Case Study: Unilateral Termination for Cause
Employee joined Business in Year 1 as a sales manager. In Year 2, employee entered into an agreement with his sister to purchase products from his sister’s company without prior notice to his employer. One year later, employer found the problem and rescinded the labor contract with employee because he violated the terms of the Employment Handbook.
In the resulting arbitration case, employee claimed that the rescission was an illegal termination. He requested the employer to indemnify compensation on the basis of his service period and an additional payment of one month’s wage since the employer did not give written notice to him 30 days in advance.
Employer believed that the rescission was legal under the Labor Contract Law of P.R.C. and a specific rule in its Employment Handbook prohibiting conflicts of interest without prior notification, and thus did not need to pay any compensation to him.
The Arbitrator held that the rescission of employee’s labor contract was lawful. A specific rule in the Employment Handbook prohibited his conduct, and according to Labor Contract Law of P.R.C. Article 39(2), the employer can rescind a labor contract due to the serious breach committed by the employee.
In this situation, the burden of proof was on the employer. employers should keep track of all evidence that may be useful and relevant for a unilateral termination. Here, the employer was able to provide adequate and relevant evidence to prove the employee’s misconduct and showed that the Employment Handbook was legal and valid. The employer followed proper procedures in implementing the Employment Handbook, and the employee had actually signed the Handbook, showing receipt and prior knowledge of the rules. The employer also followed the proper termination procedure in notifying and providing documentation to the labor union before it took action. Lastly, because this was a serious breach of protocol, unilateral termination is allowed.
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