Under the framework of the Labour Contract Law, harsh requirements are imposed on restructuring enterprises that lay off staff, and there are restrictions on manpower management autonomy of enterprises. In the Response to Questions Concerning Application of Laws in Trial of Labour Dispute Cases, issued in April 2017 by the Higher People’s Court of Beijing and the Beijing Labour Dispute Arbitration Commission, many open issues under the existing labour regulations system of Beijing are clarified. Provisions of the response regarding layoffs by restructuring enterprises are friendly to employers. Although the Labour Contract Law will not be revised in 2017, legislation and practice in Beijing usually signals the tendency of future legislative activities.
On what conditions are unilateral adjustment of position allowed? According to the Labour Contract Law, in effect, unilateral adjustment of position by the employer is allowed only when the employee is incompetent for his or her position, or is unable to resume original work after the expiration of a prescribed medical treatment period; when adjusting the employee’s position unilaterally under statutory prescribed circumstances, generally the employer must not lower the wages of the employee. In practice, however, an employer may cancel, rename or adjust the function of a position due to changes in production or operation, for instance, business restructuring or reorganization. In the past, employers who needed to adjust any position for this reason were in a passive position, given a requirement of consent from the employee being transferred.
Now, the employer’s right to adjust positions unilaterally is recognized conditionally by the response. The following principles apply depending on provisions of the labour contract between the employer and employee: (1) adjustment of position is allowed in the case where there is agreement with the employee that the employer may adjust position in line with production and operational activities, provided that the employer can prove that change has occurred to its production and operational activities, and that the adjustment is reasonable; (2) if agreement on the position to be taken by the employee is absent or unclear in the labour contract of the employee, the reasonableness of position adjustment is determined by taking into account whether the adjustment is justifiable and necessary for the operations of the employer, whether the employee is competent for the new position, and whether there is any adverse change in labour conditions, such as wages and benefits.; and (3) if the labour contract specifies the position to be taken by the employee but does not specify how the position should be adjusted, adjustment of the position beyond statutory prescribed circumstances must be deemed a breach of the labour contract. If the adjustment causes any loss to the employee, the gap in wages for the original and new positions must be paid to the employee as compensation.
Patrick Gu is a partner at DaHui Lawyers