By Weiwei Gu / Yin Wu
INTRODUCTION
Probationary period is a reviewing period agreed between an employer and its employee during which they get to know about each other, and thereby determine whether the employee is qualified for the requirements of employment/job-application. Probationary period is specifically regulated by provisions, including Art.19, Art.20, Art.21 and Art.83 of the Labour Contract Law of our country, and the details are as below:
Art.19: (Clause 1) Where the term of a labour contract is more than three months but less than one year, the probationary period shall not exceed one month; where the term of a labour contract is more than one year but less than three years, the probationary period shall not exceed two months; for fixed-term contracts of three years and above and non-fixed-term labour contracts, the probationary period shall not exceed six months. （Clause 2） The same employer and the same employee may agree on probationary period only once. (Clause 3) For labour contracts which expire upon completion of agreed assignments or labour contracts with a term of less than three months, no probationary period can be agreed upon. (Clause 4) The probationary period shall be part of the term of the labour contract. Where a labour contract only stipulates a probationary period, the period, the probation period shall be null and void and such term shall be treated as the term of the labour contract.
Art.20: The wage amount of an employee during his/her probationary period shall not be less than the lowest wage amount for the same job position in the employer's organization, or 80% of the wage amount agreed in the labour contract, and shall not be less than the minimum wage standard in the locality of the employer.
Art.21: Except where an employee falls under any of the categories stipulated in Art.39 and item (1) and item (2) of Art.40 during the probationary period, an employer shall not rescind the labour contract. Where an employer rescinds a labour contract during the probationary period of an employee, it shall explain the reason to the employee.
Art.37: An employee may notify the employer with a 30-day advance notice in writing to rescind his/her labour contract. An employee may notify the employer with a three-day advance notice in writing during his/her probationary period to rescind his/her labour contract.
Art.39: Under any of the following circumstances, the employer may rescind the labour contract:
(1) where it is proven during the probationary period that the employee does not satisfy the employment criteria;
(2) where the employee has committed a serious breach of the employer's rules and system;
(3) where the employee is guilty of serious dereliction of duties and corruption and causes the employer to suffer significant damages;
(4) where the employee holds a labour relation with another employer concurrently which has a severe impact on his/her performance of work assigned by the employer or refuses to make correction as demanded by the employer;
(5) where the labour contract is rendered void under the circumstances stipulated in item (1) of the first paragraph of Art.26; or
(6) where criminal prosecution is initiated against the employee pursuant to the law.
Art.40: Under any of the following circumstances, the employer may rescind the labour contract by giving the employee a written notice 30 days in advance or by making an additional payment of one month's wage to the employee:
(1) where the employee suffers from an illness or a non-work-related injury and is unable to undertake the original job duties and other job duties arranged by the employer following completion of the stipulated medical treatment period;
(2) where the employee cannot perform his/her duties and remains to be incapable of performing the job duties after training or job transfer;
(3) where the objective circumstances for which the conclusion of the labour contract is based upon have undergone significant changes and as a result thereof, the labour contract can no longer be performed, and upon negotiation between the employer and the employee both parties are unable to reach an agreement on the amendment to the contents of the labour contract.
Art.83: Where an employer violates the provisions of this Law in agreement with an employee on probationary period, the labour administrative authorities shall order the employer to make correction; where the probationary period agreed in violation of the law has been performed, the employer shall pay compensation to the employee based on the monthly salary of the employee upon expiration of the probationary period for the excess probationary period performed.
Admittedly, there are only a limited amount of provisions regarding probationary period, but actual application in practice gives rise to many practical issues. Legal issues that frequently occur are herein analyzed as below:
1. Whether a probationary period can be agreed without limits and what are the corresponding legal implications?
1.1. Probationary period cannot be agreed without limits
Art.19 of the Labour Contract Law provides that “Where the term of a labour contract is more than three months but less than one year, the probationary period shall not exceed one month; where the term of a labour contract is more than one year but less than three years, the probationary period shall not exceed two months; for fixed-term contracts of three years and above and non-fixed-term labour contracts, the probationary period shall not exceed six months.”
