01 January 2014

Latest Case

Case No. 1: Li Yue vs. The Company — Judgment of second instance by the Beijing Higher People’s Court

[(2013) Gao Min Zhong Zi No.3148]

Key Points of the Judgment:

1. In case of a long-term mutually non-connection status, parties will no longer enjoy any rights or undertake any obligations under employment relationship;

2. Criminal punishment is a cause for suspension of employment. The employment should resume upon the release of employee.

Key Facts:

Li Yue began to work on October 1979, and was transferred to work for the appellee, The Company (the “Company”). In 1997, Li Yue caused millions of non-performing loan to company due to his operation against relevant policies. Li Yue started to be regularly absent from duties since June 1998 and has not been on service since November 1998. The Company ceased paying him salaries since November 1998.

In 2001, the Company was declared into bankruptcy procedures. During the procedures, the auditing authority discovered Li Yue’s operation in violation of the law and reported it to the police. On 11 September, 2002, Li Yue was arrested and subsequently convicted of dereliction of duty and was imposed a 3-year sentence, from 1 September, 2002 to 10 September, 2005. After his release, Li Yue submitted written claims to the Company respectively in 20 September, 2005; 4 April, 2006; 20 July, 2006, claiming for social insurance, housing fund, reemployment and payment interval. The Company neither replied his claims, nor made any decision to terminate or end the employment contract with Li Yue.

Afterwards, the Company allocated all the listed employees and had severance paid to them respectively according to the Company’s internal provisions entitled as the Diversion and Allocation Scenario, the termination date of employment contracts of all employees is 31 December, 2009.

Li Yue applied for the labor dispute arbitration on November, 2012, claiming for the payment of insurances and housing fund from 1998 to 2002 and from 2005 to 2011, which is rejected by the arbitral committee. The 2nd intermediate court ruled that the Company should pay as follows: (1) Living expenses for Li Yue from 1 September, 1998 to 10 September, 2002; (2) Severance package of for the ending of employment relationship and others.

Li Yue challenged this judgment and appealed to Beijing Higher People’s Court.

Judgment:

1. Confirming that the Company should pay Li Yue salaries from 11 September, 2005 to 11 December, 2009;

2. Confirming that the Company should pay severance package for the ending of the labor relationship with Li Yue.

Reasoning:

Li Yue started to work for the Company in October 1993, and established the employment relationship accordingly. During the employment, Li Yue was taken criminal action. After Li Yue was released, the Company had never made a decision to terminate or end the employment relationship with him. Besides, according to the Diversion and Allocation Program issued by the Company, the termination date of employment relationships between the Company and its employees was 31 December, 2009. Therefore, the employment relationship between Li Yue and the Company was ended on 31 December, 2009.

Moreover, although the employment relationship remained valid till 31 December, 2009, both parties, since September 1998, are in the mutually non-connection status, i.e. the employee did not provide services for the employer for a long term, while the employer did not pay any salaries and relevant benefits to the employee for the same period. So neither party would bear any rights and obligations provided by labor laws.

From 11 September, 2002 to 10 September, 2005, Li Yue was detained due to the dereliction of duty and the employment relationship between both parties was in suspension. But on 10 September, 2005, the suspension cause of the employment relationship disappeared after he was released, and he expressly claimed for his rights from the Company for three times. But the Company had not carried out any relevant actions to end the employment relationship, so the employment recovered.

Source: http://www.court.gov.cn/zgcpwsw/

KWM Comments: Employer and employee could be deemed as not enjoying rights and undertaking obligations under employment relationship, where employee has not provided service for his employer for a long term and the employer has not paid any remuneration and other benefits to the employee for a long term, i.e. the two parties are in a long-term non-contact status, as provided in Article 14 of the Meeting Minutes of the Seminar regarding Several Issues surrounding the Application of Laws on Labor Disputes promulgated by Beijing Higher People’s Court and Beijing Municipal Labor Dispute Arbitration Committee. In addition, a criminal conviction is a cause resulting in the suspension or termination of employment relationship. In the event that the employer fails to exercise its right to unilateral termination, the employment relationship between the parties would be deemed to be suspended. Upon elimination of such cause, the employment relation should be resumed.

Case No. 2: Wang Jie vs. Zhongsheng Jiaxin Investment (Beijing) Co. Ltd — Judgment of second instance byBeijing Third Intermediate People’s Court

[(2013) San Min Zhong Zi No. 00654]

Key Points of the Judgment:

1. In case of reinstatement after wrongful termination, when the employment contract expires, the employer should pay severance to the employee. The court did not support the 50% compensation if the employer failed to pay severance in a timely manner;

2. In case of reinstatement after wrongful termination, the employer should pay the salaries and bonuses during the period of arbitration and litigation but is not obligated to pay 25% extra compensation. If the employee claim the salaries during the period of arbitration and litigation when the employment contract expires, the statute of limitations should be counted as of the expiry of the employment contract;

3. Any new claims will not be dealt with by the court.

Key Facts:

Wang Jie joined Zhongsheng Jaixin Company (“Company”) on September 21, 2009, with his employment contract expiry date on November 20, 2011. On February 23, 2010, the Company terminated the employment contract with Wang Jie on the ground of dereliction of duty and double employment relationship. Wang Jie filed arbitration against the Company. After the whole arbitration and litigation process, Beijing Second Intermediate Court ruled that the Company withdrew the termination and reinstated the employment contract.

On November 20, 2011, the employment contract expired and the Company did not pay severance to the employee.

In February 2012, Wang Jie filed arbitration and claimed for salaries and bonuses for the period between September 14, 2010 and November 20, 2011, 25% extra compensation for the salaries between the period February 23, 2010 and November 20, 2011, severance for termination of employment, 50% extra compensation and appraisal cost during the arbitration procedure.

