The company dismissed Steven on the grounds of sexual harassment. Steven thought that the unit’s reason was totally legally untenable. This case involves quite a new problem in Chinese judicial practice. Lawyers and experts express their respective views on sexual harassment.

I. Case Playback

Steven, an Englishman, was hired as a general manager by a consulting company in Shanghai. The term of the employment contract was two years, and the salary was quite high. One day, Steven unexpectedly received a dismissal notification, which stated, “We hereby issue this letter to inform you of your dismissal effective immediately. The reason is that you acted inappropriately and had unsuitable manners. This kind of behavior is totally unacceptable for a senior officer and also goes against the employment agreement you signed with the company.”
Actually, the consulting company made their decision because, during an international conference, Stephen allegedly sexually harassed a female Singaporean employee. His actions allegedly included sending obscene emails, exposing his body and performing obscene gestures. The company and Steven had a particular agreement that if Steven displayed dereliction of duty, dishonest performance or actions involving a lawsuit or crime that have a strong impact on the consulting company's reputation, he would be dismissed immediately.
Therefore, after an investigation, the company determined that Article 40 of the amended Law on the Guarantee of Rights and Interests of Women stipulates a definite prohibition against sexual harassment towards women. And, according to international practice, sexual harassment is flagrant delinquent conduct. Steven, as managerial staff of the company, undoubtedly performed the stated deeds and harmed the company's reputation. His actions had seriously influenced the reputation of international consulting firms. Therefore, Steven's labor contract was immediately terminated according to relevant laws and company rules and regulations.
Steven thinks that his aforementioned deeds were just an expression of admiration and praise for the female colleague with no purpose or intention of harassment. At that time, the female colleague did not express any dissatisfaction and never mentioned any serious consequences. Up to this point, the company had never initiated any related litigation about this issue. Moreover, neither party regarded sexual harassment to be the reason for the dissolution of the contract. Neither the national nor Shanghai anti-sexual harassment legislation is operational. The sexual harassment claims and the fact that the company prematurely dissolved the labor contract, therefore, lack the support of the law.
Well then, does the company have the right to dissolve the appointment contract ahead of schedule because of Steven's misbehavior?

II. Legal Background

Sexual harassment has attracted the legislative attention of many nations. Developed countries have made relevant policy and laws one after another to protect women from sexual harassment. In China, the number of sexual harassment incidents is trending upwards. It is not surprising to see women employees suffer sexual harassment during work.
The Self-government Regulation of Taipei County on Installation Location Sexual Harassment Prevention and Cure defines sexual harassment as an action in the workplace with a clear expression or implication where one makes sexual demands, or engages in language or actions with sexual implications in exchange for any conditions related to the establishment, extension and alteration of labor cooperation as well as distribution, promotion, demotion, reward, merit rating or rewards and punishments. One engages in language or actions with sexual implications that cause the other party to feel unhappy or disgusted to the extent that the actions infringe upon the other party’s freedom, personal dignity, or influence the work performance of other employees.
Regulation of sexual harassment in Mainland China can only be found in Article 40 of the Law on the Guarantee of Rights and Interests of Women. It is prohibited to sexually harass women. Women suffering from such violations have the right to complain to the unit or the appropriate department. Article 58 of this law further regulates: “For those who go against this code and engage in sexual harassment or domestic violence, if the action constitutes an infringement of public security, the victims are allowed either to demand an administrative penalty for the culprit from a Public Security Bureau or to institute a civil action in Court.”
Although this sexual harassment regulation could be regarded as a legislative improvement, these general provisions and principles are far from enough to meet the requirements for adequate punishment of the many kinds of sexual harassment that are happening in daily life. Things such as definitions and settlement standards for workplace sexual harassment are not included in relevant clauses.
At the present stage, the legislation of workplace sexual harassment is still a blank in Mainland China. Labor Law and other relevant regulations give neither a precise definition of workplace sexual harassment nor regulations for similar deeds. In the Taiwan Region, special provisions for workplace sexual harassment already exist. We should speed up the legislation of sexual harassment including workplace sexual harassment and have each of them defined and detailed.

