On May 28, 2020, the Third Session of the Thirteenth National People's Congress voted and passed the Civil Code of the People's Republic of China (hereinafter referred to as the Civil Code), which is China’s first basic law named a Code. Many of the concerns arising from daily work can be answered by the Civil Code, known as the Encyclopedia of Social Life. Since labor law belongs to the category of social law and has not been included in the Civil Code, many labor law issues will overlap with the Civil Code. However, the Civil Code is a general law, and the labor law is a specialized law, and the specialized law has priority in its area of application. When a specialized law is not clear of a specific issue, the general law supplements it.
Nowadays, there is fierce competition for talents in the society. Recruitment is an important aspect of the war for talents and is highly valued by all companies. However, the task does not end at finding excellent talents, whether the individual is concealing any important information is a key concern in the recruitment process. Workers and employers should abide by the principle of good faith in the process of entering into a labor relationship, workers should truthfully state their relevant personal information, and employers should also be careful to protect the interests of, and reasonably trust, workers. In this regard, this article will explain fraudulent situations that may invalidate a labor contract.
1. The case
Basic facts(1): A certain Nanjing science and technology company (hereinafter referred to as the Company) published recruitment information on an online recruitment platform. The position is a sales assistant and required a professional college degree and but no work experience. On March 20, 2019, Li applied for the position of sales assistant through online registration. The online application materials submitted indicate that he has a professional college degree and has a work experience of less than a year. Based on the application information, the Company called in Li to conduct an interview, and the interview satisfied the Company. When the two parties signed the labor contract on March 27, 2019, Li claimed that his diploma was at his Singapore residence. He promised to bring it back on April 10 when he returned from Singapore to apply for the extension of his green card. Thus, the Company stated in the labor contract that Li has degree in Chinese Studies Certificate from Singapore Temasek Polytechnic Institute; the work content is that Party A arranges Party B to engage in statistical analysis of sales data and other tasks assigned by the company, that the income is equivalent to the ability and competency, and that Party A has the right to adjust the position of Party. Article 10 of the contract stipulates: “If Party B’s information is falsified or falsely described, exaggerates its own work ability or mislead Party A into hiring Party B, Party A has the right to unilaterally cancel the contract, and Party B will return the salary and other expenses it has received. Party A reserves the right to pursue Party B for legal liability. The company has the right to recover wages, bonuses and benefits that have been paid for short-term employees who left abnormally and harmed the interests of the company.” Li's performance during the probation period made the Company suspect that his academic qualifications were falsified, and they repeatedly urged Li to provide it, but Li kept failing to do so. After inquiries by the Company, it was discovered that Temasek Polytechnic in Singapore do not have a "Chinese Studies Certificate" major. The Company believes that Li used fraudulent means to sign a labor contract, which violated the true intention of the employer and constituted fraud. During the labor arbitration, Li failed to truthfully state the facts, so the company sued to court.
2. Court judgment
The conclusion of labor contracts shall follow the principles of legality, fairness, equality and voluntariness, consensus through consultation, and good faith. If one party uses fraudulent means to make the other party conclude a labor contract against its true intentions, the labor contract is invalid. In this case, the company clearly stated a professional college degree as a recruitment requirement. Li should have truthfully provided his information according to this requirement when applying for and starting the job. It was explained during the lawsuit that relevant proof of education was not submitted. Combined with the evidence from SMS of Li to the personnel of the Company, it confirms the fact that the Company had requested Li to submit academic qualifications, so it should be determined that Li did not truthfully inform his true academic qualifications when joining the Company. He clearly provided false information, which led to the Company to sign a labor contract with him and constitute a fraud. Accordingly, it should be confirmed that the labor contract signed between the technology company and Li is invalid.
3. Legal analysis
Good faith is the basis for the establishment and performance of labor relations. Article 39 of the Labor Contract Law stipulates: “Where an employee is under any of the following circumstances, his employer may dissolve the labor contract (...) (5) The labor contract is invalidated due to the circumstance as mentioned in Item (1), paragraph 1, Article 26 of this Law; or…” Article 26.1 is as follow: “a party employs the means of deception or coercion or takes advantage of the other party's difficulties to force the other party to conclude a labor contract or to make an amendment to a labor contract, which is contrary to his will;” That is, if the employee engages in fraud, coercion, risk taking or other misconduct during the establishment of the labor relationship which leads to the total or partial invalidity of the labor contract established by both parties, the employer may unilaterally terminate the labor contract with the employee. Article 148 of the Civil Code stipulates that “For a civil juristic act that is performed by a party against his or her real intention as a result of fraud committed by another party, the cheated party has the right to request a people's court or an arbitral institution to revoke such act.”
The most common frauds in the establishment of labor relations are employees’ false work resumes and academic qualifications or other important qualifications. Due to the negligence by many companies to conduct a proper background check, the fraud often succeeds in establishing the labor relationship. Later, in the performance of the labor relationship, if the company discovers the real situation and use it as reason to terminate the labor contract, whether the court will support the company’s decision or not depends on the following specific conditions:
(a) How the employer regulates this type of situation and whether it is mentioned in the employee handbook.
(b) The position and work capabilities of the employee regarding core or key positions. If the ability is good, the employer may assess it as not serious and handled it in a lighter manner. However, the company must be careful and observe prudently if there are other dishonest behaviors; if there is, the employee should be dismissed. If the employee’s ability is bad and there is a dishonest behavior, then terminate the labor contract according to the regulations.
(c) The false information provided by the employee is not closely related to the position; or although the employee provided false information, the employee is competent for the job and the company entrusted him with important tasks or gave him promotions. In some cases, an employee can even work for several years without being discovered and when the employer terminates the labor relationship upon discovering the fraud, the court may not necessarily support the legality of the termination.
In this regard, the employer can conduct a background check on the employees who are entering key positions to reduce the above legal risks as much as possible.
To a large extent, employees who provide false materials will be dismissed by the company, unless they have extremely good personal abilities that make the company willing to ignore the fact that they provide false materials. One approach is that during the probation period, the employee is found to have provided some false information and can be dismissed since the conditions of the probationary period for employment are not met. However, it should be noted that the company must set the company’s employment conditions in the Employee Handbook, and the legal base for the termination is the first paragraph of Article 39 of the Labor Contract Law. Also. After the probation period, if it is discovered that an employee provided false information it would depends on the specific circumstances. If the false information is general information on the employee background and not directly related to the performance of the labor contract, in principle the employer cannot give the highest possible disciplinary action of terminating the contract. For false work history and academic qualifications, on which based on this information the company signs a labor contract, it is a fraud as stated in the Civil Code and the Labor Contract Law, and the labor contract concluded by both parties can be deemed as invalid. The company can also, based on the strong work ability, not hold the employee accountable for providing false information. However, here the author would like to remind readers to act ethically and provide real materials when applying for a position.