The first instance court did not deal with the claim for payment in lieu of notice, ruled in favor of Wang Jie’s claims for salaries and bonuses, as well as severance, and rejected Wang Jie’s other claims.

Both parties were dissatisfied with the judgment and appealed to Beijing Third Intermediate Court.

Judgment:

Beijing Third Intermediate Court upheld the original judgment.

Reasoning:

If the termination of employment is withdrawn, it should be regarded that there still existed employment relationship between the parties. During the period of arbitration and litigation, although the employee did not provide labor to the employer, it was attributable to the employer. Therefore, the employer should pay salaries to the employee for the period of arbitration and litigation based on the employee’s normal salaries when he worked. Moreover, if the employment contract expired and the employee claimed for salaries between the period of arbitration and litigation, the statute of limitations should be counted as of the expiry date.

If the employment contract expired and the employer decides to end the fixed-term employment contract, it should pay severance to the employee, unless the employee does not agree to renewal despite that the employer offers the same or better terms and conditions.

The 25% extra compensation for the salaries during the period of arbitration and litigation, as well as the 50% extra compensation for severance due to expiry of employment contract have no legal basis and should not be supported. The claim for payment in lieu of notice is an independent claim and should go through the pre-required arbitration procedure.

Source: http://www.court.gov.cn/zgcpwsw/

KWM Comments: Local practice varies regarding the application of 25% compensation across the country. According to this case, Beijing Third Intermediate Court did not support the 25% compensation during the period of the arbitration and litigation when the employment relation had been resumed.

Case No. 3: Court Ruled in Favor of Labor Bureau’s Rejection of Application for Identification of Work-Related Injury after the Expiry of Time Limit

Key Points of the Judgment:

Employees suffering work-related injury may apply for identification of work-related injury within one year after the occurrence of the injury, if the employer fails to apply for identification of work-related injury in a timely manner. The labor bureau will not accept application after the expiry of one year, unless the delay is due to the occurrence of force majeure.

Key Facts:

In February 2012, Mr. Yang work as steal fixer at the Suzhou construction site of Longxin Group, which contributed work-related injury insurance for Mr. Yang. On March 17, Mr. Yang crashed into a station wagon when he was riding a bike. He was injured and diagnosed as laceration of scalp and compression fracture of the tenth thoracic vertebra. The traffic accident report, issued by the local traffic and patrol police department, indicated that the driver of the station wagon was at fault, provided that the whole fact of this accident could no longer be testified.

On March 12, 2013, Mr. Yang filed a civil lawsuit with the court of Suzhou Industrial Park. The court ruled that the concerned traffic accident happens between a motor vehicle and a non-motorized vehicle, and since the driver of the station wagon was held at fault, it is presumed that he should undertake any and all civil liabilities consequently.

On October 8, 2013, Mr. Yang realized he was entitled to claim for work-related injury insurance, and submitted the application for work-related injury identification with the human resources and social security bureau of Haimen City. Upon the examination and review, the bureau held that such application was beyond the 1-year time limit stipulated by the laws and regulations. One week later, the bureau issued a letter entitled the Decision of Not Accepting the Application for Work-related Injury Identification. Mr. Yang challenged such decision and filed an administrative lawsuit with the court of Gangzha District, Nantong City.

The court ruled that, a work-related injured employee is entitled to apply for work-related injury identification on his own within one year from the date of injury, unless there is a force majeure causing delay to the application. If applying after the one-year time limit, labor and social security administrative department will not accept such application. In this case, the plaintiff, Mr. Yang, was the victim of a road accident in March 17, 2012, while his application was submitted to the Bureau of Human Resources and Social Security on October 8, 2013, which apparently exceeds the one-year time limit provided in paragraph 2 of Article 17 of the Regulations on Work-related Injury Insurance. Mr. Yang failed to provide evidence proving that the delay is due to force majeure circumstances, and the decision of the Bureau of Human Resources and Social Security is in line with relevant laws and regulations. Therefore the judgment dismissed the plaintiff's claim.

Mr. Yang challenged such judgment and filed an appeal with the competent intermediate court.

Judgment:

The intermediate court of Nantong City held that, in the trial of 1st instance, the facts are clear and the laws are applied properly. Thus the appeal is dismissed and the original verdict is sustained.

Court Reasons:

Paragraph 2 of Article 17 of the Regulations on Work-related Injury Insurance provides that injured employees, their immediate family members and the labor union is entitled to apply directly for work-related injury identification with labor and social security administrative department of the co-ordinate region where the employer is located, within 1 year from the date of the accident or the date when the occupational disease is diagnosed or appraised.

This provision provides a right rather than an obligation for injured employees and their immediate family members. For those who hesitate to exercise such right will bear the adverse consequence of the loss of rights accordingly.

The Regulations on Work-related Injury Insurance stipulates that the time limit for work-related injury application is 1 year, partially intending to facilitate the injured employees’ collection of relevant evidence and the protection of their legitimate rights and interests; and partially intending to urge applicants to promptly claim their rights within the specified time.

Source: People’s Court Daily

KWM Comments: The one-year time limit for applying for identification of work-related injuries as set out in the Provisions on Work-related Injury Insurance is neither the limitation for action nor the period during which a certain right is valid, thus there is a flaw in the wording of the judgment. In fact, failure to make an application within the one-year time limit in this case does not eliminate any of this employee’s right but subject the employee to some adverse consequences arising out of the administrative law. Notwithstanding the above consequences, the impacted employee may still be entitled to apply for the arbitration or file for a lawsuit in relation to the work-related injury benefits.

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In March 2019, King & Wood Mallesons (KWM) established the Belt & Road Center for International Cooperation and Facilitation (BRCICF).

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