Answer: The relationship between an employer and an employee often worsens before or after they end the employment. It is not uncommon that both parties accept the termination, but disagree on the cause: the employee may maintain that they were dismissed by the employer, and the employer may insist that the employee resigned. Both parties may stick to their own arguments, making it difficult to judge the truth.
Obviously, the legal consequences of different ways of termination are completely different. Needless to say, if the court finds that the termination of employment relationships was made by the employer, and ground of the termination is untenable, there will be serious consequences for the employer to pay punitive damages. If the court finds that the employee resigned, the employer bears no liability of punitive damages or whatsoever. Therefore, it is a very important issue to find how an employment relationship is terminated.
The current practices of the courts vary from different situations.
The first situation is termination with clear evidence, including clear terminating party, termination process, and relatively clear reasons. In this case, the court will generally judge on the basis of evidence such as resignation letters of employee, notices of termination issued by employers, and merits of each case. This is a relatively simple situation.
The second situation is unequivocal termination by mutual agreement, that is, termination proposed by employer and agreed by employee. For example, an employer persuades an employee to resign, and the employee subsequently submits resignation letter.1Guilin Suning Yunshang Sales Co., Ltd. and Zeng Liang Labor Dispute Second Instance Civil Judgment Guilin City Intermediate People’s Court of Guangxi Zhuang Autonomous Region Civil Judgment (2015) Gui Min Si Zhong Zi No.627. The employer persuaded the employee to resign because of the employee’s violation of company rules, and then the employee resigned, the court held that this was a mutual agreement to terminate the contract.This situation is also relatively simple, requiring only establishment of facts. It should be noted that employee¡¯s voluntarily proposing to terminate and employer subsequently agreeing upon the proposal, in principle, only constitutes a unilateral resignation of the employee, rather than termination by mutual agreement.
The third situation is the most difficulty situation: both parties dispute the cause of termination of employment relationship. Typically, employers claim employee¡¯s resignation or abandonment of their job, while employees assert employer dismissing them, and there is no evidence to prove either claim. In this case, the courts are likely to find, in compromise, a termination of employment contract by constructive mutual agreement between the two parties.2Ma Zhengcong, China Merchants Property Management Co., Ltd. Dongguan Branch Labor Dispute Retrial Review and Trial Supervision Civil Ruling Guangdong Provincial People’s High Court Civil Ruling (2018) Yue Min Shen No.117. “As both parties hold different opinions on the reasons for the termination of employment relationships, and there is no evidence to prove¡¡ this case is regarded as the termination of employment relationship by mutual agreement.” Huang Zhixian, Civil Ruling of Labor Dispute Retrial Review and Trial Supervision of Zhenmiao Hospital of Changfeng County, Civil Ruling of Anhui High Court (2020) Wan Min Shen No.732. Civil Ruling of the Supreme People’s Court of the People’s Republic of China (2016) S.F.M.J. No.35 in the employment contract dispute case of Liu Hanbo v. Linak Transmission Systems (Shenzhen) Co., Ltd. “The employee who returned hometown for the Spring Festival without asking for leave was an unauthroized absence, and he was refused to return to the employer after one month. The court held that this situation constituted termination of employment by mutual agreement with the employer’s proposal and the employee¡¯s consent.”
The fourth situation is that the two parties have been deadlocked and disputed repeatedly for a long time in the employment relationship, each sticking to its own argument, and finally ended the employment relationship. In this case, the courts are likely to find that the employment relationship is terminated by constructive mutual agreement between the two parties. A typical example is where employees have been waiting for work for a long time because of illness or work-related injuries and occupational diseases, and the two parties have repeatedly disputed.3Liaoning Dalong Gold Investment Co., Ltd. v. Gu Yingxue Labor Dispute Liaoning Provincial People’s High Court Civil Ruling (2014) Liao Shen Yi Min Shen Zi No.1293. Civil Ruling of Guangdong Provincial People¡¯s High Court on Labor Dispute Retrial Review and Trial Supervision of Zhuguang Street Community Health Service Center, Yuexiu District, Guangzhou (2017) No.3273. Ronglin Plastics (Fujian) Co., Ltd. and Sun Yang Labor Dispute Civil Judgment of Second Instance Civil Judgment of Fuzhou Intermediate People’s Court of Fujian Province (2019) Min 01 Min Zhong No.5328. Although the employer claimed that the employee resigned but failed to prove, the court found the termination of employment relationship by mutual agreement after three months of the employee’s resignation application.
