Answer: The Employment Contract Law and the Labor Law both stipulate that employer can terminate the employment contract of an employee who is under criminal measures according to law. The aforementioned phrase, “under criminal measures according to law”, includes the following situations: being sentenced to fixed-term imprisonment (including those on suspension) by the courts, under criminal detention, being discharged of conviction by court, and being discharged of prosecution by procuratorate.1 Laobufa 11995 No.309, the Opinions on Several Issues Concerning the Implementation of the Labor Law of the People’s Republic of China. Article 29. “If the employee is convicted of criminal liability according to law, the employer may terminate the employment contract in accordance with Article 25 of the Labor Law. Being convicted of criminal liability according to law refers to: being exempted from prosecution by the people’s procuratorate, being sentenced to criminal punishment by the people’s court, or being exempted from criminal punishment according to Article 32 of the Criminal Law. If a worker is sentenced by a people’s court to criminal detention or a suspended sentence of fixed-term imprisonment of not more than three years, the employer may terminate the employment contract.” [/notes]Employers do not need to pay economic compensation to terminate employees’ employment for these reasons. This is similar to the situation of terminating employees who seriously violate company rules.
During the period when an employee’s personal freedom is restricted by the police or the procuratorate due to a suspected crime, their employer may suspend the implementation of the employment contract without paying wages, and may suspend the contribution of social insurance at the same time. If the investigation transpires the employee being innocent, the employee may file a state compensation lawsuit for wages or other losses.2Laobufa (1995) No.309, the Opinions on Several Issues Concerning the Implementation of the Labor Law of the People’s Republic of China. Article 28. “If a worker is under confinement review, detention, or arrest by the relevant authorities for suspected crime, the employer may temporarily suspend the implementation of the employment contract with the worker during the period when the worker’s personal freedom is restricted. During the period of temporary suspension of the implementation of the employment contract, the employer shall not assume the corresponding obligations stipulated in the employment contract. If a worker proves to have been wrongly restricted in their personal freedom, he may claim compensation from the relevant departments in accordance with the State Compensation Law for the loss of the worker during the period of temporary suspension of the implementation of the employment contract.”
It should be noted that if the employee is under criminal measure but the employer does not terminate the employee’s employment contract, the employment relationship between the two parties still exists, and the employer should still contribute to their social insurance while the employee is in detention or serving their sentence.3Hegang Gongchuang Re-employment Service Co., Ltd., Chen Xiaolei Labor Dispute Civil Judgment of Second Instance Heilongjiang Hegang Intermediate People’s Court Civil Judgment (2022) Hei 04 Min Zhong No.261. “The Court holds that, according to Article 39 of the Employment Contract Law, if the employee is convicted of criminal liability according to law, the employer may terminate the employment contract. However, it cannot be considered that the employment contract is terminated naturally after the employee is convicted. The employer must serve the notice of termination of the employment contract to the employee and fulfill the obligation of notification in time. Otherwise, the employee still maintains employment relationship with the employer, and the employer should contribute to social insurance and provident fund for the employee.”In addition, even if employees are convicted, the employer has the obligation to properly keep the personnel files of the employees.4 Guo Engui and Dalian Dyeing and Chemical Group Co., Ltd. Civil Judgment (2020) Liao 02 Min Zhong No.5245 of the Intermediate People’s Court of Dalian City, Liaoning Province. Article 7 of the Personnel Files Law of the People’s Republic of China, “Personnel files departments and their workers are responsible for keeping the personnel files and supervising and guiding the work related personnel files of their organisations.” Article 18 of the Provisions on Management of Employee’s Personnel Files (LaoLiZi (1992) No.33) stipulates: “When an enterprise’s employee is transferred, resigns, terminates their employment contract, or is dismissed, the employer to which the employee belongs shall transfer their personnel files to their new employer or the labor (organization and personnel) department of the street office where their registered permanent residence is located within one month. If an employee is punished by labor education or labor transformation and their former employer is going to employ them in the future, their file shall be kept by their former employer. The employer has the obligation to properly keep the employee’s files. Even if the employee is dismissed, the employer should transfer the files out within the prescribed time limit. Therefore, the court of the fist instance rejected the the defendant’s claim that it has no obligation to keep the plaintiff’s personnel fil because the plaintiff was convicted of criminal liability and was dismissed.”Finally, if the employee’s criminal conviction or related criminal liability is finally revoked and the employee is found innocent, the employer shall reinstate the employment relationship,5Civil Ruling of the Supreme People’s Court (2012) Min Zai Shen Zi No.104, Huojia County Power Supply Co., Ltd. V. Lou yuanwei Labor Dispute Retrial.unless the employment relationship cannot reinstate or both parties have accepted the fact that the employment relationship has been actually terminated.6The labor disputes between the retrial applicant Zhai Liujun and the respondent Pingdingshan Tian’an Coal Industry Co., Ltd., Henan Provincial People’s High Court Civil Ruling (2013) Yu Fa Li Er Min Shen Zi No.01984. In the case, the employee’s criminal judgment was revoked, but the court took into account that the employee had received a one-off work injury medical allowance. Therefore, it is concluded that both parties have accepted the fact that the employment relationship has been terminated subjectively and objectively.
