Termination for refusal to sign employee handbook ruled invalid - International Law Office

On November 26 2009 Beijing Intermediate People's Court Number 4 reportedly ruled that a company's modified employee handbook was unenforceable because the modification had not followed a democratic procedure. The court ordered the company to reinstate an employee whom it had terminated for refusing to sign a notice of the modification.

Mr Hou was a chief guard in an electrical distribution room of an unidentified company. In 2008 the company issued a notice to employees stating that it had modified the section of the employee handbook regarding disciplinary action against employees sleeping at work. The company demanded that employees sign the notice. After refusing to sign, stating that part of the notice was inconsistent with the relevant industry standards, Hou was summarily dismissed on the grounds that his refusal constituted a serious breach of company rules regarding following proper instructions from the company's management and supervisors.

The court reportedly held that a proposal to modify a company rule that affects the immediate interests of employees can be adopted only once (i) it has been discussed by the employee representative council or by all employees, and (ii) the management has conducted consultations with the union or employee representatives. Since the company had modified its rules unilaterally, the employees were entitled to reject the modification. As a result, the court ruled that the company had no legal basis on which to terminate Hou on the grounds of a serious breach of company rules. The court therefore invalidated the company's unilateral modification notice and ordered Hou's reinstatement.

This case demonstrates that the courts are prepared to enforce the consultation requirement under Article 4 of the Employment Contract Law. Thus, even seemingly small amendments to an employee handbook or manual require consultation.

For further information on this topic please contact Andreas Lauffs or Jane Peng at Baker & McKenzie's Hong Kong office by telephone (+852 2846 1888), fax (+852 2845 0476) or email (andreas.lauffs@bakernet.com or jane.peng@bakernet.com).