Professional Interpretation

As China’s opening-up deepens, the number of foreign employees in China has increased rapidly. Correspondingly, labor disputes have arisen in foreign-related employment relations. Protection of foreign employees’ labor rights has become a vital issue. This article intends to analyze the difficulties that foreign employees may encounter when dismissed illegally, and give the countermeasures through relevant judicial decisions.

1. Difficulties for foreign employees to seek reinstatement when labor contracts terminated illegally

In accordance with the provisions of Article 43 of the Law of the People's Republic of China on Application of Laws to Foreign-Related Civil Relations, “An employment contract is governed by the law of the place where the employee works.” Thus, for foreigners working in China, the Labor Contract Law of the People's Republic of China should be applied.

Among all kinds of labor disputes, unlawful termination is one of the most common kind. In accordance with the provisions of Article 48 of the Labor Contract Law of the People's Republic of China, “Where an employing unit revokes or terminates a labor contract in violation of the provisions of this Law and the worker involved demands continued performance of the contract, the employing unit shall continue performing the same. If the worker does not demand so or if it becomes impossible for continued performance of the labor contract, the employing unit shall pay compensation pursuant to the provisions in Article 87 of this Law.” However, in practice, it’s much harder for the foreigners to seek reinstatement than the natives when dismissed illegally.

2. Property Consulting Company A vs. Mr. Zhang

Property Consulting Company A signed an open-term labor contract with Mr. Zhang on 1^st July, 2011. Mr. Zhang was the assistant manager of Lease Strategy Department of the Company with standard labor time system.

The Company claimed that Mr. Zhang had been absent from work since 20^th December, 2012. The Company sent a notice to Mr. Zhang on 4^th January, 2013 to warn him of the termination of employment contract on account of serious breaches of labor discipline and company rules and regulations with continued absenteeism not rectified after several written warnings sent by the Company. Mr. Zhang held an Employment Permit for Foreigners expiring on 22^nd July, 2013, but the company cancelled the permit on 11^th January, 2013.

Mr. Zhang filed a lawsuit against the Company and requested the Court to: 1. Identify that the employment contract was terminated illegally; 2. Order the company to resume employment relations with Mr. Zhang.

3. Judicial Decision

According to the Civil Judgment of No.3 Intermediate People's Court of Beijing Municipality [(2015) San Zhong Min Zhong Zi No. 09796], in regard to the legitimacy of termination of the labor contract, the two parties had different opinions about whether Mr. Zhang had applied for the leave of absence.

The Court of First Instance held that, “First of all, according to Article 4.2 of the Employee Manual, if an employee is late to work, a verbal warning will be sent from his or her department manager. Mr. Zhang had been absent from work since 21^st December, 2012, but the Company could not provide any evidence on the verbal warning delivery; Secondly, according to the email submitted by the Company, the staff of Human Resources Department of the company enquired about whether Mr. Zhang could come to the Beijing office on 26^th December, 2012. It could be deduced from how the email was composed that the HR staff did not expect Mr. Zhang to show up on the next day. Mr. Zhang clearly responded that he could not be in Beijing as he had already arrived in Australia. The company did not provide any evidence to prove that they had sent any warning or reminder regarding Mr. Zhang’s absenteeism; Thirdly, the company sent a warning on 4^th January, 2013, along with a notice on termination of employment contract by post, which did not constitute an actual warning. Therefore, during the period from 20^th December,2012 to 4^th January, 2013, Property Consulting Company A was or should be fully aware of the absenteeism of Mr. Zhang, but the company did not send any verbal or written warning or reminder to Mr. Zhang instantly to clarify any misunderstanding. The evidence submitted by Property Consulting Company A was not sufficient to prove ‘Mr. Zhang had been absent from work repeatedly after the company sent multiple warning.’ In such circumstance, under consideration that Mr. Zhang was given the presumption that his leave of absence had been approved, the Court of First Instance could neither identify that Mr. Zhang was absent from work without good reason, nor identify that Mr. Zhang had any serious violation of company’s rules and regulations, therefore, the Court held that the termination of employment contract by the company is against relevant legal provisions”

As for the reinstatement, the Court of First Instance held that “The performance of employment contract should be based on mutual trust. Mr. Zhang confirmed that he negotiated with the company about the termination in December 2012, before the two parties had major disputes about the employment relations. In addition, the performance of employment contract has been in fact suspended for a relatively long period of time. Meanwhile, Mr. Zhang’s employment permit had also been cancelled. Therefore, the continued performance of the employment contract has become impossible. The Court of First Instance would not support Mr. Zhang’s request for reinstatement and labor remuneration compensation. But it should be noted that Mr. Zhang has the right to file a separate claim on financial compensation for wrongful termination.”