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- 1Laobufa 11995
- 2Laobufa (1995) No.309, the Opinions on Several Issues Concerning the Implementation of the Labor Law of the People’s Republic of China. Article 28. “If a worker is under confinement review, detention, or arrest by the relevant authorities for suspected crime, the employer may temporarily suspend the implementation of the employment contract with the worker during the period when the worker’s personal freedom is restricted. During the period of temporary suspension of the implementation of the employment contract, the employer shall not assume the corresponding obligations stipulated in the employment contract. If a worker proves to have been wrongly restricted in their personal freedom, he may claim compensation from the relevant departments in accordance with the State Compensation Law for the loss of the worker during the period of temporary suspension of the implementation of the employment contract.”
- 3Hegang Gongchuang Re-employment Service Co., Ltd., Chen Xiaolei Labor Dispute Civil Judgment of Second Instance Heilongjiang Hegang Intermediate People’s Court Civil Judgment (2022) Hei 04 Min Zhong No.261. “The Court holds that, according to Article 39 of the Employment Contract Law, if the employee is convicted of criminal liability according to law, the employer may terminate the employment contract. However, it cannot be considered that the employment contract is terminated naturally after the employee is convicted. The employer must serve the notice of termination of the employment contract to the employee and fulfill the obligation of notification in time. Otherwise, the employee still maintains employment relationship with the employer, and the employer should contribute to social insurance and provident fund for the employee.”
- 4Guo Engui and Dalian Dyeing and Chemical Group Co., Ltd. Civil Judgment (2020) Liao 02 Min Zhong No.5245 of the Intermediate People’s Court of Dalian City, Liaoning Province. Article 7 of the Personnel Files Law of the People’s Republic of China, “Personnel files departments and their workers are responsible for keeping the personnel files and supervising and guiding the work related personnel files of their organisations.” Article 18 of the Provisions on Management of Employee’s Personnel Files (LaoLiZi (1992) No.33) stipulates: “When an enterprise’s employee is transferred, resigns, terminates their employment contract, or is dismissed, the employer to which the employee belongs shall transfer their personnel files to their new employer or the labor (organization and personnel) department of the street office where their registered permanent residence is located within one month. If an employee is punished by labor education or labor transformation and their former employer is going to employ them in the future, their file shall be kept by their former employer. The employer has the obligation to properly keep the employee’s files. Even if the employee is dismissed, the employer should transfer the files out within the prescribed time limit. Therefore, the court of the fist instance rejected the the defendant’s claim that it has no obligation to keep the plaintiff’s personnel fil because the plaintiff was convicted of criminal liability and was dismissed.”
- 5Civil Ruling of the Supreme People’s Court (2012) Min Zai Shen Zi No.104, Huojia County Power Supply Co., Ltd. V. Lou yuanwei Labor Dispute Retrial.
- 6The labor disputes between the retrial applicant Zhai Liujun and the respondent Pingdingshan Tian’an Coal Industry Co., Ltd., Henan Provincial People’s High Court Civil Ruling (2013) Yu Fa Li Er Min Shen Zi No.01984. In the case, the employee’s criminal judgment was revoked, but the court took into account that the employee had received a one-off work injury medical allowance. Therefore, it is concluded that both parties have accepted the fact that the employment relationship has been terminated subjectively and objectively.