Unlawful termination: delays in employee handover procedures

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Unlawful Termination of Employment
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Where an employee voluntarily resigns, but the company delays in initiating the departure handover procedures, such that three months elapse before termination of the employment relationship, does this constitute unlawful termination? One judicial case heard by a Beijing court may show enterprises the importance of duly managing the employee resignation procedure.

The facts

On 7 September 2021, Ms Wang [the full name was not disclosed by the court] submitted her resignation to her employer’s legal representative by WeChat, who replied verbally that they needed time to find her replacement, following which Wang continued to work for the company, and the company paid her wages as usual from October 2021 to December 2021.

On 13 December 2021, the company terminated the employment relationship with Wang on the grounds that her resignation was accepted. Subsequently, Wang applied for arbitration, demanding that the company pay her compensation for unlawful termination of her employment contract. The arbitration tribunal and the courts of first instance and second instance all ordered the company to bear liability for unlawful termination.

Court opinion

In this case, the courts held that Wang proposed termination of her employment contract to the company’s legal representative in September 2021, to which the company failed to respond, but continued to accept the labour service offered by Wang instead. Accordingly, it should be established that the parties had not reached a consensus on termination of the employment relationship and that the employment relationship between the parties continued to exist thereafter.

The company’s termination, three months later, of the employment relationship with Wang on the grounds that her resignation application was accepted obviously exceeded the reasonable period of time for an employer to process a worker’s application for resignation, which did not fall within the circumstances under which an employer has the right to terminate an employment contract as set out in the Employment Contract Law. Accordingly, the courts found that the company had unlawfully terminated the employment contract.

Takeaways

Pursuant to the Employment Contract Law, an employee has the right to resign by giving the employer 30 days’ prior notice (reduced to three days during probation period) without the employer’s “approval” or “consent”, in which case the company is not required to pay the resigning employee severance pay.

However, this does not mean that a company can unreasonably delay the departure handover procedures or extend the employment relationship with an employee in a disguised manner until a replacement is found.

A delay by a company may be deemed by a court as a consensus between the parties to continue the performance of the employment contract, and the subsequent termination of the employee by the company on the grounds that his or her resignation is “accepted” may constitute unlawful termination.

We generally recommend that a company acknowledge receipt of an employee’s notice of resignation in writing and complete the departure handover procedures as soon as possible (e.g. no later than one month) after receipt of such notice.


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-mailing Howard Wu (Shanghai) at howard.wu@bakermckenzie.com

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