Several days ago, one of our corporate clients came to me suggesting that the company would like to fire one of its employees due to the absence for 3 days in a single month without reason. The client further proved that the company has formulated the Employee Handbook with all of its employees in which there is a provision providing that “the Company may unilaterally cancel the labor contract with any employee, who is absent from work for 3 days without justified reasons during the term of the Labor Contract.” However, when we obtained the specific Labor Contract concluded between the Company and the employee, we found an article that stated ”the Company may cancel this Contract if the employee is consecutively absent from work for more than 3 days”.
Obviously, the above mentioned two provisions are different from each other. Can the company fire such employee based on the provisions in the Employee Handbook? As China lawyers, we would not advise the company to do so. Although the company as the employer can prove that such Employee Handbook was formulated through democratic procedures and had been formally announced to employees in accordance with the requirements of China laws and relevant judicial interpretations, and it seems like the employer would be justified in relying on the Handbook to terminate this employee, one must tread lightly.
China law does allow courts to use a company’s legitimate internal rules to resolve labor disputes. However, there are also provisions in the law which allow an employee to choose between applying provisions of the Employment Agreement, or the Employee Handbook in the event these documents have conflicting provisions.
Therefore, it would be risky for the Company to terminate the current labor contract with this employee based on the provisions in Employee Handbook, as the provisions in labor contract shall prevail in case there is dissatisfied with Company’s decision to terminate the Employment Agreement and brings the case to court requesting to apply the labor contract to try the case, the court will definitely support the employee’s claim, and the Company then is likely to be found liable for its unilateral cancellation of the labor contract and will be responsible for monetary compensation to the employee as specified in the law.
China companies should their company handbook and other internal rules or regulations to ensure they are aligned with the company’s current Employment Agreements. In case there are any discrepancies, timely adjustments made by company’s China lawyer will work to avoid the uncomfortable situation the surprised employer found itself in above.