The probationary period as agreed between the employer and its employee must strictly comply with the period requirements as stipulated in the above-mentioned provision, and cannot be agreed without limits.
Illustration:
|
Term of Labour Contract |
Longest Term of Probationary period |
|
|
Employee A |
Jan.1, 2018 to Dec.31, 2020 (three years) |
Six Months |
|
Employee B |
Jan.2, 2018 to Jan.31, 2021 (one day less than three years) |
Two Months |
As indicated above, the term of the labour contract with employee B is only one day less than that with employee A. However, as the term of labour contract with Employer B is less than three years, the longest term of probationary period that can be agreed between employee B and its employer is only two months, and erroneous calculation resulting in more than this number should be avoided in practice.
1.2. The employer will be liable to make compensation for violating the stipulated probationary period
In accordance with Art.83 of the Labour Contract Law, “Where an employer violates the provisions of this Law in agreement with an employee on probationary period, the labour administrative authorities shall order the employer to make correction; where the probationary period agreed in violation of the law has been performed, the employer shall pay compensation to the employee based on the monthly salary of the employee upon expiration of the probationary period for the excess probationary period performed.”
If an employer and its employee agree on a probationary period that exceeds the period limit provided by law, the excess period constitutes illicitly agreed-upon probationary period; in cases where the excess period has been actually performed, the employer will be liable to pay compensation to the employee for the excess period.
Illustration:
An employee and its employer enters into a labour contract with a one-year term where the probationary period is agreed as six months. The salary is agreed as RMB 8,000 during the probationary period and RMB 10,000 thereinafter. In accordance with laws, the employer and its employee can agree a probationary period of only two months, and the excess four months constitutes illicitly agreed-upon probationary period. Under the circumstances where such four-month “probationary period” has been actually performed, the employer has to pay the employee compensation on the monthly basis of RMB 10,000, in totality of RMB 40,000 (RMB 10,000 x Four Months).
1.3. Whether an employer will be liable for the salary difference for the illicitly agreed-upon probationary period
Generally, the salary paid by an employer to its employee during the probationary period will be less than that since “formal employment,” for instance, 80% of the salary as agreed under labour contract in accordance with Art.21 of the Labour Contract Law. Yet, in respect to the period that exceeds the stipulated probationary period and where it has been actually performed, will the employer, in addition to paying the compensation as mentioned above, be liable to make up for the salary difference for such period? In judicial practice, there are two differing opinions:
According to the first opinion: the payment of compensation cannot replace the normal payment of remuneration, so an employer is still liable to pay salary difference to its employee. That means that an employer must make double payment of monthly salary to its employee during the period which exceeds the upper limit of stipulated “probationary period” where it has actually been performed.
According to the second opinion: an employer is not liable to pay the salary difference to its employee during the excess period, as illustrated by provisions [1] regarding this issue in the Notice of Printing and Issuing the Answers No.3 to Certain Issues regarding the Trials of Labour Disputes Cases by No.1 Civil Tribunal of the High People’s Court of Zhejiang Province and Arbitration Tribunal of Labour Disputes of Zhejiang Province.
In Shanghai, we have been unable to locate relevant regulations in our research, and judicial opinions diverge in the limited amount of public cases regarding this issue. For instance, the opinion held by Yangpu District People’s Court in the case of (2016)沪0110民初2697号 (amendment not allowed) is mutually opposite [2] to that by Putuo District People’s Court in the case of (2014)普民一（民）初字第2445号 (amendment allowed).
Opinion and Recommendation: We tend to be in favor of the first opinion above. The reasons lie in that as illicitly agreed-upon probationary period shall be void and both parties thereby have entered into the status of normally performing the labour contract for such period, the employer should, under such circumstances, pay remuneration to its employee based on the monthly salary that should be paid upon the completion of probationary period. It is, therefore, suggested that an employer should pay its employee the salary difference for the illicitly agreed-upon probationary period.
2. Whether probationary period can be agreed without the term of labour contract?
2.1. Probationary period cannot be agreed without the term of labour contract
Clause 4 of Art.19 of the Labour Contract Law provides that “the probationary period shall be part of the term of the labour contract. Where a labour contract only stipulates a probationary period, the probation period shall be null and void and such term shall be treated as the term of the labour contract.” Therefore, without the term of labour contract being agreed, an employer cannot agree on probationary period with its employee.
