The probationary period is a two-way observation tool, set-up by employers for new employees at the early stage of their employment. Some companies may decide to terminate employment contracts with employees due to their poor performance during their probationary period. However, the "termination of an employment contract during the probationary period" cannot be done arbitrarily, and certain legal requirements must be met. Recently, Tianjin Municipal Human Resources and Social Security Bureau published examples of typical labor dispute cases from 2021. In one of the cases, the company terminated the employment contract with an employee on the ground of "failure to pass the probationary period". After the hearing, the Labor Dispute Arbitration Commission ("the Arbitration Commission") held that the termination was illegal and ordered the company to pay compensation for the illegal termination. Based on this case, in the following passages we will share the key points of terminating employment contracts on the ground of "failure to meet recruitment conditions during the probationary period".
The details of this case are as follows:
- An employee named Liu joined a company on June 17, 2021, and
was engaged in sales work. His probationary period was from June
17, 2021, to December 16, 2021. On July 26, 2021, the company
terminated the employment contract with Liu on the ground of
failure to pass the probationary period. Liu did not accept this
decision, and applied for arbitration to the Arbitration
Commission, claiming compensation for illegal termination of his
employment contract. During the trial, the company claimed that the
most important evaluation criteria for salespersons is their
performance. Since the first month of Liu's employment, Liu
neither brought any orders to the company, nor introduced any new
clients, and as such Liu completely failed to meet his recruitment
conditions. Liu claimed that although his performance was not
ideal, he met the recruitment conditions as stated in the
company's recruitment advertisement, i.e., holding a
bachelor's degree and more than two years of work experience in
the same industry. Moreover, he claimed that no one informed him of
his job duties, nor the evaluation criteria, after the commencement
of his employment.
- After the hearing, the Arbitration Commission held that the company's recruitment advertisement only mentioned the requirements of a bachelor's degree and more than two years of work experience in the same industry, and the company did not specify the evaluation criteria for the probationary period to Liu after he joined and began work. Therefore, there was no legal basis for the company to terminate the employment contract with Liu on the ground of "failure to meet recruitment conditions during the probationary period". As a result, the Arbitration Commission held that the termination of the employment contract was illegal, and the company should pay compensation for illegal termination to Liu accordingly.
The Employment Contract Law of China gives employers the right to terminate employment contracts with employees during their probationary period on the ground of "failure to meet recruitment conditions during the probationary period". However, as the above case shows, a company must meet certain requirements before terminating the employment based on this ground. Otherwise, the termination is likely to be held illegal, and the employee is entitled to claim compensation for illegal termination, demand that the company reinstate the employment contract, pay compensation for his/her salary losses, and make supplementary contributions to his/her social insurance and housing fund, etc. This will not only increase the expenses of the company, but may also cause adverse effects to its internal management. Therefore, it is necessary for companies to pay close attention to the management of an employee's probationary period, and understand and meet the legal requirements.
In the following, we will share the key points and recommendations on terminating an employment contract on the ground of "failure to meet recruitment conditions during the probationary period" according to our practical experience.
Key Point 1: Companies should notify employees of the recruitment conditions
The precondition for a company to terminate the employment contract with an employee on the ground of "failure to meet recruitment conditions during the probationary period" is that the company has clearly notified the recruitment conditions to the employee. Taking the above case as an example, although the company believed that the most important evaluation criteria for a salesperson was the employee's sales performance, the company did not explicitly notify the employee that sales performance was part of his recruitment conditions. Therefore, the termination of the employment contract with the employee on the ground of "failure to pass the probationary period" (due to the employee's failure to meet the performance criteria) was not supported by the Arbitration Commission.
