I. Case Playback

Lao Wang was an old worker at a state-owned enterprise. The unit arranged for him to do work which required energy and strength. Due to a lack of energy and generally feeling unwell, Lao Wang submitted a sick leave application to the unit demanding sick leave wages. The unit advised Lao Wang to wait for a job at home rather than submit the sick leave application. The unit promised to pay Lao Wang a living expense of RMB 269 per month, plus his social insurance premium contribution. Though the sick leave compensation was much higher than the living expenses offered while he was waiting for a new job, Lao Wang had no choice but toaccept the advice of the unit.
While Lao Wang was waiting for the new job, he started his own small business and led a good life. He did not go to the bank to check whether the unit had deposited the promised living expenses. He did not know that, after waiting four years for a new position, the unit had unilaterally stopped paying the living expense and the social insurance premium contribution. Later, Lao Wang suddenly received a dismissal letter from the unit stating that the labor contract between Lao Wang and the unit was dissolved. Lao Wang could not accept the decision and requested that the labor relationship be resumed. Lao Wang and the unit could not reach an agreement. Lao Wang applied for arbitration and later filed a petition with the Labor Arbitration Committee.
During the debate, the unit pointed out that it never signed a so-called “Waiting for a Position” agreement with Lao Wang; Lao Wang had no reason to wait at home because the unit had not promised him a new position. The unit dismissed him because he did not report to work and was continuously absent. At that time, the unit did not know where Lao Wang lived. After several futile attempts to locate him, the unit had to announce its dismissal decision in the Xinmin Evening Newspaper.
 Even if Lao Wang wanted to file a lawsuit, the statute of limitations would be calculated based on the date the dismissal decision notice became effective. Apparently, this time limit had been exceeded. What’s more, according to Article 37, Sub-Article 2 of the Shanghai Labor Contract Regulation, a labor contract may be terminated provided that one party to the contract does not perform the contract in practice for three months or more. As a matter of fact, the period of factual non-performance had already exceeded three months. The labor relation could be legally terminated so the unit did not agree to resume the labor relationship.
Lao Wang pointed out that: first, the unit had previously paid the agreed upon living expenses, which was proof that he was waiting for a new post instead of being absent from work. Second, it was the unit which advised him to wait for a new job at home and then stopped making the living expense payments. The unilateral action by the unit caused the non-performance of the labor contract period to exceed three months. Therefore, the unit was at fault and had no legal basis for terminating the labor contract. Third, since the unit mailed the dismissal notice, it must have known his address. If the notice could be delivered by mail, then the public announcement should be invalid. Therefore, the statute of limitations should not be calculated from the date of the announcement; instead, it should be calculated from the date Lao Wang received the dismissal notice.
Both parties had their own reasons. Which one is right? Did Lao Wang really have legitimate status to wait at home for a new post? Was the unit entitled to terminate the labor contract according to Article 37 of Shanghai Labor Contract Regulation after it stopped making the living expense payments? Was the public announcement by the unit valid? From when could the statute of limitations be calculated?

