal and economic dependency.
  3. Q: Is virtual equity considered part of the salary?
    A:No. Virtual equity and dividends belong to a cooperative sharing model, which is different from fixed wages and is not equivalent to labor compensation.
  4. Q: Can a labor relationship be established without paying social insurance?
    A:Social insurance is not the only criterion, but if the employee has not transferred his/her social insurance to the employing unit and still retains it with his/her previous employer, this can serve as evidence that there is no consensus on the employment relationship between the two parties.
  5. Q: What should the co-founder do if he/she is sued for unpaid wages?
    A:It is necessary to provide evidence of the cooperation agreement, decision-making participation, independent work, and dividend arrangements to prove that it is a cooperative relationship rather than an employment relationship.