III. Lawyer Debate

Sexual harassment should be confirmed by an official national institution with authority.
Lawyer Li Xiaoping from Shanghai Zhen Dan Law Firm in support of the laborer

I do not think the company has the right to dismiss Steven. First of all, whether Steven's actions constitute sexual harassment is under discussion. Due to the lack of a legislative definition of sexual harassment, different people have different views about sexual harassment. If Steven was sending obscene emails, exposing his body and performing obscene gestures, we cannot deem it as sexual harassment simply by these general words. We should rely on more detailed materials to come to a comprehensive judgment. What's more, it is supposed to be the Court or Arbitration Committee which decides whether it constitutes sexual harassment, not the company.
Second, in this case, the agreed dismissal clause is such that if Steven displayed dereliction of duty, dishonest performance or actions involving a lawsuit or crime that have a strong impact on the consulting company's reputation, he would be dismissed immediately. The dismissal conditions clause does not include sexual harassment.
It is obvious there is not any dereliction of duty, dishonest performance or actions involving a lawsuit or crime involved in this case. The only relevant point (if the company side insists) is that his actions may have a strong impact on the corporation's reputation. But this so-called negative influence on the corporation's reputation is vague and lacks operability. Moreover, Steven's deeds towards a female employee influenced the particular woman employee individual most. It is merely an internal impact within the company, and is not related to the corporation's public reputation.
Third, the dissolution of Steven's labor contract has no force of law. The Labor Law, the Law to Protect the Interests and Rights of Women and the Security Administration Sanction Law have no clear provisions stipulating that Steven should be dismissed if he engages in such deeds.

Sexual harassment is an offense and unlawful factual act.
Lawyer Zhang Zhen from Shanghai Shen Bo Law Firm in support of the unit

First of all, Article 24 and 25 of the Labor Law regulate the requirements for legal dissolution of a labor contract. The agreement between the company and Steven states: if Steven has engaged in dereliction of duty, dishonest performance or actions involving a lawsuit or crime, he will be dismissed right away. This agreement does not go against the law, and both sides must strictly comply. This agreement could be regarded as a term of conditional dissolution of the labor contract, according to which, if Steven performs any deed stated above, the company is then allowed to dismiss him.
Second, Steven's deeds stated above are faulty and unlawful acts. Article 42 of the Security Administration Sanction Law says, “Those repeatedly sending obscenities, insults, threats or other messages that disturb another person’s normal life shall be sentenced to police custody of less than 5 days or shall pay a fine of less than RMB 500. If the office involves circumstances of aggravation, the offender shall be sentenced to police custody between 5 and 10 days and also shall pay a fine of less than RMB 500. At the same time, Article 44 states, “Those offenders who perpetrate indecency or expose the body on purpose in public, under circumstances of aggravation, shall be sentenced to police custody between 5 and 10 days. In addition, Article 68 states, “Those offenders who spread obscene information through the computer information network, telephone and other means of communication shall be sentenced to police custody between 10 and 15 days and shall pay a fine of less than RMB 3000. In minor circumstances, the offender shall be sentenced to police custody of less than 5 days or shall pay a fine of less that RMB 500.” It is prohibited by Article 40 of the Law to Protect the Interests and Rights of Women to conduct sexual harassment against women. Women suffering from such misdeeds have the right to complain to the unit or appropriate department. Article 58 of this law further regulates: “For those who go against this code and commit sexual harassment or domestic violence, if the actions constitute infringement of public security, the victims are allowed to demand either an administrative penalty imposed by the Public Security Bureau or to institute a civil action in the Court.” Thus we can see that Steven's deed not only involves a potential lawsuit but could also be eligible for security sanctions.

