China: Applying Condition For Illness Relief

Last Updated: 2 January 2018
Article by River Delta Law Firm

1. Case Introduction

Mr.Wang joined in Construction Company A in 1997 as an manager with no written agreement about remuneration. Wang and Company A both agreed in the labor contract that the company is entitled to adjust Wang's position according to the actual condition and Wang's performance. Also, Wang's remuneration depends on the position, i.e. position adjustment would lead to remuneration changes. In 2013, adjusted by the group company, Wang was transferred into Company B and served as the Vice General Manager with remuneration and benefits maintained, and right and obligation of Company A agreed in labor contract were taken over by Company B.However, Wang applied for several sick leaves out of his lumbar disc herniation from 2014, and has been absent from work since July 2015. Among these years, Wang has been in sick leave for 103 days in 2015, 327 days in 2016 and 268 days in 2017 so far, while he also enjoyed the statutory holiday and rest days.

Until April 2017, Company B still paid Wang 100% remuneration during her sick leave. In May 2017, Company B notified Wang in written that owing to Wang's successive sick leave over eight months, the company decided to pay him 60% of base salary as illness relief since May 2017. Wang disagreed on it and argued that he was present on April 3 and 4 in light of his fingerprint on the attendance checking recorder. Since he was not in sick leave then, his successive sick leave shall not exceed eight months. Company B explained that Wang came to login his fingerprint in the new attendance checking record system instead of coming for work. Wang neither report ed to General Manager nor provided work on those days. Oppositely, he came to submit sick leave certificates. Therefore, it's with obvious malice of avoiding to be judged as "successive sick leave over six months". The conflict lied in this point.

2. Legal Analysis

1) Applying Condition and Standard for Illness Relief
"Illness Relief" was firstly mentioned in Article 13 of PRC Labor Insurance Regulations that if a worker or a staff member stops working and receives treatment due to sickness or non-work-related injury, he shall be entitled to sick leave salary when his successive treatment period is less than six months, and shall be entitled to illness relief when the period is over six months.
Based on the above clause, the precondition for applying sickness relief at least contains:

  1. Employee is in sickness or in non-work-related injury;
  2. Employee needs to stop working, receive treatment or recuperation, which requires certificates or suggestion from qualified medical organization;
  3. The successive period for treatment or recuperation is over six months.

In Shanghai, learning from Labor Insurance Regulation, the local rule differs benefits with terms of leave period. Also, Shanghai Labor Bureau issued The Notice of Enhancing Sick Leave Management and Protecting Employee's Life in Sick Leave, among which: If an employee is in successive sick leave over six months due to sickness or non-work-related injury, the company shall pay for illness relief. Also with the calculation rules:

  1. Successive service period less than one year, illness relief is as 40% of individual salary;
  2. Successive service period more than one year but less than three years, illness relief is as 50% of individual salary;
  3. Successive service period equals to or more than three years, illness relief is as 60% of individual salary;
  4. Illness relief shall not be less than 80% of minimum salary of the city.

2) Case Analysis

First of all, the major issue in this case is whether Wang meets the requirement for applying illness relief. The consideration includes the following two aspects.

On the one side, there are indeed no sick leave certificates on April 3 and 4,2017. Therefore, strictly, according to the diagnose advice, Wang did not need to receive treatment or recuperation on these two days. Also, according to attendance checking records, Wang was indeed present on these days. Even if the defense that Wang came to submit certificates was proposed by the company, it would not change the fact of his presence.

On the other side, considering Wang has been in illness since July 2015, he could not perform his obligation actually, and so, Company B could not arrange his work objectively. Wang has been in long term continuity of stopping work. Even if Wang actually attend to work on April 3 and 4, considering Wang's position of Vice General Manager, Company B could not arrange work for Wang immediately also. We could not require Wang to proceed with managing and operating work immediately just after his long-term absence. Thus, Wang shall not be judged as present nor working in these two days.

To sum up, strictly, Wang did not meet Condition III of the above applying requirement for illness relief, so Company B is lack of legal base in considering that Wang's successive sick leave is over eight months. However, it shall be noted that Shanghai's sick leave salary and illness relief standard is higher than most other cities, there are indeed a few cases that employee cheats for sickness benefits, especially utilizing or adjusting the sickness certificate period to avoid being judged as successive sick leave over 6 months, which would cause issue and impact on company's management. Therefore, if Shanghai local regulation would list this circumstance as an exemption, i.e. employee's malice in stopping successive sick leave period to avoid meeting the period cap would lead to company's exemption, the system would be more reasonable and discreet, which would also reflect the legislative intention.

Secondly, another controversial matter is that if Wang's sickness certificate period is not continuous just due to statutory holiday nor rest days, whether it could be considered as successive sick leave over six months? For example, Wang submitted a sickness certificate until April 30,2017, and the next leave period started from May 4,2017, which means the gap between these two leave periods is only Labor Holiday and day off.

There are different opinions in practice. One view is that employee's stopping working in statutory holiday and rest days are in accordance with employee's rest right, which is different from the sick leave. Therefore, there is no legal base to include statutory holiday and rest days into successive leave period. Another view is that even if employee has no sick certificate on statutory holiday or rest day, employee is still in sickness or recuperation objectively. Therefore, lack of sick certificate on statutory holiday and rest days would not lead to the successive leaves suspension.

Regarding Shanghai includes working day instead of rest days in calculating medical treatment period, from my point of view, the second view is more reasonable. 

3. Practical Suggestion on Sick Leave Management

To conclude the above analysis, Company B is facing relatively high legal risk. In this case, except Wang plays a trick in submitting sickness certificates, there are also problems in Company B's management. It is highly recommended to notice in the future company's management: 

1) Company shall manage and take record of the sick leave certificates.
    In this case, Wang submitted lots of medical certificates during his leave and HR of Company B failed in finding that Wang's medical period suspended on April 3 and 4, 2017, and still paid for sick leave salary, which caused Company B fall into passive condition. It is suggested that:
For one thing, company could list in regulations that if employee applies for long term sick leave, it is required to submit new certificates prior to the expiration of sick leave period.
Also, HR shall take good note of all certificates submitted by employees. Under the circumstance that employee's sick leave period is expired and employee does not submit new certificates, HR shall get in touch with the employee in time and notify him or her to update the health condition or to come back to work.

2) Company shall establish the reexamination system for long term sick leave and verify the truth of certificates.
In practice, among most cases related to long-term sick leave, employee's sickness is not serious enough to take such a long-term leave. About such circumstance, it is suggested to establish a reexamination system for long-term sick leave, which requires the employee, whose successive sick leave period is relatively long, to take a reexamination in the specified medical organization and therefore the company could know about employee's actual health condition correctly. Besides, company could engage professionals to investigate and verify the truth of certificate, to avoid the fake certificates. Even if the certificate is real, it is still recommended to know more from the doctors about the employee's health condition.

3)  Company shall set the calculating standard for illness relief or sick leave salary.
According to Shanghai's regulations, the illness relief and sick leave salary is calculated based on employee's service period in the company and his base salary. Meanwhile, if the sick leave benefits are higher than the Shanghai employee's average salary standard of last year, the benefits could be calculated as the average. It is suggested to set the company standard for illness relief or sick leave salary based on company's actual condition, which shall not be less than the statutory minimum standard, to reduce employee's cheating in sick leave.
 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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