As punishment for his early contract dissolution, the company removed Mr. Cai’s name from the company register.  This exasperated the employee, so he sued the company for reputation infringement. Did the infringement caused by the company exist? Will the Court accept and hear the case Mr. Cai filed? Lawyers and experts all express their own opinions.

I. Case Playback

Mr. Cai was hired by a company at the beginning of May. Both parties agreed on a three-month probation period. After 3 months, the company neither signed the official labor contract with Mr. Cai nor gave him a clear explanation as to why. Losing confidence in the company, Mr. Cai stopped going to work at the company beginning on August 28th that same year. A few days later, Mr. Cai received a letter from the company informing him to come to the company to handle the dismissal procedures in three days.
Because they had not signed a labor contract, how were the parties to handle the dismissal procedures? So, Mr. Cai signed a labor contract with the company. The contract term was one year with a salary of RMB 600 per month. Now that the contract was signed, Mr. Cai hoped that the company would process his employment, dismissal and social security procedures in due course. However, what he received was an irredeemable rubber check.
Having no alternative, Mr. Cai applied for arbitration at the District Labor Arbitration Committee with the deferred labor contract in hand, demanding that his employment and dismissal be registered and recorded in the files, three days wages equaling RMB 120 for the days between Aug 25 and 28 and other additional economic losses.
After the hearing, the Arbitration Committee supported Mr. Cai's request. However, the company did not accept the arbitration judgment and raised an action to the District Court. After the hearing, the District Court overruled the company's appeal denying payment for the three days' wages and other losses. The company then appealed. The Court of Appeals also overruled the company’s appeal and affirmed the original judgment.
Right at that moment, the company made a decision that Mr. Cai had violated company rules. The reason was that Mr. Cai had been absent from work since August for 40 days without cause. This was a severe breach of company regulations so they decided to remove Mr. Cai's name from the company register, and this dismissal punishment was to be put in Mr. Cai's personal file.
Hearing about this, Mr. Cai was extremely angry. He thought it would end his life. The fact that the company put such a dismissal punishment in his personal file was tantamount to cutting off his livelihood. Nowadays, it was so hard to find a job. Which company would hire a person whose name was stricken off the company register? Furthermore, he was not an employee of the company when the company gave him this punishment. The company had no right to punish him for regulation violations. Then, he sued the company again for defamation.
Will Mr. Cai win the case again after suffering so much tough treatment? Is the dismissal punishment a reputation infringement? How should the parties deal with this situation in a more appropriate way?

II. Legal Background

The right of reputation refers to the legal right that citizens or legal subjects enjoy to protect their reputation. Article 101 of the General Principles of the Civil Law states: “Citizens and legal persons shall enjoy the right of reputation. The character and honor of citizens shall be protected by law, and the use of insults, libel or other means to damage the reputation of citizens or legal entities shall be prohibited. Disputes of reputation infringement often arise between employees and employers, especially when employers impose certain strict punishments on laborers, such as name removal or putting one’s serious fault on record, etc.” Many employees think these actions infringe upon their reputation, while employers think they are merely lawfully managing the enterprise. It is difficult to decide whether or not reputation infringement or defamation has occurred between employees and employers.
A Letter of the Supreme Court Answering Some Questions about Trying the Case of Reputation Right provides that “the confirmation of defamation involves the fact of infringement of reputation, the illegal act of the doer, the causal relationship between the doer’s action and the defamation consequence, and the subjective determination of fault.”
The employers' subjective fault and the nature of the action are the nuclei around which confirmations of defamation revolve. Aiming at clarifying these difficult points, the Supreme Court provided some explanation in Item 4 of the Judicial Interpretation of Supreme Court on Several Problems about Trying the Case of Reputation Infringement issued in 1998. It says that “If parties sue state organs, social organizations, enterprises and institutions or other bureaus for conclusions or managerial punishments that infringe upon the parties' right of reputation, the Court will not accept and hear the case.” Obviously, whether or not the unit’s conduct is “managerial” behavior becomes the boundary deciding whether the Court will accept and hear the case. The Court will not accept and hear the case if the employer’s behavior is, indeed, managerial while the Court will accept and hear the case if it is not.
How then are we to identify managerial behavior? The unit’s execution of its management rights should be based on presence of a legitimate labor relationship. So whether a labor relationship exists is an important basis on which to identify whether unit actions can be considered managerial and upon which the Court can decide whether to accept and hear the case.

