China Employment Law Network
Shanghai Business Lawyer
Section C: Termination of employment

• Since the introduction of the PRC Labor Contract Law in 2008, the perception is that it is very difficult to dismiss an employee in China, is this true?

Yes, it can be true. The PRC Labor Contract Law has created many more obligations for employers and there can be significant financial consequences of ignoring them. Therefore, employers must take more care when preparing employment contracts and when considering dismissals.

Employees are entitled to request verification from a third part of any decision in respect of amendment, warning, dismissal or termination of their employment contract; the arbitration tribunal as well as the court will review their case for free and if the employer is considered to have acted unfairly they will be required to pay compensation. 

If you are considering dismissing an employee and are not sure what to do, please contact us and we will be happy to help.

• Are there any circumstances in which an employer can terminate an employment contract immediately, without notice?

An employer may only terminate an employment contract without notice if the employee:
• Is proved, during the probation period, not to satisfy the conditions for  employment;
• Materially breaches the employer’s rules and regulations;
• Commits a serious breach  of duty, causing substantial damage to the employer;
• Establishes an employment relationship with another employer which  significantly affects his work with the first employer, and he refuses to rectify  the matter after it is brought to his attention;
• Deceives or coerces the employer into concluding or amending a contract; or
• Is the subject of criminal proceedings

In all of these circumstances, the burden of proof lies with the employer. Any evidence should be as strong as possible if it is to be used in Court.

• In what circumstances do employers have to pay compensation for terminating an employment contract?

Under the following circumstances, the employer should pay compensation for the termination of an employment contract:
• The employment contract is terminated by the employee, but due to the fault of  the employer;
• The employment contract is terminated by both parties by mutual agreement;
• The employment contract is terminated by prior notice issued by the employer;
• Lay-off (redundancy);
• The employment contract expires, unless the employer intends to extend the contract term, but the employee refuses to do so.

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