In a recent case reported on June 9, 2014, an employment disputes arbitration tribunal in Xiamen ruled that a company’s unilateral termination of employees for participating in a strike was illegal. The arbitration tribunal held that the basis for the strike was reasonable and therefore the strike did not constitute a serious violation of company policy.

The company planned to relocate its Xiamen factory in January 2014. When the company announced its plan to compensate employees for the relocation, the factory employees refused to accept the compensation plan and on February 13, 2014, approximately 40 employees went on strike. The strike lasted for half a month and afterwards the company unilaterally terminated all the employees who had participated in the strike on the basis that the strike was a serious violation of company policy. The employees challenged the termination and submitted the dispute to arbitration.

The arbitration tribunal ruled the termination illegal because: (1) the disagreement over the factory relocation provided reasonable grounds for the strike, which therefore should not be viewed as an intentional violation of company policy in bad faith; and (2) the company provided insufficient evidence to prove that the employees conducted the strike in an inappropriate manner, e.g., prevented other employees from returning to work, verbally or physically abused anyone, etc.

While Chinese and some international media hailed the case as being the first of its kind, this is actually not true. For example, courts in Dongguan (in 2004) and Foshan (in 2007) have issued similar rulings in relation to termination of striking employees. In contrast, courts in other cases have ruled in favor of the company if they believed that the reason for the employee strike was not reasonable. For example, in a 2010 Shanghai case, the court ruled that termination of striking workers was lawful in the case where the company was willing to compromise with workers demands for improved working conditions, but employees continued their strike to demand reinstatement of two fired managers.

In practice, arbitration tribunals and courts have been examining disputes over the termination of employees for participating in strikes through this “reasonableness lens” for quite some time. If the tribunal or court believes the strike is reasonable (e.g., conducted in response to legal noncompliance or abuse of employee rights by the employer), the tribunal or court will be more likely to hold that the termination of employees for participating in the strike is illegal. On the other hand, if the tribunal or court believes that the strike is based on unreasonable grounds or the employees conduct themselves in an inappropriate manner (e.g., destroy property, obstruct other employees from returning to work, threaten management, etc.), the tribunal or court will be more likely to hold that the termination of the employees for participating in the strike is legal.