An employer who unilaterally dissolves a labor contract through a last place elimination system within the contract’s term, is breaking the law, and the employee involved can ask for either continued fulfillment of the contract or compensation, according to minutes from a judicial work conference published by the Supreme People’s Court (SPC) on November 30.
It is common for employers in China to fire an employee simply because he or she places last in a performance assessment of staff. They believe that coming last means that the worker is not up to the task, and that the Labor Contract Law states that an employer is entitled to dissolve a labor contract if the employee proves ineligible.
The problem here is that someone is bound to place last, and that doesn’t necessarily mean he or she is incompetent. “It is likely that the employee is at no fault at all,” commented the Zhejiang newspaper Modern Gold Express on December 2. “Needless to say, many companies have normalized, routinized ‘last place elimination,’ with the intent of reducing human resources costs.”
The practice has thus become extremely controversial. The SPC's stance helps bring clarity to the controversy. A labor contract can only be dissolved according to stipulations of labor law. Since Chinese Labor Law does not have a stipulation allowing the dissolution of labor contracts via last place elimination, it is illegal for employers to do so, according to the SPC.
The practice remains prevalent for two reasons: first, a lack of awareness that it is illegal, meaning many employees accept it and rarely seek legal protection; secondly, even if legal means are sought, the employer in the worst case scenario only needs to pay the compensation, which is inconsequential for employers with deep pockets, said commentator Zhang Limei on the news website eastday.com.
Zhang proposed that last place elimination dismissals must come with a higher cost for employers, if they are to be rooted out. The labor departments, for example, could impose penalties on law-breaking employers. Relevant provisions should be specified to prevent them from disguising it as the lawful “firing of people because they are not up to the task.”