II. Legal Background

There are three main concepts at play in this case: absenteeism without reason, factual non-performance of the labor contract and waiting for a new job posting.
Absenteeism without reason means that the laborer is absent from work during working hours without permission or legitimate reasons. Absenteeism without reason is a serious violation of the rules. In the Regulation on the Award and Punishment of Enterprise Workers promulgated by the state government in 1982, Article 18 provides that “the enterprise is entitled to dismiss laborers who are absent from work without a legitimate reason for more than consecutive 15 days or more than 30 days over one year and do not make corrections after being educated.” Article 25 of the Labor Law stipulates that when a laborer seriously violates the work rules the unit has a valid and legal reason to dissolve the labor contract. Because the Regulation on the Award and Punishment of Enterprise Worker is applied in a limited range, most enterprises deem continuous or repeated absenteeism without legitimate reason as a serious violation of the work rules. When this occurs, the unit may legally dissolve the labor contract according to Article 25 of the Labor Law.
Factual non-performance of the labor contract appears in Article 37 of the Shanghai Labor Contract Regulation. It states, “the labor contract may be terminated provided that one party to the contract does not perform the contract in practice for three months or more.” Factual non-performance does not emphasize the laborer’s rule violation but constitutes a condition under which the labor contract is terminated naturally.
Waiting for a new job posting is a special mechanism of state-owned enterprises. When the state-owned enterprise is restructuring, the staff is downsized which results in a surplus of laborers. In order to settle with these extra laborers, the unit usually advises them to wait for a new job posting at home. The unit promises to pay a certain amount of living expenses and notifies them to return to work if any new job position is available.
The one common characteristic between absenteeism without reason, factual non-performance of the labor contract and waiting for a new job posting: the laborer does not go to work. However, there are many differences between these three situations.
First, in terms of the scope of application, absenteeism without reason and factual non-performance apply to all kinds of units and laborers while waiting for a new job posting applies only to laborers of state-owned enterprises which are restructuring.
Second, in terms of conduct, absenteeism without reason is a serious discipline violation and the unit may handle it as a violation of the work rules. Factual non-performance refers to the situation where one party does not perform the labor contract, but that does not necessarily equal a violation of the work rules. Accordingly, the unit may not handle it as a violation of the work rules. Waiting for a new job position is an instruction that the unit arranges intentionally.
Third, in terms of subjective fault, laborers that are absent from work without reason do so intentionally. Factual non-performance does not emphasize subjective fault. Waiting for a new job position is a mutually agreed upon activity and has no subjective fault.
Fourth, in terms of legal consequences, absenteeism without reason may lead to the dissolution of the labor contract. Factual non-performance may result in termination of the labor contract. Waiting for a new job position is an extension of the labor contract.
In the Labor Contract Law, there are no clauses relating to the three concepts mentioned above.

III. Lawyer Debate

Job waiting was implemented, and the unit could not dissolve the labor contract.
Lawyer Wang Yong from Zhen Dan Law Firm in support of Lao Wang
 
First, I think Lao Wang was waiting for a new job posting instead of being absent from work. Absenteeism without cause means that the laborer, without permission from the unit or a legitimate reason, does not go to work. The key point is that the absent laborer has no legitimate reason. Lao Wang had reasons not to go to work. His health condition did not fit the working requirements. What’s more, it was the unit that advised Lao Wang not to work and paid his interim living expenses. As to the fact that the agreement was reached verbally, I do not think it should affect each party’s obligation or right to perform the agreement. Waiting for a new job post can be regarded as a modification of the performance of the labor contract. According to the relevant regulations in the Labor Law, even if both parties do not execute a labor contract, the actual labor relation is still protected by the Labor Law. In this case, the unit had performed the verbal agreement for more than three years which proves that the agreement to wait for a new job post was true and valid.
Second, Article 37 of the Shanghai Labor Contract Regulation does not apply to Lao Wang’s situation. It was not Lao Wang who breached the labor contract. As mentioned above, the unit breached the contract by unilaterally terminating the agreement for Lao Wang to wait for a new job posting. The unit should compensate Lao Wang for any damages incurred.
Third, it was unacceptable that the unit delivered the dismissal notice via public announcement. Obviously, the unit knew Lao Wang’s address. Thus, the delivery by public announcement by the unit was invalid. Further, the statute of limitations should be calculated from the date on which Lao Wang received the dismissal notice.

