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In January 2017, one Shanghai People’s Court uphold individual personal credit as a cause of employment termination without compensation for senior executives based on the Company Law.

In this instance, a senior executive who was appointed to become director, was delinquent on a CNY 10 million personal debt.

Declared by the Chinese Supreme People’s Court as a person with an unreliable credit rating and put on the blacklist, he was then dismissed by its company upon the reason of his personal credit, preventing him from being director.

Indeed, if the employment termination causes by the Employer are listed under the Labour Contract Law at the Article 39, none of them concern the personal credit of an employee. However, the Article 44 of the same law states that A labor contract shall be terminated under one of the following circumstances: (…) any other circumstances provided for by laws and administrative regulations.”.

Through this open-door, the senior executive who was appointed to be director, was hence also concerned by the rule stated in Company Law which sets personal debts as a restriction to work as a director, supervisor or other senior manager. Therefore, the senior executive was forbidden to be reinstated as the same position or else prohibiting personal debt as a requirement.

Shanghai People’s Court clearly took position to protect the Company’s interest. It is however advised to request from candidate to employment the disclosing of their individual credit rate and to state this rules in the company’s staff handbook in order not to rely on Company Law and People’s court for such kind of matter.

 

 

Maitre Nicolas Coster, Managing Partner 

 

Vanessa Sounthakith, Jurist