2.2. Whether an employer is liable for compensation if the employer agrees on a probationary period with its employee without the term of labour contract?
In cases where only the probationary period is agreed between an employer and its employee, and such probationary period has been in fact performed, whether the employee is entitled to claim for compensation from its employer in accordance with Art.83 of the Labour Contract Law? There is no specific provision specifically addressing this issue. Nevertheless, according to public cases in Shanghai that we have searched, there are judgements in judicial practice in Shanghai holding that under such circumstances the employee is not entitled to compensation in accordance with Art.83 of the Labour Contract law (See the case of (2016)沪01民终12461号 [3]), and the employer is therefore only liable to pay the salary difference to employee.
3. Whether probationary period can be agreed multiple times?
3.1. Whether probationary period can be agreed multiple times
Clause 2 of Art.19 of the Labour Contract Law provides that “the same employer and the same worker may agree on probationary period only once.” This provision aims at preventing an employer from causing damages to its employee’s interests by establishing the probationary period multiple times. In practice, the main problem is whether an employer and an employee can re-enter into probationary period at the point when a labour relation between them is re-established after the employee leaves the position at the employer? In respect to this issue, there are two mutually opposite judicial views in judicial practice:
First: With an employee who leaves the position at the employer and then returns to the same employer, the employer cannot agree upon a probationary period once again when entering into a labour contract, regardless of whether the employee will be assigned to a different position or returns to his/her position after leaving. Cases illustrating this opinion include (2016)沪02民终4682号 ruled by the No.2 Intermediate People’s Court of Shanghai Municipality.
Second: “[A]gree on probationary period only once” as provided under Clause 2 of Art.19 of the Labour Contract Law refers to the probationary period that is within “the same term of labour relation.” Thus, with the employee who leaves the position at his/her employer and later returns to the same employer, the employer can still agree upon a probationary period once again, which can be illustrated by cases including （2013）沪一中民三(民)终字第1235号ruled by the No.1 Intermediate People’s Court of Shanghai Municipality [4] .
Opinion: we tend to be in favor of the second opinion above, i.e., “agree on probationary period only once” is merely limited to the probationary period that is within “the same term of labour relation” for the reasons as below:
(1) In accordance with Clause 2 of Art.21 of the Notice of Issuing the Explanation Regarding Certain Provisions under the Labour Law from the General Office of Labour Department, the “probationary period” as stipulated hereunder applies to the employee who works for the first time or changes his/her position or type of work when resuming the work. Also, according to Clause 2 of Art.3 of the Notice of Certain Issues relating to the Application of the System of Labour Contract from the Labour Department, an employer can agree on a probationary period only once with the same employee whose position has no change.
(2) In light of common sense, under the circumstances where certain employees return to their former employers after they leave for a long period of time and changes have occurred to both their titles and positions, it is necessary for their employers to review again whether these employees are qualified for the requirements of the changed positions.
Recommendation: Although we tend to be in favor of the second opinion, if in practice the employer intends to agree on probationary period with the employee who has been employed previously, we would still suggest that: 1. for the purpose of reasonability, the employer should put forward clear and specific stipulations on the probationary period that needs to be agreed upon again; and 2. the employer should conduct a comprehensive evaluation of such employee and agree on a probationary period in a reasonable and circumspect way.
3.2. Extension of probationary period is not suggested
In practice, an employer may agree upon the extension of probationary period with its employee, but the probationary period as agreed will not exceed the stipulated probationary period. For instance, while the longest term of probationary period that can be agreed between an employer and its employee is six months, they may instead agree the probationary period as two months. After the expiration of two months, can the employer and its employee extend the probationary period for four months with negotiation and mutual agreement?
In respect to this issue, opinion from the practical perspective tends to consider such case as falling into the circumstances where the probationary period is illegally agreed multiple times, as illustrated by the case of （2017）京民申1290号 ruled by High People’s Court of Beijing. Thus, we suggest that in practice the employer should, at the early stage, agree upon the longest stipulated probationary period with its employee, and be cautious when extending the probationary period after a probationary period has already been agreed.
