Not acceptable to terminate employment due to virus related reasons
On 20 April China’s Supreme People’s Court issued guideline for virus related civil cases on employment, consumer protection, sale of medical equipment, protection of SME’s assets etc. Chinese courts are now instructed to reject companies terminating employees based on virus related reasons.
The last months we have seen companies terminate employment based on people not abiding by China’s quarantine rules. German company Bayer sited breach of company rules as basis for a termination of employee not abiding by 14 days quarantine rules after overseas travel. Termination of employment based on breach of company rules remain valid reason for termination. The new Guideline prohibits termination based on an employee having been infected, suspected of being infected or in quarantine due to disease or resent travel.
Employees unable or unwilling to work
The new Guideline clarifies that any absence caused by being infected, suspected of being infected or in mandatory quarantine period does not provide legal basis for termination of employment.
Should an employee however refuse to return to work without appropriate reason, the company may terminate the employment based on violating company attendance policies and thus be entitled to unilaterally terminate the employment in accordance with Labour Contract Law, Article 39.
Under the Chinese labour law regime, a company is allowed to release employees temporarily from their work duties.
If a company ceases its entire operations, the employees are normally completely released from all work duties, but some essential personnel continue to work such as e.g. office manager. The employees remain legally employed by the company and the company is obliged to maintain and pay the employees’ social insurance and pay full salary for the first month. Beyond the first pay cycle, the company is only obligated to pay ‘suspension’ salary in accordance with the local rules. In Shanghai, that means paying the 100% minimum wage (RMB 2,480 per month) to those employees who are completely released from work obligation, whilst these employees are to be compensated with a minimum of 70% of the minimum wage if in Beijing.
Chinese labour law grants extensive rights to employees. Given the extraordinary nature of the current circumstances, including implementation of local rules, and the consequence of wrongfully termination of employment being double severance payment, companies should carefully consider their options before implementation.
To mitigate risks of employment disputes, companies should try to reach consensus with their employees whilst remaining compliant with local and national regulations. Companies are encourage to review their employee handbook to ensure that it remain compliant and secure proper implementation of said handbook, including signatures from all employees as only then can breach of the handbook be used as valid reason for termination of employment. Companies are advised to keep record of all communications in case any dispute later on arises.
Chinese central and local authorities may continue to issue new policies and guidelines to address new issues arising from the extraordinary times. Companies are advised to continue to monitor changes in employment matters.