Brief facts of the case

Mr. Liu joined a technical consulting company in August 2022, and the two parties signed a three-year labor contract. The contract stipulates that during the duration of the labor contract, Liu is stationed at the project site to provide software testing work, mainly responsible for project system testing. Subsequently, Mr. Liu provided on-site services on the project side.    

At the end of May 2023, the project team informed the company that the end date of Liu's on-site service project needed to be advanced to June 30, 2023. The company immediately notified the parties that they needed to negotiate the change of the labor contract, and at the same time expressed its willingness to negotiate with the defendant on the amount of compensation for the termination of the labor contract, but as of June 30, 2023, due to objective circumstances, the two parties could not reach an agreement to change the contract. On July 3, the company sent an email to Liu to terminate the employment relationship between the two parties. At the end of July, the company paid economic compensation to Liu in accordance with the law.   

On July 12, 2023, Mr. Liu applied to the Arbitration Commission for the resumption of labor relations and continued performance of the labor contract. Later, the arbitration commission made a ruling to restore the labor relationship terminated by the company and Liu, and continue to perform the labor contract. Dissatisfied with the arbitration committee's ruling, the company filed a lawsuit with the Dongcheng Court, requesting confirmation that the employment relationship with the company had been formally terminated. The company believes that the termination of the labor relationship was due to a change in objective circumstances, and the company had negotiated with Liu, and had paid sufficient economic compensation to Liu without reaching an agreement to change the contract. Liu believes that he did not violate any laws and regulations and the company's rules and regulations during his employment, and the company was illegally terminated and should ntinutoerform the labor relationship.    

During the trial, the company submitted a set of evidence that Liu had joined the new unit. Upon inquiry by the court, Mr. Liu recognized that he had joined the new company in January 2024 and signed an employment contract. However, Liu said that he could terminate the new contract at any time and return to work in the original company.

Heard by the courts

After trial, the Dongcheng Court held that although the company claimed that the objective circumstances on which the labor contract was signed had changed significantly due to the termination of Liu's project, the labor contract was terminated. However, "significant changes in objective circumstances" refers to changes that could not have been foreseen by the employer and the employee at the time of the conclusion of the contract after the conclusion of the labor contract, resulting in the inability to perform all or the main terms of the labor contract concluded by both parties, or the fact that if the performance continues, there will be excessive costs and obvious unfairness, making it difficult to achieve the purpose of the labor contract. Generally, it refers to force majeure caused by natural disasters such as earthquakes and fires, or major changes such as relocation of employers, transfer of assets, or suspension of production, conversion of production, or transformation (restructuring) caused by changes in laws, regulations, and policies. At the same time, the two parties did not stipulate in the labor contract that the project was a necessary condition for Liu's performance of the labor contract. Regardless of whether Liu's previous project was completed, it was not a reasonable reason for the company to terminate the labor contract, so the company's act of terminating the labor contract was illegal. The company should pay economic compensation to Liu, and both parties agree that Liu has received the compensation paid by the company and the company has actually fulfilled its obligations. However, Mr. Liu has now joined the new company, and in this case, the labor contract between the two parties no longer has the conditions for continued performance.    

In the end, the Dongcheng Court confirmed that the employment relationship between the company and Liu had been terminated on July 3, 2023. After the judgment of the case, Liu was dissatisfied with the first-instance judgment and appealed, and the second-instance rejected Liu's appeal and upheld the original judgment. The judgment in the case is now in force.

What the judge said

Article 48 of the Labor Contract Law proceeds from the full protection of the legitimate rights and interests of employees, giving employees the right to choose how to remedy the illegal termination of the employer, and can choose between continuing to perform the labor contract and claiming compensation according to their own circumstances and wishes, so as to make up for the losses suffered due to the illegal termination in the most suitable way for themselves.    In this case, after the company illegally terminated the employment relationship with Liu, Liu had already received economic compensation, and he joined the new company and signed a new labor contract, which represented his implicit recognition of the termination of the labor contract between the two parties. Now that the worker has joined the new employer, the stability and security of the new labor relationship also need to be protected, so the basis and situation for the worker to restore the original labor relationship have undergone major changes, and it is objectively impossible to restore the original labor relationship.    

The judge reminded that after an employee is illegally terminated, in addition to the above-mentioned circumstances, the restoration of the labor relationship cannot be requested in the following circumstances: First, the employer and the employee lack a trust basis for continuing to perform the labor contract. If the employer and the employee do not recognize and trust each other, it means that the two parties lack the basis of trust to continue to perform the labor contract, and it is difficult to restore the employment relationship between the two parties in this case. The second is that the operation of the unit has changed and the original post does not exist. If the company's business license is revoked, cancelled, or declared bankrupt due to the company's operational difficulties, or the original position has indeed been revoked due to the company's business adjustment, the two parties do not need to continue to perform the labor contract in this case. Third, if the employee reaches the statutory retirement age in the course of arbitration or litigation, the original employment relationship cannot be restored. Fourth, there are other conditions that are obviously not met for continued performance of the labor contract.   

In these cases, the employee may not be able to resume the employment relationship, but may still claim financial compensation. On the contrary, if there are no of the above objective circumstances that cannot be restored, the employee may request the resumption of the employment relationship after the employment relationship has been terminated illegally. The judge also reminded the employer that the relationship between labor and management is always one of solidarity and win-win cooperation, and that the promotion of enterprise development and the protection of employees' rights and interests should be combined.   

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