4. Rescinding labour contract by an employer during a probationary period
4.1. Grounds of rescission and matters worth noticing
As pursuant to Art.21 of the Labour Contract Law, an employer is entitled to rescind the labour contract during the probationary period only under specific circumstances where the employee falls into the conditions as stipulated in Item 1 or Item 2 of Art.39 and Art.40. Accordingly, an employer is not allowed to dismiss its employee during the probationary period at will and without limitation. In the meanwhile, an employer should attach importance to the following matters when rescinding the labour contract:
(1) If the labour contract is rescinded on the ground that the employee fails to satisfy the employment requirements during probationary period (i.e., Item 1 of Art.39, which is also the ground most frequently relied on for dismissing an employee during probationary period), the employer in practical operation should conduct the following two matters:
Firstly, the employer should proffer evidence to prove that the employee fails to satisfy the employment requirements. In judicial practice, whether the employer has fulfilled such burden of proof depends on the following two aspects: first, whether the employer has given clear and specific description for the requirements of employment or qualification for the position. Generally, we would suggest the employer to make it specific in the labour contract, or the notice of employment requirements, or similar documents, and subsequently obtain the employee’s confirmation by signing. Second, whether the employer has given an objective evaluation and kept records on the performance of the employee during the probationary period. (Note: Many an employers are deemed as illegally rescinding a labour contract because of their failure to satisfy such burden of proof).
Further, the decision of rescinding the labour contract should be timely made during the probationary period and give the employee notice of the same. In practical operation, there are disputes over whether an employer can notify its employee of such a decision after the completion of the probationary period. According to the mainstream opinion, however, an employer has the duty of giving timely notice, and can no longer rescind the labour contract upon the completion of the probationary period on the ground of its employee’s failure to satisfy the employment requirements, as illustrated by the case of (2016)沪0110民初2697号.
(2) If the labour contract is rescinded on other grounds, the employer may do so only by strictly following the legal procedures in accordance with relevant regulations. For instance, if the employer intends to dismiss the employee during the probationary period on the basis of Item 1 of Art.40 of the Labour Contract Law, the employer must make adjustments to the employee’s position in strict compliance with this provision, and rescind the labour contract only if the employee still fails to perform his/her duty at work after such adjustments to the position is made.
4.2. The payment of financial compensation after rescission
Should an employer pay financial compensation to the employee if it dismisses the employee during the probationary period? In respect to this issue, there are also two difference opinions in practice:
According to the first opinion, such payment is not required. Art.46 [5] of the Labour Contract Law clearly provides circumstances where an employer shall pay financial compensation to its employee all at once for rescinding or terminating the labour contract. However, none of these includes the circumstances where an employer rescinds the labour contract with its employee during the probationary period in accordance with Art.21 of the Labour Contract Law.
According to the second opinion, distinguishing the legal grounds on which an employer can rescind the labour contract with its employee during the probationary period is necessary to determine whether corresponding financial compensation has to be paid. If the labour contract is rescinded by an employer on the basis of Art.39 of the Labour Contract of Law, the payment of financial compensation is required; if on the basis of Item 1 or Item 2 of Art.40 of the Labour Contract Law, then the payment of financial compensation is not required.
Opinion and Recommendation: We tend to be in favor of the second opinion. In the meanwhile, given the relevant cases we researched, we find that many cases are ruled in favor of the second opinion, the case of （2015）沪一中民三（民）终字第1210号[6] , for instance. Thus, when an employer intends to rescind the labor contract with its employee during the probationary period, the employer should try its best to specify the legal ground[s] for rescinding, that is, whether the labour contract is rescinded based on Art. 39, or Item 1 or Item 2 of Art.40. Failure to do so will directly affect the answer to the question of whether financial compensation should be paid.
SUMMARY
Whilst the various issues regarding the probationary period that we come across and recognize when reading relevant judicial judgment are far more numerous than those discussed in the above analysis, every scenario cannot be exhausted herein within the constraints of this analysis. Hence, an employer should be prudent and circumspect when either agreeing upon the probationary period with its employee, or dealing with its employee during the probationary period.