The fifth situation is that both parties are at fault in the termination of employment relationship, and the courts, for the sake of fairness, determine that both parties have reached a constructive termination of mutual agreement. For example, in the case of Cai Wuqiang before Guangdong Provincial High Court in 2020, the employer did not dismiss but demoted the employee due to the latter’s serious violation of company rules. Four months later, the contradiction between the two parties became irreconcilable. The employer terminated the employee, resorting to the original violation of company rules. The court held that both parties were at fault in the case and that it was fair to find a constructive termination by mutual agreement.4Civil Ruling on Labor Dispute Retrial Review and Trial Supervision of Cai Wuqiang and China Resources Concrete (Zhanjiang) Co., Ltd. Civil Ruling of Guangdong Provincial People’s High Court (2020) Yue Min Shen No.8268. The employee forged the signature for false reimbursement, but the employer only demoted the employee, then the contradiction between the two parties continued, and the employer ultimately terminated the employee for serious violation of company rules four months later. The court held that both parties were at fault and found constructive termination of employment by mutual agreement.
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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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- 1Guilin Suning Yunshang Sales Co., Ltd. and Zeng Liang Labor Dispute Second Instance Civil Judgment Guilin City Intermediate People’s Court of Guangxi Zhuang Autonomous Region Civil Judgment (2015) Gui Min Si Zhong Zi No.627. The employer persuaded the employee to resign because of the employee’s violation of company rules, and then the employee resigned, the court held that this was a mutual agreement to terminate the contract.
- 2Ma Zhengcong, China Merchants Property Management Co., Ltd. Dongguan Branch Labor Dispute Retrial Review and Trial Supervision Civil Ruling Guangdong Provincial People’s High Court Civil Ruling (2018) Yue Min Shen No.117. “As both parties hold different opinions on the reasons for the termination of employment relationships, and there is no evidence to prove¡¡ this case is regarded as the termination of employment relationship by mutual agreement.” Huang Zhixian, Civil Ruling of Labor Dispute Retrial Review and Trial Supervision of Zhenmiao Hospital of Changfeng County, Civil Ruling of Anhui High Court (2020) Wan Min Shen No.732. Civil Ruling of the Supreme People’s Court of the People’s Republic of China (2016) S.F.M.J. No.35 in the employment contract dispute case of Liu Hanbo v. Linak Transmission Systems (Shenzhen) Co., Ltd. “The employee who returned hometown for the Spring Festival without asking for leave was an unauthroized absence, and he was refused to return to the employer after one month. The court held that this situation constituted termination of employment by mutual agreement with the employer’s proposal and the employee¡¯s consent.”
- 3Liaoning Dalong Gold Investment Co., Ltd. v. Gu Yingxue Labor Dispute Liaoning Provincial People’s High Court Civil Ruling (2014) Liao Shen Yi Min Shen Zi No.1293. Civil Ruling of Guangdong Provincial People¡¯s High Court on Labor Dispute Retrial Review and Trial Supervision of Zhuguang Street Community Health Service Center, Yuexiu District, Guangzhou (2017) No.3273. Ronglin Plastics (Fujian) Co., Ltd. and Sun Yang Labor Dispute Civil Judgment of Second Instance Civil Judgment of Fuzhou Intermediate People’s Court of Fujian Province (2019) Min 01 Min Zhong No.5328. Although the employer claimed that the employee resigned but failed to prove, the court found the termination of employment relationship by mutual agreement after three months of the employee’s resignation application.
- 4Civil Ruling on Labor Dispute Retrial Review and Trial Supervision of Cai Wuqiang and China Resources Concrete (Zhanjiang) Co., Ltd. Civil Ruling of Guangdong Provincial People’s High Court (2020) Yue Min Shen No.8268. The employee forged the signature for false reimbursement, but the employer only demoted the employee, then the contradiction between the two parties continued, and the employer ultimately terminated the employee for serious violation of company rules four months later. The court held that both parties were at fault and found constructive termination of employment by mutual agreement.