China: The Reinstatement Of An Employee Under Chinese Law

Last Updated: 4 January 2018
Article by Cathy Deng

If you are a Chinese employer and have terminated an employee, it is highly likely the employer may seek redress through the courts in an effort to rescind their termination and be reinstated. Chinese employment law is extremely employee friendly and there are very limited circumstances under which an employee can be terminated when compared with the employment laws of many Western countries. If a Chinese employer chooses to terminate an employee but does not do so based upon a legally valid reason, then the employee is entitled to seek redress, including but not limited to potential reinstatement to his or her job, through the Chinese courts. If a terminated employee files a court action seeking review of his or her termination, a Chinese court will then examine the circumstances of the employee's termination carefully to ensure that the employee's termination was for a legally justifiable reason under Chinese law. Therefore, if you are the Chinese employer of a terminated employee who has won a court decision entitling him or her to reinstatement, you may wonder where this leaves you. This may be particularly true if your company hails from another, less-worker friendly jurisdiction like the United States or other Western countries with right to work laws. However, as both employers and employees often find, reinstatement of an unlawfully terminated employee simply may not be possible due to a variety of reasons. This can include bad blood between the terminated employee, other employees and management, among other scenarios.

Chinese Law Regarding Termination of Employees

Western companies, American companies in particular, may be confused by, the Chinese employment laws. Simply put, many companies may be used to right to work laws that enable them to fire or hire employees at will, for any reason or no reason at all. However, in China, things are not quite the same. Instead, under Chinese labor law, every one of a business's employees must be employed pursuant to a written employment agreement. After an initial probationary period, it also is very difficult to terminate an employee under Chinese law. Employees in the PRC can only be terminated under certain enumerated circumstances.

The PRC Labor Contract Law of 2007 permits employers to unilaterally terminate labor contracts without having to provide notice or economic compensation if: (i) the employee commits a material breach of the employer's rules and regulations; (ii) the employee commits a serious dereliction of duty or commits graft or bribery; (iii) the employee simultaneous takes a second job with another employer that materially impacts the employee's ability to do his job with his or her existing employer; or (iv) the employee is found guilty of a criminal offense.

An employer is entitled to terminate an employee by first giving one month's written notice or paying the employee one month's pay, such as if (i) the employee becomes ill or is injured for a non-work-related reason, and is unable to handle his or her original position upon expiration of the medical treatment period as prescribed, nor can he or she assume any other position as arranged by the employer or (ii) the employee is incapable of doing his or her job and would remain so even with training or with adjustments to his or her position.

In all other circumstances, a Chinese employee is considered to have been wrongfully terminated under Chinese employee law. If a China employee is wrongfully terminated, the employee may demand reinstatement of his or her position and the employer is required by law to give the employee his old job back under Article 49 of the Labor Contract Law. If the employee does not wish to continue working for the employer or if performance under the employee's employment agreement is no longer possible, then the employer must pay damages equal to double the economic compensation as if the employee had been lawfully terminated. To add insult to injury from the employer's perspective, it is very simple for a Chinese employee to terminate the employer-employee relationship: a Chinese employee can simply give thirty days notice and her or she is free to leave the business's employ.

Reinstatement Does Not Guarantee All Goes Back to Normal for the Formerly Terminated Employee

If a Chinese employee was found to have been terminated unjustly or for reasons that were not permitted under Chinese law, such an employee is entitled to his or her job back. Nevertheless, as reinstated Chinese employees often find out, having a legal right to be reinstated does not necessarily mean everything will be the same in that employee's position and in the workplace when a reinstatement occurs. Although Chinese law provides that employees who are wrongfully terminated can seek to be reinstated, the remedy provided for under the law and the reality of the employee's situation can be two very different things. For example, an employee may find himself shunned by his peers, treated less favorably (but not to the point where any laws are broken) by supervisors or senior employees, or a less warm workplace environment since the employee took the company to court and the company lost. This can all occur despite Chinese law's worker protections for terminated employees. Therefore, this begs the question for the employee as to whether reinstatement really is the most attractive option to seek and, from the employer's perspective, could cause serious problems with existing employee morale and workplace problems for the employer of the reinstated employee.

China Is Not a Right to Work Jurisdiction, But It May Sometimes Seem Like One

Although the remedy provided under Chinese law for a wrongful termination is the reinstatement of the employee, this is often an impractical solution for the employer as well as the employee. From the employer's perspective, they are stuck with an employee that they company wishes to be rid of. For the employee, management as well as co-workers likely will bear significant resentment towards the employee for taking the company to court. For an employee who may have been terminated for an inability to get along with co-workers in the first place, this could result in a daily workplace atmosphere that, while not illegal, is negative bordering on toxic for that employee.

Therefore, for these reasons it sometimes may be the best solution for both the employee as well as the employer in a dispute over termination of the employee simply be to reach some sort of accommodation with the employee in question. Whether this is a monetary or any other type of settlement in lieu of time-consuming and expensive legal proceedings that likely will not result in a situation that is uncomfortable (not to mention strained) for the employer as well as the employee. Even if an employee is reinstated, returning to the employee's previous position may simply be impossible, in which case the employer would be responsible for paying the employee severance. This may be the best solution for both the employer as well as the employee because returning to work is often awkward at best, and toxic or worse at worse, for the employee and enables the employer to continue to focus on its business without the distraction caused by a troublesome employee.

March 22, 2017

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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