26 August, 2016
Local courts in Beijing and Shanghai have recently set out their observations of employment cases and major employment law issues over the past year. We summarise their views below, which are likely to be indicative of key themes going forwards given the strategic importance of both Beijing and Shanghai.
Beijing Court's Observations
The following observations and positions were issued by the Chaoyang District Court in Beijing.
Key figures and observations
- employment cases have been increasing; the court handled over 5,000 employment cases in 2015.
- over half of the claims in 2015 were brought by younger employees – those who were born in 1980s or 1990s.
- most employment claims in 2015 were related to salary, overtime payments and economic compensation issues.
- aroun 80% of the employee claims in 2015 were upheld by the court.
- around 70% of foreigner-related employment cases in Beijing involved foreigners who were senior management officers.
Common employment law issues
- an employer may not terminate an employee on the ground of not disclosing his/her marriage status to the employer. An employer may not rely on such non-disclosure to terminate the employee on the ground of fraud when entering into the employment contract.
- internal business restructuring is not a"material change in objective circumstances" (which is a statutory ground for termination) if such restructuring is not due to factors beyond the employer's control. The court has restricted the application of this ground.
Specifically, the following elements must be fulfilled for an employer to claim that a "material change in objective circumstances" has occurred:
- the change should be substantive and objective;
- the change should be unforeseeable when the parties entered into the employment contract;
- the change is not attributable to the parties to the employment contract; and
- the employment contract can no longer be performed by the parties due to the change.
Shanghai
The following observations were issued by the Pudong New Area Court in Shanghai.
Key figures and observations
- most employment claims in 2015 were related to employment contract issues (especially wrongful dismissal claims), salary claims and economic compensation.
- there has been an increasing number of high value claims over RMB 1 million.
- typical employment issues attributable to employers include: (i) delayed payment or non-payment of bonus or commissions to employees; and (ii) unilateral change of employee positions.
- typical employment issues attributable to employees are the providing of false details regarding previous working experience, qualifications or salaries when applying for a new job. The court considers that employers are entitled to terminate the employment of such employees if they have violated of the principle of good faith or engaged in fraud when entering into an employment contract.
Comments
The court's observations and positions give rise to some interesting reflections for employers:
- in general, the number of employment claims and the value of claims in Beijing and Shanghai has increased, meaning that the workforce is getting more litigious.
- the Beijing court tends to be more protective of employees in employment cases and interpret termination grounds in a restrictive manner that tends to favour employees.
- most of the employment claims in Beijing and Shanghai relate to monetary claims for compensation, bonuses, salary and economic compensation. Employers should be compliant with the statutory requirements in relation to amounts to and keep robust records of such payments to mitigate risks.
- employers should review the grounds for termination of employees carefully and comply with statutory requirements to mitigate risks of wrongful dismissal claims.
- employers should always keep an eye on local practice, as different local courts can take different positions on the same employment issue.
For further information, please contact:
Nanda Lau, Partner, Herbert Smith Freehills
nanda.lau@hsf.com
