Pandemic-related Labor Dispute Cases Released in China

Recently, the High People's Courts of Tianjin, Jiangsu and Guangdong in China released the top ten typical labor dispute cases of 2021 in their respective jurisdictions. We hereby summarize the four pandemic-related cases for reference.

Tianjin: employer’s unilateral adjustment of job position due to the pandemic shall be both legal and reasonable

According to the relevant governmental pandemic prevention and control requirements, an airline services company is not allowed to assign employees, who are not vaccinated, to work at airport terminals. Employee X was not vaccinated for personal reasons. The airline services company negotiated with X and proposed two solutions: one solution was to adjust the workplace to a sales store with no change in work content and no significant change in remuneration; the other solution was vaccination. The parties failed to agree on the position adjustment although after written and oral consultations. The airline services company then sent a written notice to X informing that X should work in the adjusted position by a specified deadline, otherwise X would be considered absent from work without due cause and the company would deal with the situation according to its rules. As X failed to come to the position by the deadline, the airline services company sent a notice to X to terminate the labor contract immediately on the ground that X was absent from work without due cause for more than two consecutive days and seriously violated the company’s rules. Later, X requested for labor dispute arbitration and filed a lawsuit, claiming compensation for illegal termination of labor contract, etc.

The competent court held that the airline services company adjusted the job position of X during the special period of the Covid-19 pandemic prevention and control, and airport terminals as a place with a higher risk of infection were the key target of prevention and control. As X was not vaccinated for personal reasons, whether from the perspective of X’s personal health or the overall pandemic prevention, X was no longer qualified to work at the airport terminal. The airline services company had adequately consulted with X regarding the position adjustment. Before and after the adjustment there was no significant change in remuneration and no adverse change in labor conditions. Therefore, the position adjustment had no material adverse impact on the performance of the labor contract, conformed to the objective circumstance and was reasonable. X failed to obey the reasonable arrangement of the employer and did not come to the position as requested, which seriously violated the company's rules. Therefore, the airline services company was entitled to terminate the labor contract according to its rules, and X's claim for compensation for illegal termination of labor contract was not supported.

Practice Notes: When reviewing the legality of unilateral job position adjustment by an employer, labor arbitral tribunals and courts will consider not only whether the adjustment itself conforms to the rules, meets the objective needs of production and operation, provides basically equivalent remuneration level before and after the adjustment, is discriminatory and insulting or violates the law, but also whether the employer has objective and good reasons for making such adjustments. Labor arbitral tribunals and courts will protect the rights and interests of employees in accordance with the law while carefully considering the independent operation of the enterprises.

Therefore, in practice, employers should:

• consider entering agreements and/or adopting provisions for position adjustment in labor contracts and/or company’s rules;
• on a case-by-case basis, adequately evaluate the necessity, effectiveness and reasonableness of position adjustment, avoid discriminatory, humiliating adjustment and inappropriately adverse change to labor compensation and conditions, as well as keep evidence in this regard accordingly;
• consult with the affected employee on an equal and fair basis, seek to reach a written agreement as far as possible, and keep evidence in this regard accordingly;
• after consultation notify the affected employee in writing of the decision on position adjustment, the specific arrangements with a deadline and the consequences of non-compliance with the adjustment without due cause, and keep the evidence of service of such notice; and
• handle immediately in accordance with laws, regulations and rules, should the employee unreasonably disobey the arrangements, and keep evidence in this regard accordingly.

Tianjin: employee may be dismissed for failure to follow his employer's pandemic prevention and control requirements

A service company decided to give a formal warning to its restaurant manager, employee X, for failure to manage the restaurant properly. Shortly after that, X interviewed and recruited Y to join the restaurant. The service company argued that X’s placement of the new employee on the job without nucleic acid testing and a 14-day quarantine violated both the company's rule of not recruiting new employees during the pandemic and the pandemic prevention and control policies. X violated the work discipline again during the disciplinary period and should be dismissed according to the company’s rules. Therefore, the service company dismissed X on the ground that X had materially violated the company’s rules. X requested for labor dispute arbitration and filed a lawsuit, claiming that the labor contract was terminated illegally and demanding to continue the performance of the contract.

The competent court held that according to the requirements of the competent center for disease control and prevention, the service company made specific arrangements to prevent and control the pandemic. Such arrangements required the suspension of onboarding of all new employees, the mandatory nucleic acid testing and 14-day quarantine of all employees before returning to work. X, as the head of the restaurant, was responsible for the recruitment, use, adjustment and dismissal of the relevant personnel and should have implemented the company’s pandemic prevention and control requirements. After being given a formal warning, X hired a new employee without approval, His behavior violated the pandemic prevention and control requirements. X failed to implement the requirements of nucleic acid testing and 14-day quarantine, which was another violation of discipline. The service company’s termination of the labor contract with X in accordance with the company’s rule was legal. Therefore, X's request to continue to perform the contract was not upheld by the court.

