Navigating employment disputes in China can be a complex task, given the evolving interpretations of law and the wide variety of local practices. In this update, we look at three cases on social insurance and termination of senior employees' employment.
Statute of limitations on social insurance recovery
Case Summary:
Employee H joined Company A before 2009, but it was not until December 2009 that the company began contributing to the mandatory social insurance for H. In October 2012, H lodged a complaint with the local labour authority (the Human Resources and Social Security Bureau), demanding that Company A make up the shortfall. When the local authority decided not to investigate, H initiated a lawsuit.
Case Analysis:
The High People's Court of Guangdong Province dismissed H's claim. The court referred to Article 20 of the Regulations on Labour Security Supervision, which stated that if a violation of labour security laws, regulations, or rules was not discovered or reported within two years, the labour security authority would no longer pursue the case.
In this case, evidence showed that Company A began contributing to H's social insurance from December 2009. Therefore, H should have lodged his complaint about the non-payment or underpayment of social insurance before December 2009 by December 2011. However, H did not file his complaint until October 2012, exceeding the statutory limitation period. As a result, the local authority's decision to no longer investigate H's complaint was deemed appropriate.
However, it is worth noting that similar cases may yield different rulings in other regions. For instance, in Beijing, courts tend to view the social insurance authority's order for employers to make up the social insurance shortfalls as a social insurance audit action, instead of a labour security supervision action, so Article 20 of the Regulations on Labour Security Supervision does not apply. Employers are expected to make up for all underpaid social insurance, even if the underpayment dates back two years or more.
Double salary for senior employees
Case Summary:
In August 2013, Cui joined Company B as Deputy General Manager, also serving as the head of the Human Resources Department. He left the company in August 2014. During his tenure, no written employment contract was signed. Cui claimed that Company B violated the law by not concluding a written employment contract and demanded double the salary for the period from September 2013 to July 2014.
Case Analysis:
The court did not support Cui's claim.
The focus of this case lies in whether the requirement of double salary for failure to conclude a written employment contact applies to Cui as a senior employee. As per Article 82 of the Employment Contract Law, if an employer fails to conclude a written employment contract with the employee more than a month but less than a year from the date of employment, it should pay the employee twice their monthly salary as compensation. Generally, this provision applies to both rank-and-file and senior employees.
However, in this case, Cui was also the head of the department responsible for human resources. The court held that as Cui's duties included signing and managing employment contracts, the responsibility for failure to conclude a written employment contract lay with him. Therefore, the employer did not need to pay double salary; otherwise, it would easily lead to a situation where a senior employee took advantage of their authority to gain double salary.
To ensure fairness, however, if there was evidence that the senior employee requested a written employment contract but was refused by the employer, the request for double salary could still be supported by the court.
Termination of senior employee
Case Summary:
Wang joined Company J in July 1991 and was appointed as General Manager in December 2012. In 2013, Company J was warned by the authority due to internal control issues. In May 2014, Company J convened a board of directors meeting, held Wang responsible for the incident and decided to dismiss him from his position as General Manager. The next day, Company J delivered a notice to Wang and terminated the employment relationship with him on the grounds of serious negligence of duty and severe violation of internal policies. Wang then initiated a labour arbitration, after which the case was brought to court.
Case Analysis:
The court found Company J's termination of the employment relationship unlawful, and ruled in favour of Wang's request for reinstatement.
The focus of this case lies in the potential conflict between the board's right to appoint and dismiss senior employees and the employment law's restrictions on terminating employment contracts. On one hand, the Company Law allows the board of directors to unilaterally appoint and dismiss senior employees through proper procedures. On the other hand, the Employment Contract Law requires a statutory ground for an employer's unilateral termination of an employee. This overlap in the application of laws makes the termination of senior employees more complex than that of ordinary employees.
In this case, the court viewed the board's appointment or dismissal of senior employees as personnel arrangements. For senior employees who have established an employment relationship with the company, the board's resolution to dismiss their position should be regarded as a change in role, not necessarily leading to termination of the employment relationship. Therefore, Company J's argument that it was entitled to terminate the Wang's employment based on the board's resolution was untenable; instead, Company J, as an employer, must follow the statutory grounds set out in the Employment Contract Law and provide sufficient evidence in order to justify the termination. Since Company J failed to provide sufficient evidence of Wang's serious negligence of duties and severe violation of internal policies, the court ruled the termination as unlawful.
Key Takeaways
Handling employment disputes requires a precise understanding and interpretation of the relevant laws which can vary from region to region, leading to different outcomes for similar cases. Employers facing employment disputes should seek timely local legal advice and assistance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
