Termination Notification or Departure Certificate?

Maggie Jia

Maggie Jia is a partner and heads the firm’s Employment & Compliance practice. She holds a bachelor’s degree from the East China University of Political Science and Law in Shanghai (China) and a master’s degree in Economic Law from the Friedrich Schiller University Jena, in Germany. She passed the China Bar examination in 2012. Prior to joining DaWo Law Firm, she worked in Shanghai and gained experience at a well-known Chinese law firm and at De Wolf Law Firm Shanghai.

1. Following the “separation” between an Employer and an Employee, a departure certificate, similarly like a “divorce certificate”, proves that an employment relationship that was once established but now has ended;

2. Meanwhile, adhering to Article 50 of Labor Contract Law, it is a statutory obligation for an Employer to issue a certificate of termination or cancellation of an employment contract (“Departure Certificate”) at the time of termination or cancellation of an employment contract.

Article 50 of Labor Contract Law, At the time of cancellation or termination of an employment contract, the Employer shall issue a certificate of cancellation or termination of the employment contract and conduct, within 15 days, the procedures for the transfer of the Employee’s file and social insurance account.

The Employee shall carry out the procedures for the handover of his work as agreed by the parties. If relevant provisions hereof require the Employer to pay the Employee economic compensation, it shall do so upon completion of the procedures for the handover of the work.
The Employer shall have the cancelled or terminated employment contracts on file for at least two years, for reference purposes.

However, in practice, lots of Employers do not understand the connotation and extension of this legal obligation deeply, and even fail to pay attention to it. Therefore, this could perhaps lead to many labor disputes during which Employers are pronounced to compensate the Employee for damages caused by not presenting the certificate of cancellation or termination of the employment contract. We searched relevant cases on LexisNexis and found that there are as many as 703 relevant cases in the past five years.

Recently, a client of DaWo unfortunately encountered such a matter. Because the client did not issue a Departure Certificate in a timely manner, a claim was made to the ex-employee for various compensations totaling over RMB 300,000. Through the efforts made by DaWo lawyers, finally in the verdict the client was required to compensate the Employee only RMB 18,000.

Case Background

On October 1, 2016, the Employee concluded a 3-year employment contract (which would be ended on September 30, 2019) with Company A (“Company”) located in Tianjin. The work location, as agreed by both parties, was a branch company of Company which is located in Chaoyang District of Beijing. On September 30, 2019, Company A, through a face-to-face meeting, notified the Employee that the employment contract will not be renewed upon expiration and directly issued a Notification of Employment Contract Expiration (“Termination Notice”) to said Employee. But the Employee refused to sign the Termination Notice. On the same day, the Company emailed the Termination Notice as an attachment to the Employee’s email box that fully displayed the Company’s suffix.

Thereafter, the Company had repetitively informed the Employee to conduct the handover procedure and return the work computer along with other property belonging to the Company. Meanwhile, the Employee thoroughly ignored the aforementioned communication. Until June 22, 2020, the Employee went to the Company for the handover procedure and received a Departure Certificate issued by the Company at that time.

In September of 2020, the Employee applied a labor arbitration to the labor dispute arbitration commission of Chaoyang District of Beijing (“Arbitration Institution”). The Employee claimed that he could not join a new company as the Company did not provide a Departure Certificate. So, he requested the Company to compensate him for the loss of income and the loss caused by his failure to pay social insurance and housing fund, which resulted in his inability to join the new company, amounting to more than RMB 300,000. The Arbitration Institution did not accept his application because the matter applying for a labor arbitration did not belong to a labor dispute; the Employee then, filed the case to Beijing Chaoyang District People’s Court (“Chaoyang Court”) who accepted the case under a ground of “labor dispute”.

Question: can a Termination Notification issued by the Company replace a Departure Certificate?

In practice, juridical opinions toward this issue are quite debatable. This article will in detail share different views and principles behind them for an employer’s reference during employment management.

View 1: Termination Notification and Departure Certificate are the same proof of termination or cancellation of an employment contract. View 1 holds that Termination Notification and Departure Certificate are of the same nature and both of them belong as proof of termination or cancellation of an employment contract, which is required by Article 50 of Labor Contract Law. The two certificates are only different in format, but they both can effectively certify the termination or cancellation of an employment contract.