1. Art. 15 of Notice of Printing and Issuing the Answers No.3 to Certain Issues Regarding the Trials of Labour Disputes Cases by No.1 Civil Tribunal of the High People’s Court of Zhejiang Province and Arbitration Tribunal of Labour Disputes of Zhejiang Province provides that “where an employer agrees on the probation period that exceeds the period as provided by laws, in respect of the period that exceed the stipulated probation period but has been actually performed, the employer shall pay compensation to the employee as pursuant to Art.83 of the Labour Contract Law, but is not required to make up for salary difference for the excess period.”
2. Yangpu District People’s Court held in the case of (2016)沪0110民初2697号 that the employee’s claim for payment on the basis of RMB 3,500 per month as to make up for the salary difference for the period which exceeded the stipulated probation period and yet had been actually performed had no legal ground; however, the employee might have the claim to be paid on the basis of RMB 3,500 per month as the compensation for such period (Note: for the purpose of reducing the burden of lawsuit, the Court directly resolved the dispute as the employee didn't assert the claim for compensation). Putuo District People’s Court, however, in the case of (2014)普民一（民）初字第2445号 ruled in favor the employee’s claim that the salary difference should be made up for (Note: In this case, the employee didn't assert the claim for compensation).
3. In this case, Xuhui District People’s Court ruled on the first trial that as the labour contract entered into by and between both parties provided a probation period of six months, such probation period was not established as a matter of law and shall be deemed as illicitly agreed-upon. Indeed, the Court ruled in favor of the employee’s claim for the compensation for the illicitly agreed-upon probation period. On the second trial, however, the No.1 Intermediate People’s Court of Shanghai Municipality held that such term should be deemed as the term of the labour contract rather than the period when the illicitly agreed-upon probation period was to be performed, and therefore this case didn't fall into the circumstances where an employee would be entitled to claim for compensation for illicitly agreed-upon probation period in accordance with Art.83 of the Labour Contract Law.
4. In this case, the Court held that although appellant A had gone through the reviewing process during the probationary period when starting to work for appellee B in May of 2011, the labour relation established in May of 2011 between them was terminated in April of 2012 as a result of A’s resignation. Driven by the actual need of the company, the act of B and A on Jun.19, 2012, of agreeing upon probationary period to evaluate whether A was qualified for the employment requirements after B re-employed A (neither basic monthly salary or position ever changed) didn’t violate any laws.
5. Art.46 of the Labour Contract Law: Under any of the following circumstances, the employer shall make economic damages to the employee:
(1) the employee has rescinded the labour contract pursuant to the provisions of Art.38;
(2) the employer has proposed rescission of labour contract to the employee pursuant to the provisions of Art.36 and has negotiated and agreed with the employee on rescission of labour contract;
(3) the employer has rescinded the labour contract pursuant to the provisions of Art.40;
(4) the employer has rescinded the labour contract pursuant to the provisions of the first paragraph of Art.41;
(5) except where an employer proposes to renew a labour contract by maintaining or raising the provisions of the labour contract and the employee is not agreeable to the renewal, a fixed-term labour contract shall be terminated pursuant to the provisions of item (1) of Art.44;
(6) the labour contract is terminated pursuant to the provisions of item (4) or item (5) of Art.44; or
(7) any other circumstances stipulated by the laws and administrative regulations.
6. In this case, Huakuo Real Estate Co., after hiring Shunwei Chen, delegated him to be the general manager at Hongtai Co., which is a position of senior management. Eventually, Huakuo Real Estate Co. rescinded the labour relation between him for the reason that he didn't satisfy the employment requirements during the probation period. The Minghan District People’s Court held on the first trial that in light of the evidence proffered, the behavior of Shunwei Chen during the probationary period apparently didn't fulfill the requirements for the status as the general manager of Hongtai Co., which is a position of senior management. Therefore, Huakuo Real Estate Co.’s act of rescinding the labour contract with Shunwei Chen during the probation period, as agreed under the labour contract, on the ground that Shunwei Chen failed to satisfy the employment requirements during the probation period, does not violate relevant laws or regulations. Further, such rescission didn’t fall into the circumstances where the employer shall pay financial compensation to the employee as provided by laws or where the employer should give a notice in advance of 30 days to the employee before rescinding the labour contact. Finally, No1. Intermediate People’s Court of Shanghai Municipality upheld the ruling in the first trial.
