Case Study- Labor Law

Is it illegal to fire an employee if he/she operates an online shop during working hours?

Background

Miss Zheng is an employee of an e-shop company and she signed an employment agreement on April 23rd, 2014 with her employer for a term of five years. In this employment agreement, there is a special clause that as long as the employment agreement is still valid, Miss Zheng may not be engaged in any same or similar work or business as her work in the e-shop, otherwise Miss Zheng shall pay to her employer RMB50 thousand as penalty.

On May 9th, 2015, Miss Zheng is running her own online shop during the working hour and was caught by her boss.

Question

Does the employer have the right to terminate the employment agreement with Miss Zheng and claim the RMB50 thousand penalty fee?

Analysis

The employer does have the right to terminate the employment agreement with Miss Zheng and claim the RMB50 thousand penalty fee.

The reasons are:

  • Pursuant to PRC Labor Law, the employer has the right to terminate the employment agreement if an employee seriously violates the labor rules in working hours. In our case, the employment agreement between Miss Zheng and her employer expressly states that Miss Zheng is not allowed to run an online shop during working hours;
  • The RMB50 thousand penalty fee is agreed by both Miss Zheng and her employer;

However, we might as well remind the employer to keep evidence for Miss Zheng’s wrong behavior such as internet record, supervision video and etc, otherwise, the employer might not be supported by the court if a lawsuit is activated.