False reimbursement is one of the common conditions for employees who seriously violated the employment rules, especially in marketing and sales positions. Most enterprises particularly foreign one, cannot bear one false reimbursement case in dealing with compliance issues: whatever the amount is, the misconduct shall be punished. The employers mostly, would terminate the labor contract unliterally for seriously violation of employment rules. However, if the employer had approved the reimbursement, should it bring potential or realistic legal risks for termination of labor contract unliterally?
This article starts from cases, and discusses the legitimacy of termination for seriously violation of employment rules in terms of approved false reimbursement under different circumstances.
This article aims to use case study to discuss the legitimacy of termination for serious violation of employment rules based on an approved false reimbursement.
Mr. Chen established labor relationship with Company A from June 2002, and signed an unfixed labor contract on May 20, 2013. On June 6, 2016, the Company terminated the labor contract with Mr. Chen based on many violation of the financial policy from January 1, 2013 to April 30, 2015, more precisely, that one shall pay with credit card if it is over 500 RMB per time, and incited subordinates to falsely reimburse. On September 7, 2016, Mr. Chen applied for labor arbitration and claimed for continuous fulfillment of the contract. The arbitration ruled in favor of the employee on November 7, 2016. The Company was unsatisfied with the ruling and filed in action to court.
It is found by the court that the Employment Handbook provided by the Company states that "if the employee did the following conducts that violate the employment rules and were verified, the Company can terminate the labor contract with him immediately after the general manager of the Company, the local department manager and the local department HR manager giving a permission: other conducts that seriously violated related Company rules concerning gifts, hospitality and expenses; acquiesce or encourage subordinates' misconduct...". The Revised Policy on Gifts, Hospitality, and Expenses states "consumption over 500 RMB shall be paid off with credit card, cash is only available for consumption less than 500 RMB. Furthermore, the employee shall get otherwise permission from the line manager in the event of any exceptions which shall be controlled within the least number of times." The Company claimed that Mr. Chen had 26 reimbursements with every account over 500 RMB averagely in one restaurant; however, the invoices are issued by one hotel.
The courts in the first and second trials held that the reimbursed expenses were exceptions stated in Revised Policy on Gifts, Hospitality, and Expenses. Although the provider of the invoices is not the actual consumption place, the employee had remarked the name and amount of the received in the expense account, and got superior's permission as required, thus shall not be deemed as unlawful reimbursement. The court ruled that the termination was illegal and the Company shall continue to fulfill the labor contract with Mr. Chen.
Mr. Jia entered into one pharmaceutical company in September 2003, and worked as a senior pharmaceutical product representative, his last labor contract with the Company expired in September 2015. In March 2013, the Company informed Mr. Jia though express that his labor contract has been terminated due to his false reimbursement in 2012. Mr. Jia applied for labor arbitration in September 2013, and claimed compensation for illegal termination of labor contract. The arbitration ruled for the employee and thus the Company filed a lawsuit to court.
In the first trial, the court held that the employee did catering consumption based on the reimbursement record, the employee provided food receipts, copy and bill of dishes every time he apply for reimbursement, which the Company gave permission to reimburse. Thus, the claim that Mr. Jia did false reimbursed lacks solid foundation. In addition, Mr. Jia provided relevant proof in each time of reimbursement, and the Company did not raise any objection upon reviewing. Therefore, the form of reimbursement was accepted by the Company all the time. The first trial court thus ruled that the Company shall compensate the employee for illegal termination of labor contract.
The Company was unsatisfied with the ruling and appealed. It claimed that the employee shall hand in invoices after consumption to the head office and submit the application with detailed illustration in the electronic system. After the finance department received the notes and approved application, it will verify them formally, but verify whether the expenses were real. The Company will deal with the issue only if the random sampling detects it. In the entire year of 2012, Mr. Jia reimbursed approximately 90,000 RMB in the name of catering expenses, but handed in invoices from service industry, and five enterprises involved had no places and qualification for catering business. There is no real consumption though the words "catering service" was written on the invoices. The second trial court asked Mr. Jia to provide the disputed catering consumption address within a time limitation, but Mr. Jia replied in written form that he could not remember because it has been too long.
The second trial court held that it is the Company's financial supervisory right to enhance the management of enterprise financial and reimbursement policy, and to verify the expenses that employees reimbursed. The irregular conditions that the Company discovered with Mr. Jia was enough to generate reasonable doubt. In terms of invoices for false reimbursement, whether it is in the process of Company's verification or in the reimbursement account, once the Company finds that the consumption issue or amount written down on the invoice were fake, it shall cope in accordance with relevant regulations. If the Company believes employee's false reimbursement after verification, the employee shall provide the specific consumption address for further verification. Mr. Jia had catering consumption in several restaurants within one year for 9000 RMB, but without specific consumption location provided, he shall bear the legal liability consequence of failing to provide evidence. The court thus ruled against Mr. Jia and found it was legal for the Company to terminate labor contract with Mr. Jia.
False and unlawful reimbursement can be divided into three different situations based on reimbursed item and reimbursed invoice. First, the fact of reimbursement did happen and relevant to company's business, and the reimbursed invoice is true, however violates the reimbursement policy, for example, purchasing commodity, service that cannot be reimbursed as regulated, or provide offset invoices. Second, the fact of reimbursed did happen, while the invoices involved that the employee provided was fake or false. Third, the reimbursement itself was fake by way of taking personal consumption as company's business expenses, or of making up consumption events that do not exist, under this circumstance, whether the invoice provided by the employee is real or not can be left aside.
Although the above situations can all be included as false reimbursement as stated in employment rules, in judicial practice, courts hold evidently different attitudes in the event that the false reimbursement has gained the company's approval.
For the first kind of reimbursement, there are abundant enterprises that allow employees to offset invoices with equal or higher amount in expressed or implied form. The court generally would tolerate this kind reimbursement as stated in case one to greatest extent, and inclines to find non-false reimbursement.
Compared with the first one, in the second kind of reimbursement, the employee had stronger subjective malice when providing fake and false invoices. However, enterprises may verify by entering the tax administration website and comparing the par information, or recognize the fake invoices based on number, chronology and other basic par information. If this kind of reimbursement has been approval, it implies that the company was neglectful and careless, and is not serious regarding verification, or even has deliberate connivance, thus the employee's fault can be relieved to some extent. At this time, it is necessary to strengthen the identification of the employee's fault from other angles including the amount and frequency of conducts involved to terminate the employee legally based on serious violation of employment rules.
Under the third kind of reimbursement, the employee involved has the greatest subjective malice and is generally and the most serious violation of employment rules. Even though the employee claimed that it was approved by the employer and reimbursed expenses had been granted, the court would still hold it seriously violated employment rules under the circumstance of case two.
Compliance reimbursement is one of the important projects in enterprises' compliance management; only if enterprises determine the global compliance regulations can it become an effective instrument for compliance management. To be specific, the following four suggestions are for reference: First, employment rules shall cover all sorts of false reimbursement, so that it has rules to observe. Second, with regard to different kinds of false reimbursement, different punishment shall be applied as stated in employment rules, for instance, oral or written warning shall be sent if the first situation with relatively low subjective malice happens or the first and second situation approved by the company, so that punishment has different levels. Third, for employees who have been warned for many times, recidivism punishment article can be set for unilateral termination. Fourth, regarding the third circumstance, which has serious subjective malice, the company should pay attention to collect integrated evidence before unilateral termination, rather than the opposite.
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.