[Title] Li Moumou’s Dispute over Labor Relations with Shenyang XX Pharmaceutical Co., Ltd. and the Third Party, XX Outsourcing Services (Liaoning) Co., Ltd.

[Keywords] Labor dispute, unlawful termination of labor contract, continued performance of labor contract

【Key Points of the Ruling】 In this case, the court should first examine whether the employment relationship between the plaintiff and the defendant was terminated as of June 30, 2014, and whether the plaintiff established an employment relationship with a third party on July 1, 2014. Based on the determination of which entity the plaintiff’s employment relationship actually exists with, the court should then review whether the termination of the labor contract was lawful. If the termination was unlawful, the notice of termination may be revoked, and the court may order the continued performance of the labor contract.

【Facts of the Case】Li Moumou filed a lawsuit with the People’s Court of Shenhe District, Shenyang City, requesting: 1. The rescission of the “Notice of Termination of Labor Contract” issued by the defendant on January 19, 2017, and the continuation of the defendant’s performance of the labor contract with Li Moumou; 2. The defendant’s payment of wages from April 2017 to March 31, 2018; 3. The defendant’s payment of double wages for the period from July 2014 to January 2017 during which no open-ended labor contract was signed. Li Moumou began working for the defendant in 1995. On July 1, 2011, he signed a three-year labor contract. After the expiration of this contract, the parties did not sign another labor contract; however, Li Moumou continued to perform his duties at his original post. The defendant entered into a “Labor Dispatch Contract” with a third party. In November 2016, without consulting or communicating with Li Moumou, the defendant adjusted his job position. When Li Moumou objected, the defendant served him with a “Notice Regarding Disciplinary Action Against Comrade Li Moumou,” imposing a disciplinary measure suspending Li Moumou’s work. On January 19, 2017, the defendant, through Wang Moumou, the company’s Director of Human Resources, delivered to Li Moumou via WeChat a “Notice of Termination of Labor Contract,” citing Li Moumou’s serious violation of the company’s rules and regulations as the reason for termination. At the end of March 2017, the third party again delivered to Li Moumou a letter of employment including notice of termination of the labor contract. During the litigation, the “Labor Contract” provided by the third party, the “Training Sign-in Sheet” of the defendant’s rules and regulations, and the stub of the “Certificate of Termination of Labor Contract” bearing the signature “Li Moumou” all were identified as not being signed by Li Moumou himself. Bank statements of Li Moumou’s wages showed that from July to November 2014, his wages were paid by the defendant; however, subsequent bank statements no longer indicated the name of the entity making the wage payments. The third party claimed that starting from July 2014, it had been paying Li Moumou’s wages but failed to provide any supporting evidence. Li Moumou stated that he had always believed his wages were paid by the defendant and was unaware whether the payee had changed. Li Moumou’s wages were suspended starting from April 2017, immediately after the third party issued the letter of employment.

【Judgment】First-instance Judgment: 1. The defendant’s “Notice of Termination of Labor Contract” issued on January 19, 2017, is revoked; the labor contract between the defendant and Li Moumou, which is of an indefinite term, shall be reinstated as of January 19, 2017. 2. Within 10 days from the date this judgment becomes legally effective, the defendant shall pay Li Moumou a one-time salary for April 2017 in the amount of 4,735.71 yuan. 3. Li Moumou’s other claims are dismissed. The case filing fee of 10 yuan and the appraisal fee of 11,400.00 yuan shall be borne by the defendant. The Shenyang Intermediate People’s Court dismissed the appeal and upheld the original judgment.