IV. Final Judgment

    The Court recognized that the consulting firm dissolved Steven's contract for reasons of his offense and unsuitable behavior, namely, sexually harassing the female Singaporean employee. However, the decision whether his alleged deeds towards the female Singaporean employee constitutes “sexual harassment” remains pending. It was obviously inappropriate for the company to dissolve the contract for such a reason. According to the employment contract Steven signed with the company, the company is allowed to dissolve the labor contract without advance notice only when the employees have engaged in serious misconduct. Therefore the Court judged that the consulting company shall pay Steven his remaining after-tax salary of RMB 745,200 and his vacation allowance of RMB 74,211.

V. Expert Evaluation

The unit should cautiously determine how to determine and confirm both standards and facts in sexual harassment cases.
Professor Dong Baohua from East China University of Political Science and Law

This case is truly difficult because our current legislation about sexual harassment is almost blank. Being a traditional Eastern nation with a good reputation, China obviously has relatively high demands for people’s behavior. The problem arises when we try to deal with such immoral deeds that insult women.
Regarding sexual harassment, although our Law to Protect the Interests and Rights of Women has a qualitative definition, it is worth probing into how to quantify and weigh it. As a general law which protects the rights of women, it is hard for the Law on the Guarantee of Rights and Interests of Women to define the sexual harassment clearly.
To my way of thinking, in this case the first thing is to find out is whether or not our Labor Law can be applied because the employee in question is a foreigner. There are two ways a foreigner can be legally employed in China. One way is labor dispatching to which China’s Labor Law usually does not apply. The other way is legal employment to which China’s Labor Law can be partially applied. Therefore it is actually an open question whether or not this case should apply to the China Labor Law. Considering the character of the case, we suggest the Labor Law has partial applicability.
Second, the most important issue in this case is confirming the facts. If the unit expects to dissolve the labor contract with Steven based on the claim of sexual harassment, I personally think it would be quite difficult. For the moment, our country lacks confirmation standards related to sexual harassment. In this situation, it is quite difficult for the corporation to confirm the facts and conditions of sexual harassment.
It is questionable whether the company even has the right to confirm sexual harassment. Before the company's confirmation of Steven's alleged sexual harassment, they should let the Court confirm the yet undetermined truth through a lawsuit process. It seems quite a waste for the company to do so itself. Another problem arises when making the determination of who is allowed to initiate the legal proceedings. In China, it seems that only the woman employee who suffered is allowed to take legal action.
 Furthermore, many sexual harassment cases have been undertaken in our country, yet they are still under the exclusive jurisdiction of Civil Law and need to be confirmed through special civil proceedings. In a labor case, sexual harassment is an unproven truth for which the unit bears the burden of proof. However, the facts and evidence provided by the unit are difficult to confirm, while it is impossible to verify sexual harassment directly in Labor Court. Therefore, if the lawsuit is initiated on the basis of sexual harassment charges, I think the company's likelihood of winning is quite small.
Switching our way of thinking, on the premise of a partial application of the Labor Law, I suggest the lawsuit should be submitted on the grounds of serious dereliction of duty.  Although from an argument perspective, the company must bear a higher burden of proof than that in the Security Administration Sanction Law, as a general manager of the company, Steven's actions are job-related. At the international conference, did such conduct match with his status as general manager? Article 25, Sub-Article 3 of the Labor Law states: “A unit is allowed to terminate the contract if an employees' gross dereliction of duty causes material damage to the unit.” Steven performed such unbecoming conduct in a public place in an international conference while representing the consulting company. It could be considered a dereliction of duty. About the material damage caused to the units, I don't think it should be confined only to property, but should also include damage to other aspects like the company’s reputation. If the company initiates the lawsuit for gross dereliction of duty, the likelihood of winning will be greater.
Therefore, it is quite important for the company to determine a clear-cut method to confirm facts and conditions of this kind of case. After all, in our country, sexual harassment is a new and developing notion. In our judicial practice, we put comparatively strict limitations on the definition of this new concept, which is likely to lead to the failure of the company in this lawsuit.
The Labor Contract Law says nothing about sexual harassment. So the units have to keep on using ‘serious dereliction of duty’ from Article 39 of the Labor Contract Law as grounds for dissolution of a labor contract to increase the likelihood of winning in cases such as this one.

From LexisNexis