Supervisor = Part-time Job?

Company A found that HR manager Chen was the supervisor of Company B, and dissolved the labor contract for violating the “Employee Handbook”, in which it stipulates that an employee shall not take another part-time job. Chen insisted that Company B had not signed a labor contract with him, or given any salary to him, in addition, the supervisor role would not be involved in the daily business of Company B, so his behavior should not be deemed as a violation of the “Employee Handbook”. Finally, both the labor arbitration committee and the court decided that such behavior should be deemed as a party-time job, and Chen had violated the “Employee Handbook”.

The part-time job issue has been mentioned in Item (4) of Article 39 of the “Labor Contract Law”, in which it stipulates that the employer may dissolve a labor contract where the employee simultaneously enters an employment relationship with other employers and thus seriously affects his completion of the tasks of the employer, or the employee refuses to make the ratification after his employer points out the problem.

In judicial practice, how to determine that an employee simultaneously enters an employment relationship with other employers? The key factor is that whether the employee has provided labor to other employers. A labor contract and the payment are not the key factors. However, if an employee takes a part-time job, the employer should not dissolve the labor contract directly in accordance with Item (4) Article 39. Because this item has two precondition, which is that the employee’s part-time job shall have a seriously affects his completion of the tasks of the employer, or the employee refuses to make the ratification after his employer points out the problem. If an employer could not prove that the employee’s part-time job has meet one of the two preconditions, then the employer shall not dissolved the labor contract.

In view of this, considering the responsibilities of a supervisor, generally, it is impossible to prove that such part-time job would have a seriously affects his completion of the tasks of the employer, so if an employer dissolves a labor contract by applying Item (4) Article 39, such dissolution might be deemed as a violation of the “Labor Contract Law”.

Then, why Company A could win the case? The reason is that Company A dissolved the labor contract in accordance with Item (2) of Article 39, which says that an employer could dissolve a labor contract where an employee seriously violates the rules and procedures set up by the employer. In addition, Company A has stipulated the prohibition article for part-time job in the “Employee’s Handbook”.

However, normally a company’s director and supervisor might not have to be involved in daily business, there are different opinions on whether an employee takes the supervision role in other companies shall be deemed as a part-time job.

In the current judicial practice, normally such behavior shall be deemed as a part-time job. There are many reasons, such as, the employee has violated the loyalty obligation; or the employee has limited time and energy, such behavior would affect his completion of the tasks of the employer; or some individual cases have analyzed that the employee has a labor relationship with the other company by applying Article 51 of the “Company Law”, which prescribes that the board of supervisors shall include shareholders’ representatives and representatives of the employees at an appropriate ratio to be specifically prescribed in the bylaw. For example, in the case (2017) Lu 0613 Min Chu No.710, the court held that Zhang was a supervisor of Shangji Company, which only had 1 shareholder, since Zhang was not the shareholder, he should be deemed as the representative of the employees.

Therefore, from the perspective of the employer, it is recommended to stipulate articles on the management of part-time job in the labor contract or internal rules and regulations. When dealing with such behavior, it would be better to apply Item (2) instead of Item (4) of Article 39 of the “Labor Contract Law”.