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

2021-04-12

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 10: Broken Trust, the Impossible Reinstatement of Senior Executives
 
Introduction
On June 8, 2014, Fan joined a game company as Director of Operation. On May 19, 2017, the company delivered a Dismissal Notice to Fan. Fan brought the matter to court requesting to continue the performance of the labor contract. The court held that the company had illegally terminated the labor contract. However, in view of the serious disagreements between Fan and the company’s Chairman on the company’s operation, amongst other disputes still in litigation process, the two parties lack the basis of trust to continue the performance of the labor contract. The labor relationship between the two parties was terminated on May 19, 2017, and Fan can claim his legitimate rights and interests in a separate case for compensation for illegal termination of the labor contract.
 
Judge Interpretation
Senior Executives have access to and master the core business, technical content, and other important information of the company. The work content and nature are unique and irreplaceable for the employer; and the implementation of labor relations between the employer and the employer should also be based on mutual trust between the two sides to achieve good results. When the basis of cooperation between the two parties is relatively weak and proper trust cannot be established, continuing the performance of the labor contract is not conducive to a harmonious labor relationship. At this time, Senior Executives can protect their legitimate rights and interests by separately claiming compensation for illegal termination of the labor contract.
 
Lawyer's suggestions
The lawyer believes that the focus of the case is whether the labor contract can continue to be performed after labor contract is illegally terminated. In this case, the Senior Executive’s work content and nature determine its irreplaceability for the company, however, objectively the Senior Executive and the Chairman have serious disagreements on the company’s operation and there are still other disputes between the two parties currently in the litigation process. The trust between the two parties is indeed broken, and there is no trust basis for continued performance. In this case, insisting on continuing to perform is not conducive to building a harmonious and stable labor relationship, and will also create hidden dangers for both parties in the future.
This case also reflects judicial standard of the 2017 Interpretation of Beijing Municipal High People's Court and Beijing Employment Dispute Arbitration Commission on the Application of Law to the Hearing of Employment Dispute Cases Article 9:
The following circumstances shall be identified as "the labor contract cannot be indeed performed continuously":
(1) The employer is declared bankrupt, its business license is revoked, it is ordered to wind up or it is canceled in accordance with the law, or the employer decides to dissolve in advance;
(2) The employee reaches the statutory age for retirement in the process of arbitration or litigation;
(3) The labor contract expires in the process of arbitration or litigation and there are no situations as provided for in Article 14 of the Labor Contract Law that a non-fixed-term labor contract shall be signed;
(4) The employee's original post is relatively irreplaceable and unique for the employer to carry out normal business (such as the post of general manager or financial person-in-charge, etc.), and the original post of the employee has been replaced by another person, and the two parties cannot reach a consensus on the new post;
(5) the employee has been employed by a new employer;
(6) During the arbitration or litigation process, the employer has served a notice of resumption of work on the employee, requiring the employee to continue to work, but the employee has refused such requirement; and
(7) other situations in which it is obvious that the labor contract cannot be performed continuously.
If the original post of the employee has been replaced by another person and the employer defend itself on this ground only, it shall not be identified as situations when the "labor contract cannot be indeed performed continuously".
 
Employers should consider
When dealing with illegal termination of the labor relationship of a Senior Executive requesting to continue the performance of the labor contract, companies can use judicial standards to defend themselves from the perspectives of the needed mutual trust given the uniqueness and irreplaceability of Senior Executives positions. This defense may guide the judgement toward compensation for illegal termination.

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