Jurisdiction - China
News
China – Employer’s Liability For The Unlawful Rescission Of A Labour Contract.

29 September, 2014

 

Legal News & Analysis – Asia Pacific – China –  Labour & Employment

 

In accordance with the provisions of the Labour Law of the People’s Republic of China (Order of President No 28) and the Labour Contract Law of the People’s Republic of China (Order of President No 73), an employer may unilaterally rescind the labour contract of an employee, rendering him or her unemployed. In this Practice Note written by Zhenghe Liu, partner at Beijing Jingyue Law Firm, we examine the supervisory role granted by law to labour unions to protect the interests of employees.

 

Article 30 of the Labour Law of the People’s Republic of China (Order of President No 28) (Labour Law) specifies that the labour union of an employer has the right to air its opinions if it regards the revocation of a labour contract by the employer to be inappropriate. If the employer violates the provisions of any law, regulation or labour contract, the trade union has the right to request reconsideration. Where the employee applies for arbitration or brings in a lawsuit, the trade union can render support and assistance in accordance with the law.


Article 21, Clause 2 of the Labour Union Law of the People’s Republic of China (Order of President No 62) (Labour Union Law) specifies that where an employer proposes to unilaterally terminate an employee’s employment contract, it must first notify the labour union of its reasons. Where the labour union believes that the employer’s proposal will violate the provisions of any law, regulation or relevant contract, and requires that the case be reviewed and considered again, the employer is required to consider the labour union’s opinions and notify the labour union of the results of its review in writing.


Article 43 of the Labour Contract Law of the People’s Republic of China (Order of President No 73) (Labour Contract Law) specifies that where an employer unilaterally rescinds a labour contract, it is required to notify the labour union of its reasons in advance. Where the employer violates a legal provision, administrative regulation or the labour contract, the labour union has the right to require the employer to make the necessary rectification. The employer is required to take into consideration the opinions of the labour union and notify the labour union in writing of the outcome of the matter.


Notification Obligations Of The Employer


As mentioned, the employer is obligated to notify the labour union in writing of:

 

  • the reasons in advance for the unilateral rescission of the labour contract
  • the outcome of the employer’s review of the case

In practice, the employer should provide the labour union with the legal basis for the rescission, along with basic facts and the relevant supporting materials so that the labour union can accurately and comprehensively understand the situation.


It should be noted that when the opinions of the employer and the labour union differ, the employer has the right of final decision regarding the unilateral rescission without the approval of the labour union, provided that the employer has duly notified the labour union as required by law. If the employer does violate provisions of the law, regulations or labour contracts, the labour union may by law give support to the employee to protect his rights and interests and require the employer to undertake the legal liabilities for the illegal rescission of the labour contract.

Labour Union Review On Reasons For Rescission 


In reviewing the reasons given by the employer for rescinding an employee’s labour contract, the labour union may consider the following: 


Substantive conditions for rescission – whether the basis for rescission conforms to the circumstances specified in Labour Contract Law, Art 39 (where the employee is at fault), Art 40 (where the employee is not at fault) or Art 41 (economic downsizing).
Procedural conditions for rescission – eg in the case of economic downsizing, whether the employer has explained the situation to the labour union or all staff, and reported to the relevant labour administrative department.


Basis for internal rules and regulations regarding rescission – eg where the employer proposes to rescind the labour contract of an employee on the basis of a severe violation of discipline, whether internal rules and regulations contain relevant provisions andwhether such rules and regulations have undergone the civil procedures specified by law and been made public.


Factual basis for rescission – eg where the employer rescinds a labour contract on the basis of the employee’s lack of performance, whether the employer has obtained sufficient evidence such as performance appraisals to prove that the employee is unqualified for his or her work.


Payment of compensation – eg whether the employer owes compensation in accordance with the law, and whether the amount and calculation method conform to the provisions of the law.


Categories of persons for whom unilateral rescission is restricted by law – eg where the employee is not at fault, the employer may not rescind the labour contract of special categories of employees such as women during pregnancy, pre-natal or lactation periods, employees undergoing medical treatment, employees suffering from work-related injury and committee members of labour unions.


Where the labour union is unable to determine whether the employer’s reasons for rescission are legal, it may appeal to a senior labour union or external professional lawyers. The supervisory role of labour unions over the unilateral rescission of labour contracts can not only protect the legitimate rights and interests of employees, but also help employers avoid legal risk.


Legal Consequences Of The Employer’s Failure To Notify The Labour Union


Article 12 of the Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law to the Trial of Labour Dispute Cases (IV) (Fa Shi No 4) (Interpretation (IV)) specifies that where an employer with a trade union organisation rescinds a labour contract in accordance with Labour Contract Law, Arts 39–40 but fails to inform the labour union in advance pursuant to Labour Contract Law, Art 43, the people’s court may support the employee’s application for obtaining damages from the employer by reason of the illegal rescission of his or her labour contract, unless such employer has made rectification prior to the lawsuit.


Labour Contract Law, Art 48 specifies that where an employer rescinds or terminates a labour contract in violation of the provisions of the law, and the employee requests the performance of the labour contract, the employer shall continue to perform the labour contract. Where the employee does not request the performance of the labour contract or the labour contract cannot be performed, the employer shall pay compensation in accordance with Labour Contract Law, Art 87.


Labour Contract Law, Art 87 specifies that where an employer violates the provisions of the law in regards to the rescission or termination of a labour contract, compensation shall be made to the employee at a rate of twice the amount prescribed in Labour Contract Law, Art 47.


In accordance with the above provisions, in the event of a failure to perform its notification obligations, the employer will undertake to compensate the employee at a rate of twice the amount specified for the legal rescission of a labour contract. In addition, Interpretation (IV) specifies that where the employer fails to notify the labour union but makes rectification prior to any lawsuit brought by the employee, the employer will not be required to pay compensation

 

This article was supplied by Lexis Practical Guidance.

 

PG Logo_with white background-01

 

For more information on Lexis Practical Guidance, please click here.

Comments are closed.