Terminating a China-based employee is never easy, but unilateral termination is possible without having to pay severance when the terminated employee has committed a serious breach of the employer rules and regulations (aka employee handbook). For your termination to work, you as the employer need a set of rules and regulations that include a legally enforceable provision on which you can rely. “Enforceable” generally means a reasonable provision that does not violate any Chinese laws.
Let’s take absenteeism as an example. This is a fairly straightforward misconduct and there is nothing in the law prohibiting an employer from disciplining an employee for absenteeism. The question is whether your company rule is reasonable. Suppose your Rules and Regulations provide for immediate termination of any employee absent from work for half a day without good reason. Will such a provision be upheld as enforceable simply because it doesn’t violate any laws? Almost certainly not. As with almost everything regarding China’s employment laws, the answer could depend on the employer’s locale. But most China labor boards and courts will refuse to enforce this provision as too harsh. What about three days of absences without good reason? Would that be enough to allow immediate termination? Probably yes, but we still need to check the local rules and check in with the local labor authorities to confirm local practices. The line between what is considered harsh and what is not is often fuzzy, so it is important the termination provisions in your handbook be both clear and enforceable.
But what if you do not even have a set of Rules and Regulations or your Rules and Regulations are silent on absenteeism and you want to terminate an employee who has been absent from work for 3 days without any justification? Can you discipline or terminate that employee without having to pay any severance? Again, it will depend on where you are, but in most places, the answer is no. If your Rules and Regulations does not list out the misconduct you want to use as your basis for an employee’s termination, you typically cannot terminate the employee on that basis. This is yet another reason why having a set of Rules and Regulations is so important and why it should be an evolving document. If you are finding your employees engaging in misconduct not addressed in your Rules and Regulations, you should update it to add provisions that address that misconduct.
Speaking of how China’s employment laws can vary so much depending on the locale, Shanghai is an employer-favorable outlier to much of the above. In Shanghai an employer that can show its employee acted in bad faith and thus violated his or her basic duties as an employee can usually terminate an employee without justification based on a particular provision in its Rules and Regulations. Despite this Shanghai difference, you still will be on firmer ground for an employee termination that can be justified by a provision in your Employer Rules and Regulations.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.