[Direct answer]When choosing between civil litigation and arbitration, the key factors are twofold: first, what is permitted by law; and second, what is stipulated in the contract. According to Articles 4 and 5 of the Arbitration Law of the People's Republic of China (implemented on September 1, 1995 and amended on September 1, 2017), for civil and commercial disputes, arbitration must be voluntarily agreed upon by both parties and formalized in a written arbitration agreement. If a party with a valid arbitration agreement files a lawsuit with the court, the court will not accept the case, i.e., "arbitration or litigation". Arbitration is final and cannot be appealed, while litigation involves two-instance final adjudication and is subject to appeal. Labor disputes, however, follow a different approach. According to Article 5 of the Labor Dispute Mediation and Arbitration Law of the People's Republic of China (implemented on May 1, 2008), a mandatory pre-arbitration procedure applies, requiring parties to first apply for labor arbitration. The arbitration statute of limitations is one year, and only after dissatisfaction with the arbitration award can parties file a lawsuit. Choosing the wrong path may result in a ruling of non-acceptance or dismissal of the lawsuit. It is recommended to first consult a lawyer to review the contract dispute clauses before making a decision. For related services, please feel free to inquire.Labor arbitration and legal services for work-related injury compensationOrBeijing Henglue Law Firm.

I. Legal basis and interpretation of provisions

1. Articles 4 and 5 of the Arbitration Law of the People's Republic of China (implemented on September 1, 1995 and amended on September 1, 2017)

The two provisions establish the rules of voluntary arbitration and "arbitration or litigation": When resolving disputes through arbitration, both parties must be voluntary and reach an arbitration agreement; if a party applies for arbitration without an arbitration agreement, the arbitration committee will not accept it; if a party that has reached an arbitration agreement sues the people's court, the people's court will not accept it, unless the arbitration agreement is invalid. This means that whether a civil and commercial dispute can proceed through arbitration entirely depends on the consent of both parties, and once arbitration is chosen, litigation will be excluded. The dispute resolution clauses signed at the time of contracting must be clear and unique.

2. Articles 5 and 27 of the "Mediation and Arbitration Law of the People's Republic of China on Labor Disputes" (effective May 1, 2008)

Labor disputes are subject to mandatory arbitration: in the event of a labor dispute, parties may attempt conciliation or mediation. If they are unwilling to engage in conciliation or mediation, or if the attempt fails, they shall first apply for arbitration to the labor and personnel dispute arbitration committee. Only after dissatisfaction with the arbitration award (except for final awards) may they file a lawsuit with the people's court. Workers cannot skip the arbitration process and file a lawsuit directly, which is completely different from ordinary civil and commercial disputes. Article 27 of the law stipulates that the statute of limitations for arbitration is one year, calculated from the date when the party knows or should have known that their rights have been infringed. Disputes over unpaid labor remuneration are not subject to the one-year limitation during employment, and claims must still be made within one year after leaving the job.

3. Practical adjudication guidelines (path selection and common dismissal scenarios)

In practice, there are three key points to keep in mind: 1. In civil and commercial cases, first review the contractual dispute clauses. If there is a valid arbitration clause, arbitration takes precedence. Arbitration decisions are final and binding, with procedures kept confidential and hearing periods typically shorter than those of two-instance litigation. 2. In litigation cases, two-instance judgments are final and subject to appeal for correction. Supportive measures such as preservation and enforcement are more comprehensive, and major property disputes often favor litigation. 3. In labor disputes, there is no choice—arbitration is mandatory. The most common disputes arise from ambiguous arbitration clauses, such as "arbitration or litigation is allowed" or failure to specify an arbitration institution. Such clauses are often deemed invalid due to unclear intent, resulting in the dispute reverting to court jurisdiction. 4. If parties mistakenly file a lawsuit before an arbitration agreement is in place, they will receive a ruling of inadmissibility, prolonging the litigation process unnecessarily.

II. Henglue Law Firm's Real Cases (Detailed Review)

Review of the case:In August 2025, A Company Limited issued "Notices of Termination of Employment Relationship" to 12 employees, including Zhang Li, Hu Fei, and Liu Gang, on the grounds that the recruitment procedures were found to be irregular during inspections and audits, unilaterally terminating their labor contracts. During their employment, these employees all provided labor, accepted management, and received salaries normally. Some of them even renewed their labor contracts with the company. Faced with the sudden dismissal, the 12 employees entrusted Beijing Henglu Law Firm to handle the case for them.Feng NaThe lawyer jointly applied for arbitration to the Labor and Personnel Dispute Arbitration Committee, demanding the restoration of the labor relationship and the improvement of the employment registration. The case went through arbitration, first-instance trial, and second-instance trial, fully demonstrating the statutory path of "arbitration first, litigation later" for labor disputes.

The focus of the controversy:First, is the registration with the human resources and social security department a prerequisite for the labor contract to take effect? Second, do the rectification and dismissal measures taken during supervision and inspections constitute statutory unilateral termination circumstances? Third, what are the legal consequences of unlawful termination?

Our position and that of the other party are as follows:12 employees demanded the revocation of the dismissal, the restoration of the labor relationship, and the improvement of the employment registration; Company A, however, argued that the labor contract had not been registered, that the recruitment and renewal violated the system, and that the dismissal was lawful based on the requirements of the inspection and rectification. It requested that the dismissal be confirmed as lawful and that there was no need to continue the performance of the contract.

