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Ten Typical Cases of Labor Disputes With Senior Executives (Ⅸ)

2021-04-06

On December 4, 2020, the Beijing Intermediate People’s Court No. 1 held a press conference to inform of labor disputes involving senior executives in recent years and issued the "Beijing’s Ten typical labor dispute cases." River Delta Law Firm conducted a comprehensive interpretation of the ten major cases and put forward corresponding management suggestions for employers.

Case 9: Resignation of Senior Executives With Consent is Effective
 
Introduction
On December 1, 2008, Luo joined the company as General Manager. Luo is also a shareholder and member of the Board of Directors of the company. On March 10, 2018, the company held a Board of Directors meeting and Luo’s requests to resign as General Manager was approved. On March 12, the Board of Directors issued a Personnel Order to confirming the approval. Subsequently, the company took back Luo's office computer, and cancelled his access card and WeChat group permissions. Luo claimed that he resigned from the position based on the request of the Chairman, and that it was not an expression of his intention to terminate the labor relationship. Later, Luo went to the court to request for the termination to be deemed as illegal. After the trial, the court held that Luo's resigned as General Manager and obtained consent, the legal effect of the termination of the labor contract occurred, and the company did not illegally terminate the labor contract.
 
Judge Interpretation
The position of the worker determines the core elements of the labor relationship such as the job content and labor remuneration. Obtaining, performing and discipline of the position are important indicators for judging the establishment, conduction, and termination of labor relations. The resignation of the Senior Executive is a release of their own position, and neither the company nor the Senior Executive have reached a consensus on modifying or concluding a new labor contract. The resignation of the Senior Executive will inevitably lead to the legal effect of the termination of the labor contract.
 
Lawyer's suggestions
The lawyer believes that the focus of the case lies in the relationship between Luo's resignation as General Manager and the dissolution of labor relations. From a legal perspective, Luo's resignation from the position of General Manager and the approval of the Board of Directors is an act of dismissing Senior Executives in accordance with the Company Law. This act is indeed different from the act of rescinding the labor contract in accordance with the labor law. But on the other hand, the job position is closely related to the rights and obligations of labor relations, and determines the core elements of labor relations such as work content and labor remuneration. The rights and obligations of the labor relationship between the two parties in this case have been specified and are inseparable from Luo's position. That is, Luo's resignation of sole position resulted in the simultaneous and identical treatment of the labor relation.
However, in judicial practice, there are different views on whether the dismissal of Senior Executives by the Board of Directors will inevitably lead to the termination of labor relations. Its typical representation is the labor dispute case Wang Zhuo v. Shanghai Jahwa. In this case, Shanghai Jahwa was a well-known listed company, and Wang Zhuo was the former Senior Executive General Manager. The Board of Directors dismissed Wang from the position of General Manager. However, Wang advocated that the dismissal of the General Manager position does not automatically terminate labor relationship, and therefore the termination is illegal. The court of second instance finally decided to restore his general manager's labor relationship.
 
Employers should consider
When dealing with the dismissal of Senior Executives and labor relations, fully consider the particularity of their status from the perspective of Company Law and Labor Contract Law. To effectively handle legal risks, properly handle the dismissal and labor contract termination matters, have them sign written documents timely.

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