12 May, 2016
In April 2016, a Chongqing court dismissed an employee’s claim for severance on the basis that a workplace relocation within the same district did not constitute a breach of the employee’s employment contract.
The employer relocated its factory to another location which was about three (3) kilometers away from its original location. Both the factory’s new location and the original location were within the same district. The employee refused to relocate to the new location of the factory and terminated the employment alleging that the employer had failed to provide him with the working conditions stipulated in the employment contract. The employee brought a claim for severance on that basis.
The court concluded that the employer had not breached the employment contract, because it provided that the employee’s workplace was Chongqing. Given that both the new location and the original location were in Chongqing, the court found that the factory’s relocation did not substantially impact the employee’s commute, as the new location was very close to the original location. The employee’s claim for severance pay was thus dismissed.
Key Take Away Points:
In practice, companies may sometimes need to relocate for various reasons. Except for a few cities such as Shenzhen, most local regulations do not provide clear legal guidance as to when a company’s relocation would give employees the right to terminate employment and claim for severance pay. In such cases, courts would look into the circumstances of the relocation and exercise their discretion to determine whether the relocation causes a material impact on the employees or whether it materially changes the objective circumstances upon which the employment contracts were entered into. If the court finds that there has been a material impact then it would uphold the employees’ severance claims.
Employers should consider drafting employee work location provisions more broadly (but within reason) in their template employment contracts and should also take measures to reduce the impact a relocation may have on the employee’s commute, as this could assist the employer to defend against employees’ claim for severance pay should a relocation scenario arise.
For further information, please contact:
Jonathan Isaacs, Baker & McKenzie
jonathan.isaacs@bakermckenzie.com