Schedule: Cases for Reference
|
Case Number |
Closing Date of the Case |
Brief Conclusion |
|
Case of (2016)沪01民终12461号 ruled by No.1 Intermediate People’s Court of Shanghai Municipality
Labour Contract Dispute between Hongyan Culture Media (Shanghai) Co., Ltd. v. Yi Wang
|
Mar.8, 2017 |
The case where only the probation period is agreed does not fall into the circumstances where compensation should be paid for illicitly agreed-upon probationary period.
|
|
Case of (2013)沪一中民三(民)终字第2024号ruled by No.1 Intermediate People’s Court of Shanghai Municipality
Labour Contract Dispute between Deliang Jin v. Shanghai Qingyi Office Supplies Co., Ltd.
|
Mar.11, 2014
|
The case where only the probation period is agreed does not fall into the circumstances where compensation should be paid for illicitly agreed-upon probationary period.
|
|
Case of（2013）沪二中民三（民）终字第83号 ruled by No.2 Intermediate People’s Court of Shanghai Municipality
Labour Contract Dispute between XXX Dai v. Shanghai Carbon-Free Architecture Design Co., Ltd.
|
Feb.16, 2013
|
The case where only the probation period is agreed does not fall into the circumstances where compensation should be paid for illicitly agreed-upon probationary period.
|
|
Case of (2016)沪02民终4682号ruled by No.2 Intermediate People’s Court of Shanghai Municipality
Labour Contract Dispute between Shanghai Zhenchu Food Co., Ltd. v. Bijin Tao
|
Sep.6, 2016 |
A probationary period cannot be agreed once again between an employer and its employee who returns to it. |
|
Case of（2013）沪一中民三(民)终字第1235号 ruled by No.1 Intermediate People’s Court of Shanghai Municipality
|
Jul.30, 2013 |
A probationary period cannot be agreed once again between an employer and its employee who returns to it.
|
|
Case of (2016)沪0110民初2697号ruled by Yangpu District People’s Court
Labour Contract Dispute between Xiaodong Ren v. Yishitong (Shanghai) Medical Equipment Co., Ltd.
|
Mar.22, 2016 |
(1) After the completion of the probationary period, an employer cannot dismiss its employee for the reason that the employee fails to satisfy the employment requirements during the probationary period; (2) an employee’s claim for the payment of salary difference for the illicitly agreed-upon probationary period has no legal ground.
|
|
Case of (2014)普民一(民)初字第2445号 ruled by Putuo District People’s Court
Labour Contract Dispute between Shanghai Lejia CNC Machine Co., Ltd. v. Huadong Zhu
|
Jan.30, 2015
|
An employer should pay the salary difference to its employee for the illicitly agreed-upon probationary period. |
|
Case of 上(2015)沪一中民三(民)终字第1728号 rule by No.1 Intermediate People’s Court of Shanghai municipality
Labour Contract Dispute between Shanghai Oriental Ladder Bilingual School (Non-State) v. Jingyuan Xue
|
Oct.12, 2015 |
An employer has no claim that as the payment of salary has not changed, the probationary period is not performed. |
|
Case of（2017）京民申1290号 ruled by High People’s Court of Beijing
Labour Dispute involving Fazhijin Information Technology Co., Ltd.
|
May.31, 2017 |
Extending the probationary period even after negotiation and mutual agreement is still illicit. |
|
Case of（2015）沪一中民三（民）终字第1210号 ruled by No.1 Intermediate People’s Court of Shanghai Municipality
Labour Contract Dispute between Shunwei Chen v. Shanghai Huakuo Holding Group Co., Ltd., and etc.
|
Oct.8, 2015 |
Notice in advance of 30 days and payments of financial compensation are not required for rescinding the labour contract during the probationary period on the ground of the employee’s failure to satisfy the employment requirements.
|
