In a case reported on 29 August 2013, the Shanghai Jing’an District People’s Court dismissed a foreign national’s claim for reinstatement, reasoning that the foreign national’s work permit had expired and therefore he was unable to lawfully perform his employment contract in China.
The foreign national had been working for the company since 1 September 2009, and his work permit expired on 21 September 2012. On 6 February 2012 the company gave a termination notice to the foreign national and paid RMB362,500 (US$59,400) in lieu of the three months’ notice stipulated in his employment contract. The foreign national brought the dispute to the labour commission on 5 June 2012, requesting reinstatement and back payment of his regular salary up to the date of reinstatement. The labour tribunal supported the foreign national’s requests and the company filed a lawsuit with the Jing’an District People’s Court.
The court ruled that by the time of the trial the foreign national’s work permit had expired, and so his employment contract could not be performed because he was no longer eligible to lawfully work in China. Considering the company had paid three months’ salary in lieu of notice, the court rejected the foreign national’s claims for reinstatement.
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Under PRC law, a foreign national must obtain and maintain a valid work permit – and residence permit – to lawfully work and reside in China. Theoretically, the employer is responsible for renewing a foreign national’s work permit upon its expiration if the employment contract is still in effect. This case shows, however, that it is possible for a company to essentially be able to unilaterally terminate a foreign national by not renewing the foreign national’s work permit during the term of employment. Even if the court later finds the termination to be wrongful, this case shows at least some courts will not grant reinstatement but only order damages, if any, though not all courts may necessarily follow this line of reasoning.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com
