Terminating labour contracts on grounds of detention

By Shaw Zhao and He Yanling, Jingtian & Gongcheng
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Recent years have seen some employers terminate labour contracts on the grounds that the employees were detained. The basis of termination was cited as article 39.1.2 of the Labour Contract Law – “serious violation of the employer’s rules and regulations”, or article 39.1.6 – “held criminally liable under the law”.

This article analyses some cases in Beijing to illustrate the legality of these scenarios of termination.

CHOICE OF BASIS

Terminating labour contracts grounds of detention
Shaw Zhao
Partner
Jingtian & Gongcheng

Being detained does not equal being held criminally liable. According to article 39.1.6 of the Labour Contract Law, where the labourer is held criminally liable under law, an employer may terminate his/her labour contract. In practice, many employers take this article for granted by citing it as grounds for termination as soon as an employee is detained.

However, under article 28.1 of the Opinions on Several Issues of Implementing the Labour Law by the then ministry of labour: “Where the labourer is suspected of committing an offence and is taken into custody, detained or arrested by the relevant authority, the employer may temporarily suspend the performance of the labour contract while the labourer’s personal freedom is restricted.”

Therefore, detention – no matter whether criminal, administrative or judicial – is not the same as “being held criminally liable” under the Labour Contact Law. Being detained, then, cannot be cited as a reason to terminate a labour contract. However, employers may temporarily suspend contracts.

Application of serious breach of rules and regulations. By comparison, more employers in these scenarios choose to apply article 39.1.2 of the Labour Contract Law. This allows an employer to terminate a labour contract if an employee seriously breaches the company’s rules and regulations.

The rationale behind this is that, by being detained – itself a result of the employee’s personal illegal activity – an employee has directly caused an inability to perform the labour contract. Therefore, if an employer has explicitly set out regulations that cite being detained as a serious disciplinary offence, the employer is usually permitted to terminate the employment.

Sometimes termination will be legal without such an explicit provision, if a labourer’s action overlaps other disciplinary offences such as brawling.

Terminating labour contracts grounds of detention
He Yanling
Associate
Jingtian & Gongcheng

For example, in a 2021 Beijing case, the court pointed out that an employer’s corporate regulations explicitly stated that administrative detention could lead to the termination of a contract. In this matter, the labourer was administratively detained due to obstructing the performance of duties, and this constituted a serious breach of the employer’s regulations. Considering this, and that the regulation had been made known to the labourer according to the law, the termination of the labour contract was deemed legal.

In another 2021 case, a court held that as brawling was listed as a serious disciplinary offence in the staff handbook, the termination of the labour contract after the employee was administratively detained due to brawling was in line with the established regulations in the handbook, and thus lawful.

Unapproved absence. It should be noted that many employers also opt to terminate labour contracts of detained employees for a more common cause: absence without leave.

Opinions vary among courts in Beijing, but the mainstream judicial approach is to judge the legality of the termination based on whether the labourer had informed the employer in time.

In a 2021 case involving this scenario, the court held that as a labourer failed to inform the employer of a detention, the employer had no way of knowing the relevant facts and made the decision of termination based on the information at hand. Without any request for leave of absence or other valid reason given by the labourer after detention, the decision to terminate the labour contract was deemed legal.

To sum up, as far as judicial practice in Beijing is concerned, the authors tend to believe that as long as being detained is listed in a company’s regulations as a serious disciplinary offence, an employer may terminate a labour contract on such a basis.

COMPLIANCE ADVICE

Although the judicial tendency in Beijing is that employers may terminate a labour relationship with detained employees on the grounds of a disciplinary offence, this practice is still sometimes found illegal due to defects in the validity of regulations or termination procedures.

In a 2016 case, a court in Beijing found a termination was baseless and illegal because the employer failed to prove the underpinning termination was formulated through a democratic process and effectively conveyed to the labourers.

In a 2020 case, although company regulations stated that a labour contract might be terminated if an employee was criminally examined or detained by public security authorities, the court noted the regulations failed to clarify whether the regulations meant administrative or criminal detention.

Under the principle of favouring the labourer whenever rules are ambiguous, the court determined that the detention in this context should refer only to those of a criminal nature, not administrative, and the termination on the grounds of an administrative detention was illegal. The employer was then ordered to pay compensation to the employee for illegal discharge.

RECOMMENDATIONS

    • Employers are recommended to clarify the exact nature of a detention and whether it constitutes a serious disciplinary offence when formulating relevant regulations;
    • A democratic negotiation procedure should be conducted for these regulations in accordance with article 4 of the Labour Contract Law;
    • Labourers should be lawfully informed of the regulations; and
    • Relevant evidence should be retained.

If an employee is detained, the employer should determine the cause of termination based on facts, proceed with the termination according to law and, most notably, exhaust all means to deliver the notice of termination to the labourer.

Shaw Zhao is a partner and He Yanling is an associate at Jingtian & Gongcheng

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Jingtian & Gongcheng

34/F, Tower 3, China Central Place
77 Jianguo Road, Beijing 100025, China

Tel: +86 10 5809 1026

Fax: +86 10 5809 1100

E-mail:

zhao.xiao@jingtian.com

he.yanling@jingtian.com

www.jingtian.com

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