Property Consulting Company A refused to accept the Civil Judgment made by the Court of First Instance and lodged an appeal. The Court of Second Instance dismissed the appeal and upheld the original judgment.

4. Legal Risk

In accordance with Article 8 of Provisions on the Employment of Foreigners in China, “Prior to obtaining employment in China, a foreigner shall enter China with an employment visa (or in accordance with an agreement on mutual exemption of visas if there is such an agreement), and, after entering China, obtain an Employment Permit for Foreigners (hereinafter referred to as ‘employment permit') and a residence permit for foreigners, and then may he or she be employed in China.” Therefore, obtaining an employment permit for foreigners is a statutory condition for performing a foreign-related employment contract. A foreigner who does not have an employment permit is not the eligible subject of foreign-related employment contract. In the aforesaid case, after the property consulting company illegally terminated the employment contract, they instantly cancelled the employment permit of Mr. Zhang that was still valid then. Even though the court identified the illegality of termination of contract, the claim of Mr. Zhang to reinstate the employment relations could not be enforced, as the contract could not be performed if Mr. Zhang did not have the employment permit. Meanwhile, the employment permit can only be applied or cancelled by the employer, therefore, when it comes to the illegal termination of employment contract, the foreign employee is prone to be in a passive position.

In other similar cases, even if the court supported the claims of foreign employees for reinstatement, the reinstated term of employment contract would be the same as the expiry date of employment permit of foreign employees. In the case of Information Technology Company A vs. Mr. Leng, the company had signed an open-term employment contract with him. Later, the company terminated the contract illegally. As the company did not extend the employment permit for Mr. Leng that expired on 21^st February, 2014, the court adjudicated that the employment relations would be reinstated till the day of 21^st February, 2014. In the labor dispute case of Bank A vs. Mr. Wu, the court ordered to repeal the notice made by the bank on 30^th November, 2012 to terminate the employment contract, the employment relations between the parties would be reinstated till 30^th June,2013, as Mr. Wu’s employment permit expired on 30^th June,2013. The bank shall pay for labor remuneration and rental allowance of Mr. Leng during the period between 1^st December,2012 to 30^th June,2013.

5. Reminders of Legal Matters

Despite the difficulties for foreign employees to claim restatement in unlawful termination cases, the right to claim for damage is still guaranteed. As in the aforesaid judgment, the Court particularly pointed out that Mr. Zhang had the right to file a separate claim on financial compensation for unlawful termination. The rate for financial compensation shall be twice the average monthly salary of the employees in accordance with the Article 47 of the Labor Contract Law of the People's Republic of China.

In the case of Kennedy vs. Gas Company A, the foreign employee requested to alter the claim for litigation of continuing performance to financial compensation. The Court held that the altered claim was good for conflict resolution between the two parties and in conformity with the law, thus approved such request. Afterwards the court adjudicated that the employing unit shall pay the compensation to foreign employee in accordance with Article 47,48 and 87 of the Labor Contract Law of the People's Republic of China.

There is another exception. In accordance with The Administrative Measures for Entitlements of Foreigners with Permanent Residency in China, foreigners holding a valid Permanent Residence Certificate are not subject to the Employment Permit for Foreigners requirements. Thus, the difficulties for a foreign employee who has obtained the Permanent Residence Certificate to seek reinstatement when dismissed illegally would be significantly reduced. Take the labor dispute case between an ocean engineering company and Behnam for example, the foreign employee is Canadian and has a valid Permanent Residence Certificate of China, thus enjoys equal employee rights as a native in principle, and does not need an employment permit to attain employment in China. The court held that termination of employment contract was against the law. Upon the confirmation of the court, the foreign employee made clear that he requested the ocean engineering company to reinstate the employment contract rather than to pay the financial compensation. As there was no such circumstances that prevent the employment contract from continuing the performance, the court upheld the claim of the employee.

6. Conclusion

Foreign employees’ legal rights should be protected in China. If dismissed illegally or having other labor disputes, foreign employees could seek for professional help from lawyers to protect their legitimate interests and minimize economic losses through legal means.