The Application of the Principle of Good Faith in Employment

Article 3 of the “Labor Contract Law” stipulates that the conclusion of a labor contract shall follow the principle of good faith. Furthermore, Article 26 stipulates that a labor contract which is concluded by use of fraudulence is invalid. The above-mentioned provisions are the main legal basis for the application of the principle of good faith in employment.

However, if an employee has provided fraudulent information while concluding a contract, when his employer found out such fraudulence, and claimed the contract is invalid, or rescinded the contract with the reason that the employee had violated the internal rules and regulations, and broken the principle of good faith, it is a pity that some courts may not support the employer. For example, in the “2019 Typical Cases of Protecting the Rights and Interests of Female Employees” issued by Guangzhou Intermediate People’s Court, in one case, the court states that an employer had illgeally rescinded the contract with a female employee who had hidden her marriage information. In addition, in some cases, the employees had provided fraudulent academic certificates or resumes, even internal rules and regulations have prescribed that the contract could be rescinded due to such behaviors, different courts may have different opinions.

How could employers manage such behaviors properly?

Article 8 of the “Labor Contract Law” has set the scope of the information that an employee should turthfully share with the employer; the scope of such information shall be the basic information directly related to the implementation of a contract. Normally, the marital status, fertility status and some other personal information would not be deemed as the basic information; and the health status, knowledge, education, work skills, work experience, professional qualifications and so on, might be deemed as the basic information. In individual cases, the courts would decided the scope based on the position, job requirements, and the impact on the performance of the contract and etc.. For example, if an employer rescinded a contract due to the employee had provided a counterfeit CPA certificate for an accounting position, normally the court would support the employer, for the reason that the certificate plays an important role in the decision on hiring this employee for such position.

In practice, there are disputes on whether an employer could rescind a contract with the employee who had provided a counterfeit acdemic certificate. For example, an employee is a porter, and he provided a counterfeit acdemic certificate, his employer rescinded the contract, normally the court would not support the employer, because the acdemic certificate is not the decisive factor for the employer to decide to hire him. Conversely, for a position that lists academic certificate as an employment requirement, an employee was hired and performed very well for many years, one day, his employer found out the fraudulence, and then, rescinded the contract with the reason that the employee had broken the principle of good faith, however, different courts may have different opinions. For example, in the case (2014) Tongzhong Min Zhong Zi No. 0758, the employer rescinded the contract with an employee who had worked 10 years for this employer, with the reason of fraudulence. The court held that, the employer had the obligation to review employees’ certificate, and a counterfeit academic certificate may affect the validity of a contract for a reasonable period of time, so it is not appropriate for the employer to take the counterfeit academic certificate as the reason to rescind a contract after the contract had been implemented for a long time. In the case (2016) Hu 01 Min Zhong No. 12926, the employer rescinded the contract with an employee who had worked 12 years for this employer, with the reason of fraudulence. The court held that, the employee has violated the principle of good faith, and the employer could rescind the contract with this reason. In our point of view, if such employee has other disciplinary violations, especially involving integrity and ethics issues, the employer could list those violations as the reasons to rescind the contract, by which the employer could obtain more support from the courts.

For those dishonest behaviors during the employment, such as the fraudulent sick leave, reimbursement and etc., if the internal rules and regulations have set any behaviors which have violated the principle of good faith should be deemed as severe disciplinary violations, then normally the courts would support the employer. However, in the “2019 Typical Cases of Protecting the Rights and Interests of Female Employees” issued by Guangzhou Intermediate People’s Court, the court points out that the termination of a contract would not only affect workers’ basic right to live, but also affect workers’ reputation and future employment, so employers shall have a certain degree of tolerance; and the seriousness of fraudulent behaviors shall be handled carefully, for some minor cases, it would be better to issue a relatively mild sanction, and give the employee a lesson, if the employee violates again, then the employer could rescind the contract.

Besides the above circumstances, if an employee makes an agreement with the employer on not to pay social security or pay social security at a lower standard, and the employee claimed for economic compensation after many years, normally, the courts would hold that the employee has violated the principle of good faith, and reject the employee’s claim.

It is worth to mention that the “Civil Code” has come into force in 2021, and Article 7 of this law has set the principle of good faith as a basic principle in civil relationships. We believe that the main opinion would tend to implement the principle of good faith more in regulating dishonesty behaviors in the future.