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The Use of “Employment Manuals” in Terminating Labour Relations

Date:2020-05-11 16:49:56

As a central tenet of the Labour Contract Law, termination of labour relations sparks fierce debate within the context of labour disputes. When unilaterally terminating an employment relationship, employers intone the magic formula ‘serious violations of internal rules and regulations’, a move that usually receives short rift from the courts. This is partly due to the employer’s intent, and partly due to their incorrect application of the “Employment Manual”.

1.    Instances of Incorrect Application of the “Emplo yment Manual” 

Article 4 of the Labour Law provides that employers shall establish and perfect a system of internal rules and regulations according to law, in order to protect the rights and obligations of workers. Employers often regulate internal discipline via the “Employment Manual” (the Manual), which they fashion in their own image and according to industry characteristics. In this way, we can consider the Manual to constitute part of the employer’s internal law. Yet, when it comes to implementing such ‘law’, employers run into the following problems:

A.    Improper Enactment

Article 4(2) of the Labour Contract Law provides that employers shall, when “enacting, amending or deciding upon rules and regulations concerning such matters as remuneration, work hours, holidays, safety and hygiene, insurance and welfare, employee training, discipline and norm management, or any such matters as may directly concern the rights of employees or other significant event”, engage in “equal negotiations with the labour unions, worker’s representatives, a meeting thereof or a discussion of all the workers and solicit plans and opinions therefrom.”

From the above, we can discern the following procedures which enterprises should follow in enacting rules and regulations: 1) it shall draft the rules and regulations; 2) it shall submit the draft either to a meeting of the workers’ representatives or all of the workers for discussion, whereupon proposals are put forth and opinions given; 3) it shall engage in discussions with the labour union or workers’ representatives on an equal footing; 4) it shall confirm and enact the relevant rules and regulations; 5) thus enacted, it shall publicly display the rules and regulations . These 5 ingredients are essential, the absence of any one of them liable to cause the Manual to become inoperable. In practice, courts are particularly seeking when examining the foregoing procedural requirements. For example, in the case of Liu vs Pengjiang District People and Machinery Automated Equipment Centre,1 the court found that the employer’s decision to dismiss the plaintiff was illegal because it could not prove that the Manual had been publicly displayed. Therefore, the court reasoned, its provisions did not apply to Liu.

B.    Illegal or Unreasonable Provisions

Article 38 of the Labour Contract Law provides that, where the employer’s internal rules and regulations breach applicable laws and regulations, with such breaches infringing upon the rights of workers, the latter may terminate the contract. Additionally, Article 80 provides that “where the employer’s rules and regulations concerning the employee’s rights are found to breach laws and regulations, the labour administrative department shall order their rectification and warn the employer accordingly; if harm is done to the employee, he shall be entitled to compensation.” One can therefore see that the Manual must comply with the law, for want of which it will not only lose effect but also expose the employer to administrative sanctions. Employers, often favouring the use of ‘performance-based dismissal’, have inserted a provision to the effect that failure to meet performance objectives is tantamount to incapacity. Such a reading of the Labour Contract Law is incorrect, and will be deemed to be of no effect due to non- compliance with the law.2

Unreasonable provisions within some Manuals have also resulted in a declaration of ineffectiveness. In the case of Zhejiang Putian Electronic Appliances Co. vs Dong,3 the employer provided in its “Regulations for the Administration of Awards and Punishments”: ‘persons who commit any of the following acts on company grounds shall be subject to dismissal without compensation: theft of company property or the property of others, organized gambling or fishing.” The court found against the employer on the grounds that equating fishing with grave breaches of the law such as theft or gambling is unreasonable, and deemed Dong’s dismissal illegal.

C.    Improper Use

In some circumstances an employer may well have complied with the procedural requirements in enacting their respective Manuals, but this does not absolve them of the duty of proof. When disputes do arise, employers must still prove that the alleged conduct satisfies the elements set out in the Manual, or risk losing the case. In the recent case of Carrefour Ltd (Tongzhou District, Beijing) vs Liu,4 although the employer was able to prove that Liu had contravened the rules and regulations, it was unable to prove that such breach met the standard required for dismissal.

2.    Instances of the Employee Manual Being Effectively Used

Despite many obstacles in its application, when correctly used the Manual is undoubtedly the best way to control risk. In light of this, a detailed Manual is indispensable when employers seek to terminate the labour relationship. In the case of Wei and Cao vs Foshan Pulihua Technology Ltd,5 the defendant provided that ‘if the employee refuses to comply with company arrangements after being spoken to, or if he has three serious breaches recorded against his name, he shall be subject to dismissal.” According to the “Employee Punishment Reporting Form” and audio recordings, the employer amply demonstrated that it had repeatedly spoken to the employee regarding his failing to comply with management instructions, and issued him with a written notice. Given this evidence, the court was satisfied that the dismissal was lawful.  One can therefore appreciate the importance of a clear and specific Manual in managing workers.

3.    Conclusion

As an expression of employer autonomy, the “Employment Manual” is apt to regulate and avoid labour disputes. Properly used, not only does it increase the propriety of management, but it can also offer the necessary clout in terminating labour relationships.
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