China has many special laws/rules related to protecting female workers, especially those who are pregnant, nursing, or on maternity leave. For example, Chinese law generally prohibits employers from unilaterally terminating the employment contract of a pregnant or nursing employee or an employee on maternity leave. The only exception to this is that the employee may be unilaterally terminated due to the employee’s wrongdoing. Specifically, such employees can be terminated for any of the following:
- Failing to meet relevant recruitment requirements during the probation period;
- Materially breaching labor disciplines or the employer’s rules and regulations;
- Committing a serious dereliction of duty or practices, such as engaging in graft or causing substantial damage to the employer;
- Establishing an employment relationship with another employer which materially affects the completion of her tasks with the employer, or refusing to terminate such an employment relationship with the other employer after she is required to do so by the employer;
- Has criminal liability imposed in accordance with the law.
If an employer wants to terminate a female employee but has no legally permissible ground to do so as a unilateral termination, the employer should seek to obtain agreement from the employee for a voluntary termination in exchange for severance. With a voluntary termination, the parties agree to a mutual termination with the “price” for the employee’s departure being a severance payment.
It should go without saying — but it is so important I will say it anyway, but when it comes to terminating an employment relationship with a female employee, you need to be super careful. Our policy with our clients is to err on the side of securing a mutual termination, paying severance, and getting a signed and enforceable settlement agreement, rather than risk months or years of expensive litigation.
Most foreign companies realize the difficulties inherent in terminating female employees in China (many learned this by being sued) but too few are aware of a similar need to be super careful when not renewing a female employee’s employment contract.
Consider this hypothetical: Employer and Female Employee enter into a written employment contract in year one for a 2-year fixed term. Two months before the end of year two, Female Employee provides Employer with a doctor’s note stating that she is pregnant. Employer ignores this, thinking pregnancy status is not relevant in considering whether to renew Female Employee’s contract. Employer then notifies Female Employee in writing a month before the end of year 2 (assuming this meets the specific locale’s requirement on notice of non-renewal), that her employment contract will not be renewed. Female Employee then sues Employer, demanding she be reinstated. The Chinese court will side with Female Employee and require Employer re-hire her at her old job back until her nursing period ends. When a female employee is pregnant, on maternity leave or nursing, the law prohibits an employer from ending the employment contract even when the contract term expires; it requires the employment contract be extended until the end of the nursing period.
Now, let’s consider hypothetical 2: Female Employee never provides Employer with a doctor’s note saying she is pregnant until after Employer processes Female Employee’s separation. Female Employee never raises any objections or concerns during the entire separation process, but when that process is completed, she sues and demands reinstatement because she finds out she is pregnant. Unless Female Employee has convincing evidence that she did, in fact, inform Female Employer of her pregnancy status before the expiration of her contract, Employer will likely prevail.
Hypothetical 3. Same facts as hypothetical 1, except Employer does not ignore Female Employee when she submits the doctor’s note, but rather asks her whether it is okay to proceed with not renewing her employment contract. Female Employee orally says “okay,” but immediately after her departure, she sues Employer anyway.
Employer will likely lose and have to take Female Employee back as an employee. Indeed, because so many China employment laws cannot be contracted away, even had she given written consent to Employee not renewing her employment contract, she still would have a very good chance of prevailing. So in this situation as well, the safer path is usually to enter into a mutual termination agreement with the employee and provide the employee with at least the statutory minimum severance. Going this route will usually beat a strict non-renewal with clear documentation.
Bottom line: China has high expectations for how employers must treat their female employees, especially pregnant and nursing employees and those on maternity leave and employers that fail to follow China’s particularized laws on protecting female workers tend to get burned.