III. Lawyer Debate

How can they dismiss him, while he is not an employee of the unit?
Lawyer Wang Cheng from Shanghai Jie Hao Law Firm in support of Mr. Cai

First, from May to August, Mr. Cai did come to work. The unit was at fault for not signing a labor contract with him. Without a written labor contract, it was factual labor relationship. Without a written contract, the Law entitles laborers to dissolve the labor relationship at any time. Mr. Cai dissolved the labor relationship with the unit in the form of not going to work at the unit beginning at the end of August. In this light, the labor relationship only existed between May and August.
Second, in order to process the employment and dismissal procedures, the unit signed a labor contract with Mr. Cai afterward. Since the labor contract was signed after August, Mr. Cai was not able to predict in August that a labor contract would be signed. This labor contract was only signed for the purposes of processing the employment and dismissal procedures. It did not indicate that Mr. Cai was willing to rebuild the labor relationship with the unit. The unit had full knowledge that Mr. Cai was not working in the unit when the contract was signed. Therefore, the unit had no right to remove his name from the register while he was no longer an employee of the unit, not to mention writing the decision into his personal file.
Third, from May to August, the unit did not lawfully process and pay his social benefit contributions. Mr. Cai certainly had the right to protect his lawful rights and interests. The Arbitration Committee and the Court both supported Mr. Cai's claim.
Fourth, when the relationship and disputes between Mr. Cai and the unit were about to come to an end, the unit conducted an alarming retaliatory act. The unit suddenly removed his name from the register on the grounds of his absence from work for 40 days after August and recorded the decision in his personal file. Such acts would make new units mistake Mr. Cai for a person who disregards the law and lacks discipline and would therefore choose not hire him. This posed a huge obstacle for Mr. Cai’s job search, infringed upon his reputation, impaired his career development and even caused problems in his daily life.

The dismissal did not infringe upon his right of reputation.
Lawyer Zhang Zhihong from Shanghai Zhen Dan Law Firm in support of the company

I think the company's decision to remove Mr. Cai's name from the company register was lawful and did not infringe upon his right of reputation.
1. The company signed a one-year labor contract with Mr. Cai. No matter whether it was signed after the fact, it actually confirmed the original labor relationship in the form of a written contract. The company had a legal right to punish a laborer who broke the rules.
2. Now that Mr. Cai had signed a labor contract with the company, he was obligated to loyally perform the contract. After deciding not to go to work in the company, Mr. Cai signed another one-year labor contract. This shows that he was willing to work in the company during this time, otherwise why did he agree to sign for one additional year? A three-month contract is long enough to process employment and dismissal procedures. Now that the contract was signed, he ought to perform according to the contract and should not be absent from work without reason.
3. During the factual labor relationship, Mr. Cai could simply terminate the relationship with the company by going away. But after the contract was signed, Mr Cai had to submit a request for dismissal of the contract 30 days ahead of schedule. He should not terminate the relationship in the form of a continuous absence from work. Such an action can only be regarded as absenteeism. This was the laborer's own fault.
4.As Mr. Cai does not deny that he did not go to work during that time, it was legal for the company to remove his name from the register and record the punishment in his personal file according to the law and the company's regulations. Of course, his actions did not constitute absenteeism before the contract was signed no matter whether they occurred during the agreed contract period or not.
5. Because the punishment was legal, the company's conduct does not constitute an infringement of Mr. Cai's right of reputation.