When notifying employees of the recruitment conditions, companies should consider the detailed content, and the method and time required for notifying employees of those recruitment conditions. Specifically:
- Detailed content of the recruitment conditions
For new employees, many companies will pay attention to whether the employees, meet the on-boarding qualifications set forth at the time of recruitment, have gone through the on-boarding procedures, comply with labor disciplines and internal policies, and show work performance that meets the company's requirements. A company may set its recruitment conditions for employees based on its actual situation. According to our experience, and common practice in the market, some common recruitment conditions for employees are listed as follows:
(1)With respect to the on-boarding qualifications and on-boarding procedures, the recruitment conditions that companies may propose include, but are not limited to:
- Holding the professional qualifications, licenses and/or permits necessary for the position;
- Providing the materials required by the company on time (including but not limited to, the employment separation certificate issued by the previous employer, the academic qualification certificate, etc.);
- Ensuring that all the documents, materials and information provided to the company are true, complete and without any untruthful withholding of information;
- Confirming that the employee has no employment/service relationship with any other entities;
- Confirming that the employee is not under any obligation which restricts or prevents him/her from performing the required job duties in the company (including but not limited to the non-compete obligation), and that there are no judicial or administrative proceedings that may affect the establishment and performance of an employment relationship between the employee and the company; and
- Transferring personnel files, social insurance and housing fund account information according to the requirements of the company.
(2)With respect to labor disciplines and internal policies, the recruitment conditions that companies may propose include, but are not limited to:
- Strictly abiding by the company's internal policies
(compared with employees who have passed the probationary period,
companies may impose stricter requirements for employees in the
probationary period based on their actual situation, but such
requirements should still be reasonable); and
- No violation of any laws or regulations.
(3)With respect to an employee's work performance, companies may set performance evaluation criteria in the recruitment conditions based on the employee's actual position and work responsibility. In order to reduce the risk that the relevant evaluation results will be regarded as too subjective (and thus the final termination decision being regarded as unreasonable), it is recommended that companies avoid vague expressions (e.g., "excellent", "good", "meets the satisfactory standards", etc.), and try to set objective, specific and quantifiable criteria. For example, for salespersons, companies may consider requiring them to complete a certain number of orders/business volume during their probationary period.
In addition, Article 11 of the Interpretation of Beijing Municipal High People's Court and Beijing Labor Dispute Arbitration Commission on the Application of Law to the Hearing of Labor Dispute Cases, provides that situations where employees fail to meet the recruitment conditions can include making mistakes at work during the probationary period. Mistakes at work should be defined in accordance with the relevant provisions of employment laws, the employer's internal policies and the contents agreed in the contracts between the two parties. Therefore, companies in Beijing can also set "making no mistakes at work" as one of the recruitment conditions, and specify the definition of "mistakes at work" in internal policies and employment contracts.
- Method and time period for companies to notify
employees of the recruitment conditions
Laws and regulations do not provide the method for specifying the recruitment conditions between companies and employees. In practice, some companies incorporate the recruitment conditions into internal policies, or list the recruitment conditions in recruitment information. However, if labor disputes arise, it may be difficult for companies to prove that employees are aware of, and have confirmed, the recruitment conditions. To reduce legal risks, we recommend that companies set forth the recruitment conditions in written documents, such as employment contracts between companies and employees, or notices of recruitment conditions, and ask employees to sign such documents for confirmation to ensure the clarity of the agreement between the parties.
With regard to the time for notifying the recruitment conditions, it should normally be before, or at the time of, an employee's commencement of employment. If an employee is notified of the recruitment conditions after performing his/her job duties for a certain period of time, then based on such recruitment conditions, it may weaken the reasonableness of the company's evaluation of the employee's performance during the probationary period.
