China: Terminating an Employee on Sick Leave

Ending employment during sick leave in China is legally complex. Even when an employer doubts the legitimacy of an absence, strict labour protections under PRC law leave few options beyond mutual agreement.

An Example from Recent Case Law

Background

A company faced challenges after an employee missed work without prior approval, later submitting a doctor’s note recommending two weeks’ rest and applying for four days of sick leave. The company questioned the note’s authenticity but lacked evidence to dispute it. Internal policy allowed warnings for unauthorised absence but not immediate dismissal.

Legal Position

Chinese labour law prohibits arbitrary termination. Dismissal during the statutory medical treatment period is highly restricted. Exceptions include:

• Mutual agreement
• Proven serious misconduct
• Company closure

In this case, the absence—supported by medical documentation—did not amount to serious misconduct. Without proof of fraud, unilateral termination would likely be deemed unlawful, exposing the employer to arbitration claims and compensation (estimated at five months’ salary for 2.5 years’ service).

Practical Approach

Given limited grounds for dismissal, the company pursued mutual termination. Statutory severance equalled 2.5 months’ salary, though negotiations typically result in higher payouts. This strategy reduced legal risk and preserved leverage.

Notes for Employers

• Termination during sick leave requires clear statutory justification.
• Document performance issues and follow internal policies.
• Avoid unilateral action unless misconduct is proven.
• Mutual termination is often the safest and most pragmatic solution.

This is a high-level general update only. Legal advice should be obtained on specific circumstances.