Typical cases of labour dispute in 2019

On 10 December 2019, Jiangsu Changzhou Labour and Personnel Dispute Arbitration Commission (Arbitration Commission) released examples of some typical cases of labour and personnel disputes for the first time. These illustrate current issues for employers in China.

Case 1: employment status of couriers

In this case, a courier and a courier service company signed a 'service contract'. However, in the course of actual performance: (1) the courier and the company met the legal qualification for parties to an employment relationship; (2) the courier was subject to the labour management of the company; and (3) he was engaged in paid labour arranged by the company as part of its business.

Therefore, the Arbitration Commission determined that the courier and the company had established a de facto employment relationship. Thus, all relevant factors should be comprehensively considered in determining the existence of employment relationships under new types of business, for instance:

• whether both parties have agreed to establish an employment relationship
• the degree of personal dependence and economic subordination between both parties, and
• whether the way in which remuneration is obtained and work is provided is different from that under a regular employment relationship.

Case 2: it is reasonable for employers to reduce the salary of employees who fail to fulfil their duties

To the extent permitted by laws and regulations, employers may determine, at their own discretion and according to the needs of operation and management and the performance of employees, the form, method and quantity of work, working time and conditions, positions, and content of duty.

If an employee fails to perform his/her work-related duties according to the law and their employment contract, the employer may deal with such failure as legislation permits, which can include, as in this case, an appropriate reduction of the employee’s salary.

Case 3: unauthorised absence is a serious violation of the principle of good faith, so the employer may clawback any signing bonus

In addition to provisions agreed in the employment contract, parties to an employment contract also need to abide by the general principle of good faith. Even if there is no clear stipulation or agreement, if the employee severely violates the principle of good faith, causing losses to the employer (for instance, in this case, the employee took an unauthorized absence shortly after starting employment), the employer in entitled to clawback a signing bonus.

Case 4: pregnancy rights are subject to formalities

A female employee in the 'three periods' (periods of pregnancy, maternity and lactation) is entitled to special legal protections. However, if the employee has seriously violated the rules of the employer (such as through a failure to fulfil the formalities for leave application and taking consecutive absence in this case), Article 39 of the Labour Contract Law will still apply, and the employer may terminate the employment relationship for cause.

Case 5: as regular induction training is not special training, the agreed service period and liquidated damages in connection with the induction training are null and void

Providing regular vocational training (such as induction training) is an employers' obligation under the Labour Law, and such training is not special technical training under the Labour Contract Law. This meant that an agreement requiring continuing service and payment of damages if the employee left early was void.

Only in the case of special technical training for employees can the service period and liquidated damages be lawfully agreed.

Case 6: if a violation of company regulations is not serious, the employer may not terminate for cause

An employer may unilaterally terminate the employment contract lawfully if its employee "has seriously violated the company's rules and regulations". According to the Arbitration Commission, the severity of the violation should be judged according to whether the violation has caused a serious impact on the company's production or operational management, and whether it has led to any property loss and social impact.

If the employer fails to prove that the employee's violation of company regulations (such as a fight between two employees in this case) is serious, it is unlawful for the employer to terminate the employment contract for cause.