Key Point 2: Companies need to prove that employees do not meet the recruitment conditions
Once a company's decision to terminate an employee's employment contract on the ground of "failure to meet recruitment conditions during the probationary period" is challenged, the company generally has to bear the burden of proof that the employee does not meet the recruitment conditions. Therefore, after notifying employees of the recruitment conditions, companies should focus on deciding whether an employee has failed to meet the recruitment conditions during this period, and retain relevant evidence. In this regard, we recommend that companies can focus on the following points:
- Companies can conduct probationary period performance
evaluations for employees and deliver the evaluation results to
Prior to the expiration of the probationary period of an employee, the company may review the employee's performance during his/her probationary period to determine whether the employee meets the recruitment conditions. In practice, some companies will conduct probationary period performance evaluations for employees and form written evaluation results, which is generally recognized by arbitration commissions and courts. If the evaluation results show that an employee has failed to meet one or more recruitment conditions, the reason should be stated, and corresponding supporting evidence is required.
During performance evaluation, companies should also pay attention to complying with rules stipulated in relevant internal policies, as well as the agreement with the employee, in order to ensure the reasonableness of the procedures and content of the evaluation.
In a recent case in Beijing, a company terminated the employment contract with an employee named Sun on the ground of Sun's failure to meet his recruitment conditions. The court held that the company's sales evaluation incentive policy stipulated that "new employees should complete the Salesperson Probationary Period Performance Evaluation Form one week after the end of the third month from commencement of employment". However, the company did not conduct performance evaluation for Sun until the fourth month, which was a lag in the evaluation process. In addition, the company's internal policy stipulated that if a new employee's performance evaluation score was lower than 80, the new employee could have the opportunity to take a make-up evaluation after one month, and if his/her score was still lower than 80, the employee would be deemed to have failed to meet the recruitment conditions during the probationary period, and the company could terminate the employment relationship. However, the evidence submitted by the company was insufficient to prove that the opportunity to take a make-up evaluation was given to Sun when he failed the performance evaluation. Therefore, the court held that the termination of the employment contract by the company was illegal, and the company should pay Sun RMB 22,000 as compensation for illegal termination.
Therefore, in order to prevent the final evaluation result from being challenged, we recommend that companies should review and improve the probationary period performance evaluation system in due course, and strictly comply with relevant provisions and agreements when conducting probationary period performance evaluation.
In addition, we recommend that companies communicate with employees in due course after the performance evaluation results are formed, deliver the results to the employees, and require employees to sign for them.
- Collect evidence related to employees' performance
in daily management
As mentioned above, companies are generally required to have supporting evidence for the probationary period performance evaluation results. Therefore, in daily management during the probationary period, companies should pay attention to retaining evidence related to an employee's performance during this time. For example, if an employee is required to complete a certain number of orders every month, as stipulated in the recruitment conditions, the company should keep objective and direct evidence (such as relevant communication records, weekly/monthly work reports, etc.) about the employee's completion of orders each month.
- Performance evaluation results and termination
decisions should be made before the expiration of the probationary
If a company terminates an employment contract on the ground of "failure to meet recruitment conditions during the probationary period", it should pay close attention to the time when the termination decision is made. The probationary period performance evaluation result, and the decision to terminate the employment contract of an employee on the ground of "failure to meet recruitment conditions during the probationary period", should be made before the expiration of the employee's probationary period (certainly no later than the expiration date of the probationary period). Otherwise, the decision to terminate will be held as illegal.
Key Point 3: A company should issue a notice of termination and deliver it to the employee
Before the expiration of the probationary period, if the result of an employee's probationary period performance evaluation is judged as a failure to meet recruitment conditions, the company is entitled to terminate the employment contract with the employee. We recommend that after the company has made the decision to terminate, it may organize a face-to-face communication with the employee, deliver to the employee the probationary period performance evaluation result document and the notice of termination of the employment contract, and request the employee to sign for them. If the employee refuses to sign for the above documents, the company may deliver the documents by express, WeChat, message, etc. Besides, if the company has a trade union, it should notify the trade union of the reason for termination in advance before terminating the employment contract with the employee.
The above is our analysis and recommendations for the termination of employment contracts by companies on the ground of "failure to meet recruitment conditions during the probationary period". We hope that the analysis and recommendations can assist companies in further regulating the management of the probationary period, and help to ensure the compliance of their daily employment management and operations.
Originally published October 2022
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.