Lao Wang was not waiting for a job, and it was legal for the unit to dismiss Lao Wang.
Lawyer Liao Mintao from M&A Law Firm in support of the unit

First, Lao Wang was not subject to the job waiting system. Waiting for a new job posting is similar to being laid off; both are the methods used by state-owned enterprises to deal with laborers during a special historical period. Waiting for a new job posting is used by certain units to temporarily pause the performance of a labor contract when the units are in process of restructuring and have to settle with the extra laborers. Obviously, Lao Wang was not in the situation stated above. Lao Wang applied for sick leave due to his poor health condition. It was not initiated by the unit.
Second, a factual labor relationship is not analogous to waiting for a new job position. A factual labor relationship is provided for explicitly in the Labor Law and refers to the situation in which a laborer and employment unit do not sign a labor contract but have a labor relationship. However, there is no regulation on the factual waiting for a new job post in the Labor Law. Both terms - factual labor relationship and waiting for a new job position - should be clarified.
Third, the unit volunteered to pay the living expenses. When a laborer does not perform the labor contract, the unit may volunteer to pay the laborer certain living expenses out of sympathy. However, this can not be a reason to dismiss the fact that Lao Wang was continuously absent from work.

IV. Final Judgment

After the hearing, the Court ruled that Lao Wang had not performed the labor contract for more than three months. According to Article 37 of the Shanghai Labor Contract Regulation, the unit was legally entitled to terminate the labor contract. The judge denied Lao Wang’s petition.

V. Expert Evaluation

The actions taken by the unit are invalid.
Professor Dong Baohua from East China University of Political Science and Law

First, there were three possibilities in this case which might have led to three results. If Lao Wang did not go to work without having a legitimate reason, then it should be regarded as absenteeism without reason, which is a serious violation of the work rules. The unit could terminate the labor contract due to the reason mentioned above. If Lao Wang did not go to work for three consecutive months, then the labor contract could be terminated. If an agreement was reached where Lao Wang was to wait for a new job post, then it should be regarded as a labor contract modification, and the labor relationship would be maintained. Once a suitable job opening became available, Lao Wang could still work at the unit.
Second, how can we define the relationship between Lao Wang and the unit during the last three years? From Lao Wang’s perspective, when he applied for sick leave, it was the unit which asked him to wait for a new job post at home and paid him the monthly living expense. However, from the perspective of the unit, Lao Wang was not supposed to be waiting for a new job post. Lao Wang did not obey the work rules or go to work. Lao Wang should be then dismissed and the labor contract could be terminated due to non-performance for more than three months. Which one was right? We often quote the legal phrase, “facts as the basis, law as the parameter”. It is really hard to achieve that balance in real life. We can only say “facts as the basis, evidence as the parameter.” Once the laborer gets into a dispute with the employing unit, the facts of the dispute depend on the evidence provided by both parties. It is much like a puzzle. The facts are the whole picture while the evidence is each piece of the puzzle. Only when all the pieces are assembled will the puzzle be complete and whole.
In this case, Lao Wang did not provide sufficient evidence to prove that he had reached an agreement to wait for a new job post. Therefore, the Court judged that Lao Wang had not performed the labor contract for more than three months and the labor contract could be legally terminated. Strictly speaking, the judgment issued by the Court was not wrong. But, in my opinion, it might be more reasonable to conclude that Lao Wang was waiting for a new job post. From the evidence, the unit had paid the living expenses which could prove that Lao Wang was waiting as he claimed.
Did the unit really pay the money out of sympathy? If Lao Wang was really absent from work, why would the unit still pay the living expenses? It might be unreasonable for the unit to do that. Therefore, Lao Wang was waiting for a new job post. Later, when the unit stopped paying the living expenses, the unit should have first notified Lao Wang that he should return to work rather than notify him that he was dismissed.
Even if both parties suspended performance of the contract for a period of time, it does not constitute a condition for termination of the labor contract. In this case, it was unreasonable for the unit to deliver dismissal notice unilaterally via public announcement. A public announcement is the last resort for delivering legal documents. It is used when any other delivery method has proven futile. The unit knew Lao Wang’s address. The unit did not use other feasible methods to deliver the notice. Obviously, the unit was evading legal requirements, and the delivery method was certainly invalid.

From LexisNexis