China Employee Terminations for Misconduct: Get Your Documents in Order

Our China employment lawyers often get the following question from both potential and current clients:

We have an employee who did something clearly wrong. However the conduct in question is not directly addressed in either his employment contract nor in our employer rules and regulations. Given how wrong his conduct is though, can we terminate him anyway?

Our response is usually something like this:

As much as we would love to give you a simple yes or no answer, it is almost always more complicated than that and for us even to know whether yours is in the majority of complicated cases, we will need to gather up all sorts of additional facts from you.

Let me first say that unilateral terminating a China employee is generally tough and terminating an employee for misconduct is even tougher.

At the end of 2019, Jiangsu labor authorities issued a notice called the Seminar Minutes on Difficult Issues in the Trial of Employment Disputes in the “Three Provinces and One City” (that is, Jiangsu, Zhejiang and Anhui provinces and Shanghai) of the Yangtze River Delta Region. This notice shed some light on unilateral terminations when an employee commits wrongdoing but neither the employer rules and regulations nor the employment contract deals with the employee’s specific misconduct or the employer rules and regulations document is not valid due to the employer’s failure to properly implement it. It provides that if an employee violates the laws, administrative regulations or labor disciplines which must be followed and those violations seriously affect the employer’s production/operation or management order, the employer will be deemed to have been justified in terminating the employee.

To be clear, there is nothing particularly new in the sense that some places (Shanghai for example) already have rules allowing an employee to be disciplined or even terminated for serious misconduct when the relevant employment documents do not have anything on point. Even in Beijing (a very pro-employee city), employers are permitted to terminate an employee who seriously violates labor disciplines or professional ethics, even if the employer’s rules and regulations and employment contract are silent on the specific misconduct.

In other words, the Chinese labor authorities generally recognize that employers should not be without recourse against an employee who commits wrongdoing just because the relevant employment documents do not and cannot cover everything. The above just reaffirms this.

However this by no way means any sort of employee misbehavior will justify an employer’s dismissal decision. In a way, this reaffirms that it almost does not matter how wrong the employee’s action is, or how angry a reasonable employer would be in the same situation, it comes down to if the employer suffered harm because of the employee’s action. The employee misconduct must rise to a level that causes “serious” bad consequences to the employer for the employer to meet the above legal requirements. And if the employer does not have hard evidence to prove this, it might as well forget about a unilateral termination.

This should go without saying, but it is still the case that disciplining or even terminating an employee without reference to any employer document remains quite risky. Unilateral terminations without severance are often challenged by employees and employers that do not have anything in its own employment documents absolutely will give the terminated employee (and his or her plaintiff’s employment lawyer) greater incentive to sue for wrongful termination.

So what can you do in this sort of situation? If you believe it necessary to terminate someone, plan, plan and plan some more. In addition, be proactive by checking all your key employment documents and make all necessary changes and updates to make sure you are covered before you initiate the termination.

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.