【Reasons for the Ruling】 The People’s Court of Shenhe District, Shenyang City, holds that the legitimate rights and interests of employees shall be protected by law; an employee’s labor contract is protected by law and may not be unlawfully terminated; during the term of the employee’s labor contract, the employee has the right to receive remuneration in accordance with the law. According to Article 6 of the “Several Provisions of the Supreme People’s Court on Evidence in Civil Litigation,” the defendant bears the burden of proof regarding the legality of terminating the labor contract with Li Moumou on January 19, 2017. In this case, Li Moumou began working for the defendant’s predecessor enterprise upon its establishment in September 1998. After the defendant claimed that the employment relationship had ended on July 1, 2014, Li Moumou continued to work in his original position. Without consulting Li Moumou, the defendant unilaterally adjusted Li Moumou’s job duties. Moreover, merely because Li Moumou expressed disagreement with the adjustment via WeChat—and despite the absence of any legally prescribed grounds for termination—the defendant issued a notice of termination of the labor contract. Furthermore, the termination certificate submitted by the defendant was determined through forensic examination not to have been signed by Li Moumou himself. Thus, this notice cannot prove that the defendant and Li Moumou had terminated their original labor contract relationship as of June 30, 2014. Although the defendant entered into a “Dispatch Agreement” with a third party, the “Labor Contract” provided by the third party was also determined through forensic examination not to have been signed by Li Moumou himself. The defendant and the third party’s claim that the third party was responsible for paying social insurance contributions and issuing wages (including the February and March 2017 wages) to Li Moumou arose from the dispatch contract relationship between the defendant and the third party. This claim and the supporting evidence do not establish that the third party had entered into a new labor contract with Li Moumou or established a new employment relationship effective from July 1, 2014. The defendant failed to provide any evidence demonstrating exactly which rules and regulations Li Moumou had violated or whether the violations were serious. Moreover, the “Training Attendance Sheet” submitted by the defendant as evidence of the company’s rules and regulations was also determined through forensic examination not to have been signed by Li Moumou himself, thus failing to prove that the defendant had fulfilled its obligation to inform Li Moumou of these rules and regulations. Li Moumou merely raised objections via WeChat after the defendant made adjustments to his job without prior consultation. Although his language contained some inappropriate remarks, such conduct did not rise to the level justifying termination of the labor contract. Additionally, given that Li Moumou was unaware of the relevant rules and regulations at the time, his actions cannot be considered a serious violation of the company’s rules and regulations. Therefore, the defendant’s termination of the labor contract on the ground that Li Moumou had seriously violated the company’s rules and regulations constitutes an unlawful termination. As for the double wages owed for failure to sign an open-ended labor contract, since the statute of limitations for arbitration has expired, this claim is not supported.

[Relevant Statutes] Article 4, Article 14, Article 39, Article 42, and Article 48 of the Labor Contract Law of the People’s Republic of China; Article 7 of the Implementation Regulations of the Labor Contract Law of the People’s Republic of China; Paragraph 1 of Article 27 of the Mediation and Arbitration Law on Labor Disputes of the People’s Republic of China; and Article 6 of the Supreme People’s Court’s Provisions on Evidence in Civil Litigation.

[Lawyer’s Perspective] The employer bears the burden of proof regarding the termination of the labor contract and the legality of such termination. In this case, the defendant contends that the employment relationship had already been terminated prior to the current dispute, while the plaintiff has established a new employment relationship with a third party—a situation involving the legal provisions on labor dispatch. For a labor relationship to be established between a worker and a dispatching company, it is essential that both the employer and the dispatching company have signed a dispatch agreement, and simultaneously, the worker must have signed a labor contract with the dispatching company. Otherwise, the labor relationship between the worker and the dispatching company cannot be recognized. Moreover, the existence of a social insurance relationship is not necessarily the primary criterion for determining the existence of an employment relationship. In this case, it is clearly established that a continuous employment relationship has always existed between the plaintiff and the defendant. Furthermore, if an employer terminates a labor contract on the grounds of serious violation of the company’s rules and regulations, it must bear the burden of proving the legality of the content of those rules and regulations, the proper delivery of such rules to the employee, and the employee’s serious misconduct. Otherwise, the termination will be deemed unlawful. In practice, it is not advisable for workers to demand continued performance of the contract after their employer has terminated it, as trust between labor and management has significantly eroded, making it extremely difficult to carry out work effectively. Therefore, we recommend that workers seek compensation for the unlawful termination of their labor contracts instead.