Answer: Under Chinese employment legislations and practice, an employer is entitled to transfer position of an employee by mutual agreement and under five other statutory circumstances.
Position transfer by mutual agreement may be the easiest and the most convenient way. According to the provisions of Article 35 of the Employment Contract Law, an employer can legally and effectively transfer the position of an employee after a negotiation and obtaining the employee¡¯s consent. Moreover, employers often stipulate in employment contracts or company rules that they have the right to transfer their employees to other specific roles or relevant roles, or do so based on the needs of business operation or management or under specific circumstances.
The other five statutory circumstances for position transfer are stipulated in the provisions of Article 40 and Article 41 of the Employment Contract Law. Employers may transfer positions of their employee under the following five exceptional circumstances.
The first situation is position transfer based on the employee’s physical or mental incompetence to work in their position after the expiration of the medical care leave (or the expiration of the paid work injury leave).We call it health incompetence. This is a lawful position transfer according to Article 40 (1). The health state in connection with the work capacity of the employee determines the availability of this type of position transfer. Whether pay cut is lawful in a position transfer is an interconnected issue with the lawfulness of position transfer itself, and it is often a matter of degree with uncertainty.1Civil Ruling on Labor Dispute Retrial Review and Trial Supervision between Liu Qi and Beijing Metro Operation Co., Ltd. the Second Branch, Civil Ruling of Beijing High Court (2019) Jing Min Shen No.1674. The court held that ¡°the employee could not return back to work upon expiration of medical care leave, and the employer conducting position transfer for him to a role with lower labor intensity is not a malicious demotion and wage cut.¡± The labor dispute appeal case between Zeng Hong and Shenzhen Long-distance Bus Passenger Transport Co., Ltd., the Intermediate People’s Court of Shenzhen City, Guangdong Province, Civil Judgment (2017) Yue 03 Min Zhong No.1039. In the case, the employee was unable to work as a driver after the expiration of the medical care leave, and the employer transferred him to a position with the same wage. The court held that the transfer did not reduce the treatment and was not insulting, and that the transfer was legal.For example, a reasonable position transfer due to an employee¡¯s health state may be rendered illegal due to an overly pay cut.
The second situation is the position transfer of ability-incompetent employees. Article 40 (2) allows employers to arrange training or position transfer for ability-incompetent employees. This is the incompetence due to employees¡¯ individual ability instead of their health state. We call it ability incompetence. Therefore, an employer intending this transfer must first prove that its employee is not competent for their job. Cases show that the most common situation is that employers failed in proving ability incompetence, resulting in illegal position transfer.2Guangzhou Yingda Imaging Equipment Co., Ltd. v. Mai Weiyu Labor Dispute Guangdong Provincial People¡¯s High Court Civil Ruling (2016) Yue Min Shen No.1990. The court found that the employer did not prove that the employee was not competent for the work or that the transfer did not substantially degrade the work conditions, so the position transfer was illegal.Employers proving ability incompetence often needs to refer to employees¡¯ job descriptions or company rules.
The third situation is the position transfer due to major changes in objective situation. According to Article 40(3), in case of major changes in objective situation on which an employment contract was based at the time of its conclusion, the employer must first negotiate with the employee for a changes of employment condition, including a position transfer, before it proceeds to terminate the employment contract. This is the rule under employment law allowing employers to transfer positions of employees in case of circumstance changes rendering the implementation of the roles unnecessary or unreasonable, so as to improve operational efficiency of the employers¡¯ businesses. As for how to identify a major change in objective situation, please refer to My employer terminates my employment contract on the ground of major changes in objective situation. Is it legal?
The fourth situation is the position transfer due to major changes in objective during economic redundancies. Article 41 (4) stipulates another ¡°major changes in objective situation¡±, on which the employment contract was based at the time of its conclusion and that is relevant business hardships, the employer, subject to statutory requirements, may lay off employees. Although the article does not mentioned the right of position transfer, we consider that the employer is certainly entitled to transfer position of the employee to relief the difficulties the employer faces before the ultimate redundancy. As for the circumstances and extent of major changes in objective situation during economic redundancy, please refer to My company is experiencing business hardship. Can we reduce workforce for survival?
The fifth scenario is the employer’s position transfer as agreed upon by both parties. Employers often stipulate in the employment contract or company rules that they have the right to reassign employees to specific positions, or that the employer may do so due to operational needs or other circumstances defined by the employer. The more explicit and reasonable the agreement on position transfers, the more legitimate and justifiable the position transfer is considered to be.
There are general substantive and procedural requirements to employers to legally transfer positions of their employees. Please refer to How can we legally transfer the position of an employee?
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
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- 1Civil Ruling on Labor Dispute Retrial Review and Trial Supervision between Liu Qi and Beijing Metro Operation Co., Ltd. the Second Branch, Civil Ruling of Beijing High Court (2019) Jing Min Shen No.1674. The court held that ¡°the employee could not return back to work upon expiration of medical care leave, and the employer conducting position transfer for him to a role with lower labor intensity is not a malicious demotion and wage cut.¡± The labor dispute appeal case between Zeng Hong and Shenzhen Long-distance Bus Passenger Transport Co., Ltd., the Intermediate People’s Court of Shenzhen City, Guangdong Province, Civil Judgment (2017) Yue 03 Min Zhong No.1039. In the case, the employee was unable to work as a driver after the expiration of the medical care leave, and the employer transferred him to a position with the same wage. The court held that the transfer did not reduce the treatment and was not insulting, and that the transfer was legal.
- 2Guangzhou Yingda Imaging Equipment Co., Ltd. v. Mai Weiyu Labor Dispute Guangdong Provincial People¡¯s High Court Civil Ruling (2016) Yue Min Shen No.1990. The court found that the employer did not prove that the employee was not competent for the work or that the transfer did not substantially degrade the work conditions, so the position transfer was illegal.