In the verdict of (2021) SU 09 MINZHONG No 1998 rendered by Intermediate Court of Yancheng, Jiangshu Province, the judge found that Termination Notification has, formally and substantially, met the purpose of the requirement that the employer to issue a certificate for termination or cancellation of an employment contract. After the previous employer issued a certificate of the same nature, it should not be responsible for its ex-employee’s failure to join a new company, which was caused by the new company’s discretional requirement to the form or name of the certification.

View 2: Termination Notification cannot replace Departure Certificate. In View 2, Termination Notification and Departure Certificate are of different nature. Termination Notification shall not replace Departure Certificate. This view believes that Termination Notification is a notice unilaterally issued by the Employer and aims to notify the Employee that the Employer will terminate the employment relationship unilaterally; while, the Departure Certificate is heavily laden in proving the fact that the employment relationship between the two parties “has ended”.

In the verdict of (2021) JING 03 MINZHONG No 18675 rendered by No. 3 Intermediate Court of Beijing, the judge believes Termination Notification merely acts as an expression of the Employer’s intent to terminate the employment contract, which cannot be deemed as a Departure Certificate. Therefore, the defense by the Employer that it is not necessary to issue a Departure Certificate to the Employee, as the Termination Notification has already clarified that there is no longer an employment relationship between these two parties, is without legal basis.

Besides, the contents, forms, and application scenarios of the two documents are usually diversified. In respect of applicable laws and common practices, when joining a new company or handling relevant administrative procedures (such as receiving unemployment benefits, transfer of social security and housing funds, application or deregistration of working permit, etc.), Employees will often be required to provide Departure Certificate instead of Termination Notification. Therefore, a lack of Departure Certificate will inevitably have an adverse impact on an Employee when entering a new company or dealing with relevant procedures.

DaWo’s View

Subject to Article 50 of Labor Contract Law, the Employer is legally obliged to issue a certificate for termination or cancellation of employment contact at the same time when either of them occurs. The aim is to verify that the employment relationship does not exist any longer between Employee and Employer, and provide convenience for the Employer to be re-employed as soon as possible.

However, in practice, many Employers fail to do that in strict accordance with the law, and may “postpone” it until all departure matters will be finished, especially after the Employee completes the handover procedure. It is understandable that from the Employer’s perspective, this is the actual stage where the employment relationship between the two parties really “ends”.

In fact, the certificate issued by the Employer for termination or cancellation of employment contract is only with the function to show that the Employer unilaterally believes or recognizes that the labor relationship between the two parties will no longer exist, but it cannot “prove” that there is no labor dispute between the two parties during or after the employment relationship. Whether the Employer issues the Departure Certificate it will not have any impact on any labor disputes that may arise between the two parties, which shall be determined and ruled in accordance to the facts and laws.

Based on the above analysis, we believe that whether the Termination Notification can replace the Departure Certificate cannot be generalized. It depends on whether the content of the Termination Notification in a specific case can achieve the purpose of proving that the Employment Contract has been terminated or cancelled; and, on whether its contents comply with requirements of Article 24 of Implementing Regulations of the Labor Contract Law, e.g., term of employment contract, date of termination or cancellation of employment contract, position, years of service in the company, etc.

In addition, whether the new employer or administrative authority can accept the Termination Notification as a proper certification document is also an important factor to determine whether it can replace the Departure Certificate. It should be noted that in our opinion that the burden of proof for this point should be borne by the Employee.

If the Termination Notification does not meet the requirements of the Departure Certificate in fact and missing of its results in an adverse effect on the Employee when joining a new company or handling administrative procedures, the previous Employer will probably be liable for the losses suffered by the Employee.

DaWo’s Suggestion

  1. Issue a Departure Certificate to the Employee in a timely manner, at the time of termination or cancellation of employment relationship, regardless of whether Termination Notification has been issued to the Employee;
  2. The Departure Certificate shall correctly state the term of employment contract, the date of termination or cancellation of employment contract, position held, and the years of service within the company;
  3. In the Departure Certificate, the Employer may list information other than above, such as the reason for departure. But it is suggested that the statement should be as true and objective as possible to avoid ambiguity or the risk of labor disputes;
  4. If the handover procedure is not completed due to various reasons, suspending the payment of relevant economic compensation could be a balance between Employer and Employee; whilst the Departure Certificate shall still be issued in time as the No. 1 suggestion.

If you have any contract or labor related queries, please feel free to contact us at DaWo Law Firm.

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