Under what circumstances can employees be lawfully terminated pursuant to China’s Labor Contract Law?

An employer in China cannot unilaterally terminate an employment contract at-will or without fault, unless the termination falls under certain statutory grounds.

Pursuant to China’s Labor Contract Law, depending on the termination grounds, employers have different obligations with regard to both providing notice and severance.

There are three main circumstances where employees can be terminated without the employer having to provide notice or severance payment:

• During the employee’s probation period, the employee does not satisfy the conditions for employment that are written in the job description;
• The employee breaches the employer’s code of conduct, rules, and regulations (please note it needs to be specifically written in the staff handbook);
• The employee has criminal liability (not including administrative arrest/sanction unless specifically written in the staff handbook).

Under the following circumstances, the employer may terminate the employee with either 30 days written notice and/or severance equal to one month of the employee’s salary:  

• The employee is unable to work after a non-work related illness or injury. Upon expiration of the prescribed medical treatment period, the employee is unable to perform the original job, and the employee is unable to assume any other position as re-arranged by the employer.
• The employee is not capable of doing his/her job. Before the employee is terminated, however, the employer is required to provide the underperforming employee with another position and related training. The employer must make clear the expectations and responsibilities for the new position and conduct multiple performance reviews accordingly. If the employee is still unable to perform the job, the employee may be terminated. The whole procedure must be clearly noticed to the employee in advance.

Again, an employer must establish lawful grounds for termination and be able to provide evidence. Otherwise, the termination will be deemed unlawful. If deemed unlawful, compensation to the terminated employee may be mandated. 

For further information, please contact Ines Liu.