By Linda LIANG, LIU Piao King & Wood Mallesons

On April 24, 2017, Beijing Higher People’s Court and Beijing Labor and Personnel Dispute Arbitration Commission jointly issued the Answer on the Legal Application of Labor Dispute Cases (hereafter referred to as “the Answer”). Article 11, Section 3 of the Answer adopts a lenient attitude towards the standard of reviewing unlawful dismissals during the probation period. The Answer clearly points out that, when determining whether laborers meet the recruitment conditions, the standard applied during the probation period may be moderately lower than that after the expiration of the probation period. More than one year has passed since the Answer was issued, by reviewing recent judgments made by arbitration commissions and courts on dismissals during the probation period, further analysis is made regarding new changes as below.

The Answer establishes a new standard

According to the provisions of Labor Contract Law of the People’s Republic of China, employers may terminate the employment contract without making any severance payment where the employers prove that employees have failed to meet the recruitment conditions during the probation period. However, for a long time, laws and regulations had no clear provisions of what suffices for “not meeting the recruitment conditions”. In practice, arbitration commissions and courts had different opinions about the standard of “not meeting the recruitment conditions” during the probation period. There were a few judgements where arbitration commissions and courts equated the dismissal criteria during the probation period with that after the expiration of the probation period.

As stated in Article 11, Section 3 of the Answer, when determining whether laborers meet the recruitment conditions, the standard applied during the probation period may be moderately lower than that after the expiration of the probation period. The Answer distinguishes the probationary period employees from the formal employees and confirms the distinction between the probation period and the period thereafter, clearly establishing a new standard for the judicial practice.

More flexibility is given when reviewing dismissals during the probation period

On September 30, 2017, Beijing Xicheng District People’s Court (Xicheng Court) made a judgment regarding a dismissal during the probation period. Plaintiff A Company, the employer, alleged that Defendant Xu, who was an employee responsible for system security, failed to meet the recruitment conditions and was incompetent for the position because he was absent from work without approval. The Company requested the court to confirm the legality of termination of the employment contract between the Company and Xu, and Xu was not entitled to any compensation.

Unlike in prior judgments, Xicheng Court made it clear in this judgment that a probation period is set for further assessment of employees. It is a process during which employers and employees make coordination and mutual choices. Therefore, the standard of reviewing the legality of termination should not be too strict. Furthermore, court applied the provisions of the Answer that set forth situations where employees fail to meet the recruitment conditions, and held that, considering Xu’s misconduct of absence without requesting for leave, it was within the autonomy of A company to terminate the employment contract during the probation period. Xu then appealed to Beijing Second Intermediate People’s Court, but the claim was dismissed.

It is worth mentioning that Xu applied for labor arbitration to Beijing Xicheng Labor and Personnel Dispute Arbitration Commission on August 15, 2016, and on October 1, 2016, the commission rendered an award that the employer should pay compensation to the employee for its unlawful termination of the employment contract. However, as the Answer was released on April 24, 2017, Xicheng Court made the opposite decision that the termination of the employment contract by the employer was lawful.

By comparison of the distinct judgments made before and after issuing the Answer regarding the same case, it is believed that the more flexible standard of reviewing dismissals during the probation period prescribed in “the Answer” is adopted in practice. It is agreed that the probation period is a special period for coordination so that the standard of reviewing should not be too strict.

Risk of unlawful dismissals during the probation period still exists

Although the Answer corrects the tendency of providing over-protection for employees in some degree, the new standard does not grant employers the right to dismiss employees discretionally during the probation period.

On July 26, 2017, Beijing Dongcheng District Court (Dongcheng Court) made a judgment regarding a dismissal during the probation period. Plaintiff (Defendant) B company alleged that the Defendant (Plaintiff) Sun rejected to perform duties assigned by the supervisor and violated attendance policies of the company, requesting the court to confirm the legality of termination of the employment contract between the company and Sun. Sun requested the opposite.

Although the court held an employer may terminate the employment contract provided that the employee fails to meet the recruitment conditions, it was also pointed out that three requirements shall be satisfied so that the employer could lawfully dismiss the employee during the probation period on the basis of not meeting the recruitment conditions, namely explicit recruitment conditions, clear statement of recruitment conditions to the employee, and proof provided by the employer of not meeting the recruitment conditions. The three elements are in accordance with the first two sections of Article 11 of the Answer. In this case, B Company proved the three elements. Therefore, the court held that termination of the employment contract was lawful.

The research on relevant judicial judgments shows that, prior to the issuance of the Answer, when reviewing the legality of dismissals during the probation period, though not explicitly stated, courts make analysis and reasoning pursuant to the aforesaid three elements. In light of this situation, the Answer only makes such judicial practice an official rule. The bright side for employers is that the standard of reviewing dismissals of probationary employees should be lower than that of official employees. However, unless the three elements are proved, it is still possible that the termination will be held unlawful under the court’s review.

To lawfully dismiss employees during the probation period, you should check the followings

In sum, the Answer corrects the practice of applying the dismissal criteria after the expiration of the probation period to dismissals during the probation period, yet it does not grant employers the right to dismiss employees discretionally during the probation period. Certain requirements should be met. Specifically,

  1. Fully inform employees of the recruitment conditions. It is suggested to keep relevant evidence and require employees to sign acknowledgments. Recruitment conditions could be stipulated in appendices attached to employment contracts, in a separate offer letter or in any other documents.
  2. Provide evidence that the employee does not meet the recruitment conditions during the probation period. It is suggested for the employer to carry out an assessment during the probation period and demonstrate the failure result to the employee. If specific facts and evidence could be provided to prove the employee’s failure to meet the recruitment conditions, the credibility of the assessment is enhanced and the decision to dismiss will be regarded as more reasonable and convincing.
  3. Explain the reasons and legal basis to the employee. The explanation is suggested to be in writing and signed by the employee. In the case where the employee refuses to sign, it is recommended to duly deliver the notice in alternative ways.
  4. Dismissal has to take place before the expiration of the probation period. Once the probation period expired, the recruitment conditions are regarded to be met. From then on, employers could no longer terminate the employment contracts on the basis of not meeting the recruitment conditions.