Tianjin court releases updated guidance on hearing labour disputes

By Patrick Gu, DaHui Lawyers
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In November 2017, the High People’s Court of Tianjin released the Guidance on Hearing Labour Dispute Cases for Courts in Tianjin (Guidance), which provides for specific issues about hearing of labour dispute cases by courts of competent jurisdiction in Tianjin, including the acceptance of labour dispute cases, determination of employment relationships, and the conclusion, modification, rescission and termination of labour contracts, wages and benefits. Effective from 1 January 2018, the Guidance comprehensively reviews criteria applied by judges of Tianjin in hearing labour dispute cases, is mindful of protecting both employers and employees, and reflects the autonomy of the parties. Below is the interpretation of several relevant articles.

辜鸿鹄 PATRICK GU 达辉律师事务所合伙人 Partner DaHui Lawyers
DaHui Lawyers

Continuing to use services of an employee who has reached retirement age may constitute an employment relationship under special circumstances. The question of whether the continued employment of a retiree constitutes an employment relationship has been controversial. According to the Implementing Regulations for the Labour Contract Law, when an employee reaches the statutory retirement age, his labour contract shall terminate. However, pursuant to the Labour Contract Law, the labour contract will not terminate until the employee receives benefits under the basic endowment insurance scheme.

The Guidance provides more detailed rules. It says that a labour service relationship shall be deemed existing if an employer uses the services of an employee who is receiving retirement pay or benefits under the basic endowment insurance scheme; however, an employment relationship shall be deemed existing if an employee of statutory retirement age still has not received retirement pay or benefits under the basic endowment insurance scheme due to any reasons attributable to the employer while the employer utilizes the services of the employee.

It is obvious that there is discrepancy between the Guidance and the Implementing Regulations for the Labour Contract Law. Employers should keep in mind that according to the Guidance, where an employer continues to use the services of an employee who has reached the statutory retirement age but has not completed retirement procedures that entitle him to retirement pay, the employee may lodge claims against the employer for his entitlements, e.g., double wages for failure to conclude a labour contract and economic compensation for terminating labour contract, based on an employment relationship in the case of labour dispute.

Employers are allowed to adjust position and remuneration of an employee unilaterally under certain conditions. One human resource management challenge that employers often face is whether they are allowed to adjust the position and remuneration of employees unilaterally to meet their business needs, as employees generally emphasize that any modification to their labour contract must be based on mutual consensus.

The Guidance provides employers with flexibility in adjusting positions unilaterally provided that the adjustment complies with provisions of the labour contract or labour rules and policies, reflects objective needs of production or operations, the remuneration for the new position is substantially the same as the original position, and the adjustment is not discriminatory or insulting and does not violate any laws or regulations.

Showing greater respect to the right of employers to operate independently, the Guidance further specifies that a circumstance where an employer relocates an employee to a new position with lower pay due to any significant change to the business situation or deterioration in the financial performance of the employer shall not be deemed a violation of laws or regulations.

Employers and employees may negotiate rates of overtime pay. The Guidance allows rates of overtime pay to be fixed as negotiated between employers and employees, provided that they must not be lower than the minimum wage. In the absence of such negotiated rates and a collective contract that specifies the relevant rates, the overtime pay shall be based on the wage payable to the employee or the employee’s average wages (bonus inclusive) in the 12 months prior to termination of the employment. The Guidance also allows an employer to agree with an employee that overtime pay is included in the employee’s payable wages, provided that the rate of overtime pay must not be lower than the minimum wage.

An employee who leaves his employment in the middle of a year of performance review shall be entitled to receive an annual bonus from the employer. Many employers stipulate in their labour contracts or employee handbooks that employees who are not employed on the day of annual bonus distribution are not entitled to receive a year-end bonus, even if they have worked the full year of the performance review. This rule has been upheld by many courts across the country.

However, the Guidance stipulates that former employees are entitled to year-end bonuses notwithstanding any written provisions like the abovementioned one in the policies, notifications, meeting minutes or other documents. Employees who leave their employment without working a full year of the performance review shall be entitled to a pro-rata year-end bonus based on the actual duration of employment. Therefore, when formulating or revising their rules and policies, employers should keep in mind that provisions like the abovementioned one may be held invalid by courts.

Are employers required to notify their trade union before duly terminating any labour contract? Notifying the trade union is considered by courts in many places to be a procedural duty that employers must fulfill in order to validly terminate a labour contract. If an employer does not establish a trade union, it must provide notice about the termination to the trade union of the local place or of the industry to which it belongs. Termination without such notice shall be deemed a violation of applicable law.

Pursuant to the Guidance, however, an employer may duly terminate a labour contract without notifying any trade union if it does not have one. Where an employer with a trade union fails to notify the trade union before terminating a labour contract, it will be sufficient to fulfil this notification duty before the employer is sued (by the employee) for allegedly violating any laws or regulations in terminating the contract.

In conclusion, employers in Tianjin must pay special attention to the compliance risks that may arise out of any discrepancy between stipulations of the Guidance and usual practices and understanding.

Patrick Gu is a partner at DaHui Lawyers

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