Dissolving of Open-ended Employment Contract
The newly ratified “Open-ended employment contract” is undoubtedly a solemn concern for employers and raises serious implications for the culture of employment in China. Among the concerns of employers is the worry about whether or not they can dismiss an unsuitable employee, given the context of the open-ended employment contract. This article will explore this problem through study of an actual case.
Case Brief:
Mr. Miao signed an open-ended employment contract with a medical instruments company on July 1 1996. In January this year, Mr. Miao was put on trial for intentional injury. Finally, he was sentenced to 1 year in prison but reprieved by one year and a half years. After trial, the medical instruments company informed Mr. Miao of a rescinding open-ended employment contract. Mr. Miao had thought that his employment contract was open-ended and that he could still go to work everyday during the reprieved period even though he was sentenced because of intentional injury. Therefore, Mr. Miao disagreed to rescind the contract.
This Case Raises to Two Distinct Issues:
1. Whether an open-ended employment contract can be dissolved;
2. Whether or not an employment contract can be rescinded during the reprieved period.
Open-ended Employment Contract Can Be Dissolved.
Contrary to prevalent belief that open-ended employment contract guarantees an absolutely interminable lifelong secure job or position, thus creating a neo-“Iron Rice Bowl,” the new implementing regulation of employment contract law actually sets forth 14 circumstances under which the employer can dissolve the open-ended contract.
(1) The Employer can rescind the contract upon reaching a negotiated consensus with the employee;
(2) The employee is proved during the probation period not to satisfy the conditions for employment;
(3) The employee materially breaches the employer’s rules and regulations;
(4) The employee commits serious dereliction of duty or practices graft, causing substantial damage to the employer;
(5) The employee has additionally established an employment relationship with another employer, which materially affects the completion of his task with the initial employer, or he refuses to rectify the matter after the issue is brought his attention by the initial employer;
(6) The employee uses such means as deception or coercion, or takes advantage of the employer’s difficulties or handicaps to conclude an employment contract or to make an amendment thereto that is contrary to the employer’s true intent;
(7) The employee has his criminal liability pursued in accordance with the law.
(8) After the set period of medical care for an illness or non-work-related injury, the employee can engage neither in his original work nor in other work arranged for him by the employer;
(9) The employee is incompetent and remains incompetent after training or adjustment of his position;
(10) A major change in the objective circumstances relied upon at the time of conclusion of the employment contract renders it non-performable and, after consultations, the employer and employee are unable to reach agreement on amending the employment contract;
(11) The enterprise is restructuring pursuant to the Enterprise Bankruptcy Law;
(12) There are substantial difficulties in production and/or business operations;
(13) The enterprise switches production, introduces a major technological innovation or revises its business method, and, after amendment of employment contracts, still needs to reduce its workforce;
(14) Another major change occurs in the objective economic circumstances relied upon at the time of conclusion of the employment contracts, rendering them non-performable at the present.
In Mr. Miao’s case, he was pursued for criminal liabilities, which just falls into the 7th condition of the 14 circumstances. Thus, the employer can rescind the employment contract even without paying any economic compensation.
Reprieved Person Is also the Criminal.
According to Chinese Criminal Law, reprieve is a consequence of being charged for criminal liability; therefore, the person reprieved is still considered a criminal. Thus, the rescission of contract by the medical instruments company is legal and reasonable.
In Conclusion, the differences between fixed-term and open-ended employment contract is that the former has a definite ending date but the latter does not. Nevertheless, upon qualification for certain legal conditions aforementioned, open-ended employee contracts still can be rescinded. Additionally, if the employer wants to dismiss an employee under an open-ended employment contract even without any legal reasons, it may be possible as long as the employer pays enough economic compensation and fines in accordance with laws and regulations.
Allen & John Law Firm
By Ivy Hou
Legal Assistant
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