Application of Company Law in labour disputes involving executives

Chinese laws, as is known, “extend the same treatment” to all factions of labour, without exception to senior managers (executives) and general employees. However, in recent years, there have been increases in labour disputes involving executives, making the application of laws a matter of concern.

In our opinion, under the framework of existing Chinese laws, labour disputes over executives can be subject to Company Law and its supporting stipulations in some specific issues (mostly related to procedural matters, such as the confirmation of dismissal formalities and remuneration), but they must still be subject to Labour Law, Labour Contract Law and supporting stipulations in other matters, such as whether economic compensation or indemnity stemming from the dissolution or termination of labour contracts has to be paid.

A case of labour dispute we handled goes as follows: The headquarters of a foreign luxuries enterprise discovered that the general manager and deputy general manager of Chinese branch were involved in malpractices and other behaviour that was seriously damaging company interests. At the request of the headquarters, the said branch removed the pair from their duties concurrently through the resolution of its board of directors. Soon, the company sent a dismissal notice to the two executives because their malpractices and gross neglect of duties saw it suffer significant losses. Subsequently, the deputy GM (Manager C) applied for arbitration, and claimed that the company’s dissolution of the labour contract violated laws and required it to pay more than RMB20 (US$2.9 million) as “special awards” as agreed in the labour contract.

Qi Bin is a director and partner, and Wilson Dong is an associate, at Xin Bai Law Firm