In March 2012, Mr. Gao, who was working for an express company’s Shanghai branch (the “Company”) as senior courier, was suspended from his duties and investigated by the Company for his conduct of using personal credit card to pay business payment. One week later, the Company terminated Mr. Gao’s employment contract upon gross misconduct, because his aforementioned conduct resulted in the Company’s loss of “swipe fees”. Mr. Gao then applied for labor dispute arbitration, requesting the Company to pay severance for wrongful termination. The Arbitration Commission upheld his request. The Company refused to accept the award and brought a suit before Shanghai Changning Court.

The Company asserted that, Mr. Gao’s conduct of using personal credit card to pay business payment resulted in the Company’s loss of “swipe fees”, thus caused damages to the Company. And this conduct is a “gross misconduct” stipulated in the Employee Handbook. Therefore, the Company’s termination is legal. Mr. Gao argued that, he had already compensated the Company for the “swipe fees”. Besides, the Company had been giving tacit consent to, even more, encouraging the employee’s conduct of using personal credit card to pay business payment, by requiring him and other employees with same position to do so, and took the initiative to provide POS machine for swiping card. Three witnesses gave their testimony to support Mr. Gao’s argument.

The Court ruled that, firstly, the Company should undertake the managing responsibility as an employer to timely discover and stop the employee’s misconduct. However, it is found by the Court that Mr. Gao’s conduct of using personal credit card to pay business payment for many times had never been corrected by the Company. Secondly, the Company, for a long time, had been giving tacit consent to the same type conduct. Neither had any employee been given disciplinary actions, nor had any employee borne any “swipe fees”, thus, Mr.Gao’s conduct should not be deemed misconduct. Lastly, the Company did not provide sufficient evidence to prove that Mr. Gao had committed gross misconduct which caused damage to the Company. In conclusion, the Company’s termination of Mr. Gao’s employment is wrongful, and the Company should pay severance in accordance with the laws.

The Company later appealed, and the court of second instance upheld the above judgment.

KMW Comments:

The Employer should undertake the managing responsibility to timely discover and stop the employee’s misconduct. Where the employer has been aware of the employee’s misconduct but has not stopped it or has even given tacit consent to it, but later dismisses the employee for committing such misconduct, the employer may face the legal risk of wrongful termination.