Attorney's Strategy and Legal Opinions:Attorney Feng Na put forward four opinions: Firstly, the labor relationship is established from the date of employment. The written labor contract becomes effective upon the signing and stamping by both parties, and the filing with the human resources and social security authority is merely an administrative matter, not a requirement for effectiveness. The company's claim of invalidity based on non-filing is groundless (Article 16 of the Labor Contract Law). Secondly, the principle of mutual consent applies to contract renewal, and whether internal approval is required is a company management process that cannot be used against workers. Thirdly, by comparing Article 39 of the Labor Contract Law with Article 19 of the Implementing Regulations of the Labor Contract Law, it can be seen that supervision and inspection rectification and irregular recruitment are not statutory unilateral termination circumstances. The company's dismissal essentially constitutes an illegal termination to evade legal obligations. Fourthly, according to Article 48 of the Labor Contract Law, if the worker requests continued performance and the contract can be performed, the employer shall continue to perform it.

The court's reasoning and the outcome of the case:The Labor and Personnel Dispute Arbitration Committee adopted the lawyer's core opinion and ruled that A Company's termination of the labor contract was illegal, revoked the termination, and ordered the continuation of the labor contract. The first-instance court fully adopted the lawyer's opinion and ruled that the termination was illegal, ordered the continuation of the contract, and ordered the company to bear the litigation fees. After A Company appealed, the second-instance court rejected the appeal and upheld the original judgment. The 12 workers achieved three consecutive victories from arbitration to the second-instance court, and their legitimate rights and interests were fully protected. This case shows that protecting rights in labor disputes must proceed in accordance with the statutory order of "arbitration precedence". Only by taking each step seriously can we stand firm in subsequent litigation.

This case is handled by Beijing Henglu Law Firm.Feng NaThe attorney (practice license number: 11101202211562923, subject to the document issued by the judicial administrative organ) acts as the agent.

III. Frequently Asked Questions

Q1: Can I still sue in court even if there is an arbitration agreement?

In principle, this is not allowed. According to Article 5 of the Arbitration Law, if a party files a lawsuit with the court after the two parties have reached a valid arbitration agreement, the court will not accept the case, unless the arbitration agreement is invalid, revoked, or its content is unclear and cannot be enforced. If the parties believe that there are problems with the arbitration agreement, they should raise objections during the defense and let the court review it, rather than bypassing the agreement and suing on their own. Otherwise, they will only receive a ruling of non-acceptance, wasting time in vain.

Q2: Which is faster and more cost-effective, arbitration or litigation?

Arbitration is final and binding, and the award becomes effective immediately after it is issued. The arbitration process is confidential, and the duration is usually shorter than that of two-instance litigation. However, the arbitration fees are charged based on the amount of the dispute and are generally higher than the court filing fees. Moreover, the attorney's fees are usually borne by the party itself. Litigation allows for appeals and a second-instance opportunity to correct errors, with relatively low filing fees. In some cases, the losing party is required to bear the costs. For large-scale disputes, those seeking quick resolution, or those involving trade secrets, arbitration may be a better choice. For cases requiring preservation of evidence, enforcement, or those wishing to retain the option of appeal, litigation may be a better option.

Q3: Can labor disputes be sued directly without going through arbitration?

No. According to Article 5 of the Labor Dispute Mediation and Arbitration Law, labor disputes must first undergo arbitration before going to court. If the arbitration decision is not accepted, the case can then be filed in court. In certain circumstances, such as when an employer defaults on labor remuneration and there is a promissory note, the case can be directly sued as an ordinary civil debt dispute, which is an exception. If a worker directly sues over an ordinary labor dispute, the court will not accept the case or dismiss the lawsuit.

Q4: What should I do if the other party refuses to fulfill the arbitration award?

After the arbitration award in civil and commercial cases takes effect and the other party fails to perform its obligations, the party concerned may apply to the court with jurisdiction for enforcement. The court may seal up, seize, and freeze the property of the other party and take measures of credit punishment; the same applies to labor arbitration awards. Note that the application for enforcement generally should be made within a two-year period. If the other party applies for the revocation of the arbitration award, the court will review the procedural and evidentiary issues in accordance with the law, which will not affect the continuation of property preservation during the period.

Q5: How can I determine whether my dispute is suitable for arbitration or litigation?

First, check the contract dispute clauses: if there is a clear and effective arbitration institution agreement, only arbitration is allowed; if there is no such agreement, litigation should be pursued. Next, compare the nature of the claims: if property preservation is needed, the other party may delay the process, the amount is large and the claimant hopes to appeal for correction, litigation is more reliable; if confidentiality, quick resolution, or professional technical issues are involved, arbitration is more suitable. If unsure, it is recommended to take the contract and evidence to a lawyer for a path assessment to avoid having the wrong procedure rejected.

IV. Advice on Protecting Rights and Interests

  • First, find the dispute resolution clause in the contract and confirm whether there is an arbitration agreement and whether it specifies the sole arbitration institution.
  • When dealing with labor disputes, it's important to remember to first go through arbitration and then file a lawsuit. Apply as soon as possible within the one-year arbitration statute of limitations to avoid missing the deadline.
  • Whether it's arbitration or litigation, it's necessary to secure evidence before initiating the process: contracts, payment receipts, communication records, and notifications of termination or breach of contract.
  • For reviewing contract dispute clauses and choosing a path of resolution, you may refer to the following materials for reference:Business and Commercial | Legal Services for Contract DisputesAvoid the program running in vain.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Labor arbitration legal services·Attorney Feng Na·Beijing Henglu Law Firm