Court has difficulty enforcing judgment reinstating employee

In a recent case, reported on 16 February 2013, the Shanghai Jing’an District People’s Court was reported as admitting that its judgment to reinstate a terminated employee was unenforceable when the employer refused to take the employee back or assign any work to the employee, even after the court attempted to mediate between the parties on three occasions.

The employee had joined a Shanghai interior design company in September 2008, but no written employment contract was ever signed by the parties. On 20 May 2011, the company issued a termination notice to the employee based on the fact that the company lost many of its clients resulting from the employee’s poor performance and improper behaviour during work. The employee applied for arbitration the same month, and asked for an open-term contract, back payment of wages owed from the date of termination and reinstatement of employment. Both the arbitration tribunal and the court supported the employee’s claims, reasoning that the company did not have sufficient evidence to justify the termination.

On 18 May 2012, the appellate court affirmed the ruling that the company must reinstate the employee, make back payments of wages for the period from termination until reinstatement, and sign an open-term contract with the employee, since PRC law deems an employee to be on an open-term contract if he works for more than one year without a contract.

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com