Can the Employer Repent After Issuing the Notice of Termination?

Company A issued a Notice of Termination (“1st Notice”) to Sheng 30 days in advance, in accordance with item 2 of Article 40 of the “Labor Contract Law”. 15 days later, Company found that Sheng would retire after 30 days, so it sent another written notice to Sheng. The written notice stated that the company would withdraw the 1st Notice, and the labor contract would continue to perform until Sheng had accomplished the retirement procedure. 30 days after the 1st Notice, Sheng asked Company A to pay the economic compensation. Company A refused to pay. Finally, the court ruled that Company A should pay the economic compensation.

Then, once an employer has issued the Notice of Termination, whether there is any chance for the employer to withdraw?

It is possible for an employer to withdraw the Notice of Termination, but the possibility depends on the timing for the withdraw, and the specific situation.

Article 96 of the “Contract Law” stipulates that a party demanding termination of a contract in accordance with the agreed or statutory termination right, shall notify the other party. The contract shall be terminated upon the receipt of the notice by the other party. The “General Principles of Civil Law” has further prescribed that a declaration of will made by dialog shall become valid at the time when the opposite party knows the content of will; a declaration of will not made by dialog shall become valid at the time when it reaches the opposite party.

Therefore, if Company A could withdraw the 1st Notice before it reached Sheng, then the 1st Notice had not become valid, which means Company A could repent. However, in this case, since the 1st Notice has reached Sheng, which has become valid, and Sheng could ask Company A to pay the economic compensation.

In practice, the judicial authorities hold a positive view on the validation timing of such notice. But for the economic compensation, there are different opinions. For example, in the case (2011) Sui Zhong Fa Min Yi Zhong No.272, the court held that the employer withdrew the notice, the employee did not lose his job and there was no salary loss; according to the principle of “No Loss, No Compensation”, the employer did not have to pay the economic compensation.

Another opinion is that the employer has dissolved the labor contract in accordance with Article 40 of the “Labor Contract Law”, although this is a right in formation, in consider that the contract will be dissolved 30 days later, even the employee has received such notice, the rights and obligations of both parties have not changed, and the legal consequence of the dissolution of a labor contract has not occurred yet, if the employer withdraws the notice within the 30 days, the notice will not be valid, the employee shall implement the labor contract continuously. However, if such withdraw has brought any loss to the employee, then the employee shall be entitled to claim for the loss. (Quoted from “Whether the employer could withdraw the Notice of Termination” published in the People’s Court News, Feb.6 2005. This opinion is different from the opinion of the “General Principles of Civil Law”, so it is less possible to be applied in the future.

To sum up, before an employer decides to dissolve a labor contract, it shall have a comprehensive knowledge of the labor relationship with the employee, including but not limited to the relevant evidence, the timing (e.g. in the above case, if Company A let Sheng to work till he retires, it would save the large amount of economic compensation), and so on.