Practice Notes: If an employee seriously violates the rules of his/her employer or commits a gross negligence of duty, causing significant damage to the employer, the employer is entitled to immediately terminate his/her labor contract for cause without paying any severance. However, in view of its heavy statutory burden of proof, in practice the employer should consider:

• including in its rules as full, detailed, legal and reasonable as possible a description of the circumstances in which violations and failures leading to an immediate dismissal;
• ensuring that its rules are formulated, adopted and issued in accordance with the statutory procedure of democratic consultation with employees set forth in the Labor Contract Law; and
• conducting prompt investigation, thorough evidence collection and compliant handling of violations and misconduct by employees.

Jiangsu: employer may terminate the labor contract if employee fails to faithfully report her trip during the pandemic prevention and control period

During the pandemic prevention and control period, a female employee, X, of a telecommunication company went abroad during pregnancy for delivery, but concealed this by falsely issuing a sick leave note. When the telecommunication company was required by authorities to do the epidemiological investigation regarding its personnel in accordance with the Covid-19 pandemic prevention and control requirements, X continued to conceal her overseas trip for delivery. The telecommunication company terminated the labor contract with X with immediate effect on the ground that X applied for sick leave by falsely issuing a sick leave note and repeatedly filled in false information to conceal her overseas trip. X filed a lawsuit after labor arbitration, claiming compensation for the alleged illegal dismissal.

The competent court held that X should actively cooperate with the national pandemic prevention and control requirements and inform the telecommunication company truthfully of her overseas trip. During the pandemic prevention period, X repeatedly filled in false information and provided a false sick leave note, which not only seriously violated the company’s rules, but also caused a major error in the pandemic prevention statistics of the telecommunication company. As X violated the governmental pandemic prevention requirements and endangered the pandemic prevention, the telecommunication company was entitled to terminate the labor contract. Therefore, the court ruled against X.

Practice Notes: Among others employers may process employees' personal under the following circumstances:

• if it is necessary for the fulfillment of the labor contract or for the implementation of human resources management in accordance with the labor rules established according to law and the collective contract concluded according to law;
• if it is necessary for the performance of the statutory duties or obligations; or
• if it is necessary to respond to a public health emergency or to protect the life, health and property safety of employees in case of emergency, etc..

However, employers have to handle employees’ information legally, justifiably, necessarily and in good faith. The processing of personal information shall have a clear and reasonable purpose and shall be directly related to the purpose of processing and in a manner that has the least impact on the rights and interests of the data subject. The collection of personal information shall be limited to the minimum extent necessary to achieve the purpose of processing, and personal information shall not be collected excessively.

Subject to the above, if the employee still refuses to cooperate or even deliberately provides false information, the employer may discipline him/her correspondingly according to the relevant laws, regulations and company’s rules, and keep all relevant evidence.

Guangdong: employer may not terminate the labor relationship due to employee’s part-time self-help actions during the production stoppage caused by the pandemic

A textile company arranged for employee X to take a leave of several months during the production stoppage caused by the pandemic and paid X at 80% of the minimum wage according to the relevant local regulations. During this period, X worked part-time with a third party and had social insurance contributions made there. The textile company discovered the above situation and sent a notice to X asking X to correct the situation immediately or assume the consequences. After the leave, X wanted to return to work at the textile company, but the textile company refused to arrange work on the ground that it had already terminated the labor relationship with X. X requested for labor arbitration and asked the textile company to pay compensation for illegal termination of labor contract.

The competent court held that the textile company arranged for X to take leave for nearly half a year due to the pandemic, which had a serious impact on X's life. The labor contract between the parties could not be performed normally due to the employer's such arrangement. The fact that X temporarily worked part-time at a third party during the leave to bridge this special period would not have any impact on X's work at the textile company. Therefore, the textile company’s refusal to arrange work after X’s return on the ground that it had already terminated the labor relationship with X was lack of basis, and should assume the corresponding liabilities to X.

Practice Notes: When it is impossible to properly perform the labor contracts for reasons not attributable to employees (e.g., due to pandemic prevention and control measures), employers may consider among others:

• arranging for the employees to work at home;
• arranging for the employees to take paid or unpaid leave,
• adjusting job positions and remuneration;
• stopping operation/production and only paying local basic living expenses fee after the first payment cycle;
• suspending labor relationship, or even
• terminating labor contracts in accordance with the Labor Contract Law.

However, all of the above measures are directly related to the interests of employees and the performance of labor contracts. To be on the safe side and to avoid potential disputes, it is recommended that on a case-by-case basis employers should consider either reaching a detailed written agreement with the affected employee or making/adopting relevant company’s decisions, rules and/or policies through the statutory process of democratic consultation with its employees.