Labor Case Study: Navigating China’s Laws Surrounding Employee Termination During Probation

July 26, 2016 Posted by China Briefing Reading Time: 5 minutes

By Allan Xu Manager, Business Advisory Services
Editor: Alexander Chipman Koty
Dezan Shira & Associates, Shanghai

Although many employers in China know that the labor contract of an employee can be dissolved at any time during the probationary period, most are unaware of the restrictions governing this termination procedure. According to China’s labor laws, the ability to terminate a labor contract during the probationary period is limited to the specific circumstance “where it is proved, on the expiry of the probationary period, that a worker has failed to meet employment requirements”. In practice, this rule is endowed by the law as a right for the worker, and it is the employer’s burden to prove that the employee “has failed to meet employment requirements” if the employer intends to dissolve the labor contract during the probationary period. Here, a case involving this situation will be discussed, along with practical advice for managing employees during the probationary period.

Scenario

Mr. Qian signed a two year labor contract with a company as a project manager. The contract stipulated the probationary period of Mr. Qian as two months and did not provide any explicit employment requirements. Among the 60 projects he was managing, 18 were not completed and 25 needed to be further revised. Since Mr. Qian did not perform well and did not meet the expected targets, the company rescinded the labor contract with him after one month, declaring that he had failed to meet the employment requirements.

In response, Mr. Qian applied for arbitration. Because the labor contract did not list any specific employment requirements, Mr. Qian argued that he was terminated without grounds and was therefore entitled to compensation from the company for violating the contract. The labor disputes arbitration committee determined that the evidence submitted by the company was insufficient to prove the failure of Mr. Qian to meet the employment requirements and thus approved the claim of Mr. Qian for compensation.

Legal Grounds and Analysis

According to China’s labor contract law, an employer can terminate the labor contract with an employee within the period of probation if the employee cannot satisfy the employment requirements. However, the employer is obliged to provide relevant evidence to justify the termination, including the company’s employment requirements, the employee’s acknowledgement of these requirements, and an assessment of the employee’s performance during the probationary period. The employer must make the employment requirements clear to the employee during the recruitment process.

If the court or the arbitration committee considers the evidence of the employer insufficient, the employer might be required to pay compensation to the employee and the termination can be overturned. In this particular case, the company did not indicate any employment requirements in the labor contract with Mr. Qian, and also did not stipulate specific requirements during the probationary period. As such, the labor dispute arbitration committee deemed the company’s actions a violation of the labor contract and approved Mr. Qian’s claim for compensation.

Suggestions

From a legal perspective, there are no specific regulations on the standards and principles of “employment requirements”. Hence, the definition of “employment requirements” must be determined by the employer themselves, within the scope permitted by law and based on its practical situation.

Generally speaking, the professional abilities or skills required by a given position are a must-have for the employee during recruitment, and can be regarded as their “employment requirement”. However, it should be noted that the employer must provide the specific and feasible criteria for the “employment requirements” and clearly inform the employee of these requirements before signing the contract. The “employment requirements” can be included in the labor contract, employee handbook, or stipulated in a separate policy.

It is suggested that the acknowledgement receipt of the “employment requirements” be obtained from the employee in advance. If the employer intends to terminate the employee within the probationary period due to poor performance, the employer must bear responsibility for proving the employee’s failure to meet the stipulated employment requirements, such as through an assessment form. Otherwise, the claim for terminating the employee during the probation period based on dissatisfying employment requirements might not be approved by the court or arbitration committee.

About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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