IV. Final Judgment

After a hearing, the Court found that, when the dispute happened between Mr. Cai and the company about the termination of the labor relationship, although Mr. Cai sought remedies via Labor Dispute Arbitration, the company had made the dismissal decision before the decision of Labor Arbitration was legally confirmed. This should be regarded as an internal administrative action towards the company's employees. Accordingly, the Court decided not to accept Mr. Cai's case.

V. Expert Evaluation

The existence of a labor relationship affects the determination of reputation infringement.
Professor Dong Baohua from East China University of Political Science and Law

In this case, whether it constitutes defamation depends on whether the company had the right of management when they dismissed Mr. Cai. The company can only obtain the right of management over Mr. Cai through establishment of the labor relationship. Therefore, a labor relationship is the precondition of the confirmation of defamation.
Was there a labor relationship between Mr. Cai and the company? I don't think so. First, Mr. Cai and the company had a factual labor relationship. The company failed to sign the labor contract after three months of probation, so Mr. Cai stopped going to work. He also processed the transfer procedures. This means that both parties agreed that the labor relationship was finished.
Second，the contract signed after-the-fact did not bring about a new labor relationship. The additional contract was signed to facilitate the procedures of employment and dismissal which has been confirmed by two arbitration judges.
Third, if the company thought that the after the fact contract was valid, then the contractual obligation was bilateral. The company did not lawfully contribute to the social insurance which means the company did not admit that both parties had a labor relationship. Therefore, according to the Judicial Interpretation of Supreme Court on Several Problems about Trying the Case of Reputation Infringement, we can say that the company did not have the right to remove Mr. Cai's name from the register because they did not possess the right of management over Mr. Cai. The case should be accepted and heard as a defamation suit.
Next, we need to figure out whether the punishment of name removal constitutes legal defamation. Removing one's name from the register is a severe punishment for laborers. Once such a punishment is made, it refers to a severe “negative appraisal”.
Generally speaking, removing one’s name is a managerial disciplinary action for laborers over whom the units have right of management. As long as laborers and the unit have a labor relationship, then it is the unit's right of management to dismiss someone or not. Of course in practice, the units also may exercise their right of management illegally. Disputes brought about by such illegal actions have been handled as labor disputes, and the employees have no right to institute civil action for this. Conversely, if the unit removes one's name and records the “negative appraisal” in the personal file of a laborer who does not even have a labor relationship with the unit, it then impairs the laborer’s reputation and leads to damaging facts that lower his social assessment.
Summarizing this case, the company made the mistake of defaming Mr. Cai. Before the punishment, Mr. Cai received a letter instructing him to conduct the transfer procedures in three days, which means the company had admitted that the labor relationship was over. The unit still implemented the punishment even after the Labor Dispute Committee confirmed the dissolution of the labor relationship and ruled the company should complete the employment, dismissal and social insurance procedures. This means that the unit had subjective intention. Conversely, if the labor relation was not dissolved, why did the unit fail to process the employment procedures and contribute to social insurance?
It is illegal for the company to remove someone's name from the register who did not have a labor relationship with the company. It constituted reputation infringement when the company wrote this punishment into the personal file. Furthermore, the evidence shows that the company deliberately removed his name from the register while knowing they had already dissolved the labor relationship. Again, this shows the company had subjective intention. Of course, direct causality exists between the infringement fact and the infringement act.
To sum up, according to the Letter of the Supreme Court Answering Some Questions about Trying the Case of Reputation Right, we can judge that the company’s action met the requirements of reputation infringement and the company thus should bear the legal liability. Obviously, the final judgment in this case was wrong.
In the Labor Contract Law, there are more specific provisions about auxiliary obligations of the unit after dissolution or termination of the labor relation. For example, Article 50 states “The unit shall carry out the transference of the laborer’s file, social insurance and unemployment registration.” Yet it is a pity that the new law does not mention the right of reputation.

From LexisNexis