Termination unlawful because employer applied valid company policy in bad faith

In a recent case reported on January 14, 2014, the Intermediate People’s
Court of Suzhou Municipality, Jiangsu Province upheld an employee’s
claim for RMB 85,000 against his former employer for unlawful
termination, because the employer relied in bad faith on a valid company
policy.
The company’s policy required employees to file for and receive advance
approval to take leave and provided that taking leave without approval
was considered absenteeism. On January 30, 2013, (about 10 days before
the beginning of the Chinese New Year holiday), the employee submitted
an application to take leave a few days before and after Chinese New
Year, so that he could travel to his hometown in Hubei to celebrate the
Chinese New Year. After the employee submitted the leave application, the
company talked to him several times and tried to persuade him to stay in
Suzhou during the Chinese New Year holiday. However, in none of the talks
did the company say whether it was approving or rejecting the employee’s
leave application. The employee still left Suzhou for Hubei. Two days
later (after the beginning of the Chinese New Year holiday), the company
officially rejected the employee’s leave application on the company’s
internal network, and the employee was later terminated for absenteeism
in accordance with the company’s written policy on absenteeism.
The employee’s claim for unlawful termination was rejected in arbitration
and the court of first instance. However, the appellate court ruled the
termination unlawful by citing a violation of the principle of good faith. The
principle of good faith requires an employer to provide express approval
or rejection of an employee’s leave application within a reasonable period
of time. According to the appellate court, asking the employee to stay in
Suzhou during the Chinese New Year holiday did not constitute an express
rejection of the leave application. Instead, the express rejection was only
provided after the employee had already taken leave, which the court
concluded was not within a reasonable period of time because it came
after the start of the Chinese New Year holiday.
This case shows that a court may use the civil-law principle of good faith
to challenge the unilateral termination of an employee even when such
termination is in accordance with valid company policies.