Is it illegal to give too much financial compensation?

Abstract: Giving less financial compensation for dissolving and terminating labor contracts is a violation of the law, but what if it is too much? Some people think it is also against the law. This paper analyzes simply from the production of labor law and the general principle of validity of mandatory norms, whether it is a violation of labor law to give too much financial compensation.

Keywords: labor law | financial compensation

Recently, the announcement that Stanley Best Precision Manufacturing (Shenzhen) Co., Ltd. dissolves its plant caused a lot of praise, mainly because the financial compensation is higher than the legal standard, and employees leave happily.

An online search shows that Stanley gives the compensation plan:

Those who are willing to go to Suzhou can raise their wages by 30%, if they are not willing to go, according to "the compensation plan is' N + 1 'bottom,' N 'according to the average wage; there is also a seniority allowance! One of the employees has been in Shenzhen since the day Stanley was founded. In order to show his dedication, the company gave him 600,000 dissolution compensation, which is already very happy for him.

Even those who have been employed for just over eight months have received more than 20,000 compensation, and the staff dormitory can live until the end of next month, which is very friendly to the workers.

However, there are also dissenting views about the high compensation, who question its illegality. The title of the article "Shi Shuo Labor Law" on November 1, 2020 is "No! Stanley's dissolution is illegal to pay too much financial compensation! "The article says:

Payment of financial compensation in excess of the statutory standard can also imply problems. The term of financial compensation is "shall" and can be based on mandatory provisions (although I do not agree, it can be understood if government departments want to intervene). After all, mechanical provisions of the Labor Contract Law are invalid if they violate mandatory provisions, and Article 153 of the Civil Code of the People's Republic of China is much more scientific.

It is unanimous that the employer's payment of financial compensation for terminating the labor contract is lower than that stipulated by law. However, it is inexplicable that the law is higher than that stipulated by law. This article intends to make some responses to this article.

First of all, let's talk about the statutory functions of the labor inspection agencies.

The above article begins with the suggestions of the author of the headline "South Asian Subcontinent". The suggestion is that "if the US enterprise Stanley has violated the Labor Contract Law and overpaid financial compensation, the labor inspection agency shall order it to rectify."This article is actually a suggestion to the labor inspection agency, not a report that the labor inspection agency has exercised its inspection authority.

Item 4 of Article 85 of the Labor Contract Law authorizes the labor administrative department to order the employer that fails to pay financial compensation according to law to make the payment within a time limit. Therefore, the labor administrative department has the power to supervise, inspect and correct the illegal acts of failing to pay financial compensation according to law.

Second, does the labor law restrict working conditions above the statutory standard and favorable to the worker?

Few people, by common sense, would consider it illegal. From the perspective of mandatory provisions of law, the above article argues that high standard of payment of financial compensation is a violation of mandatory provisions. The reason is that "paying financial compensation above the statutory standard does disrupt the market, making it more difficult for cash-strapped businesses to lay off workers and easily leading to employee comparisons."So, in order to be fair and reasonable, for social stability and long-term stability, the intervention of the human resources and social security department is also normal. "

Such a claim is untenable. The labor law interferes with labor conditions from the point of legislation not to restrict workers, but to restrict employers. Factory legislation in the United Kingdom has been in place since the 14th century, when employers were restricted from paying more than a certain standard. This was the case with factory legislation for a considerable time thereafter. So, although early factory legislation also dealt with working conditions, it was not considered a modern labor law because it was directed not to protect employees, but to protect employers. It was not until the beginning of the British Factory Act in 1802 that the legislative starting point was reversed, by restricting working hours, the age of child labour, the minimum wage, etc. that marked the birth of labor law.

Today, labor law is still the lower limit (not the upper limit) for state interference in labor relations. For example, labor law has a minimum wage, but no maximum wage. It is not considered illegal for enterprises to pay more than the minimum wage. It is considered illegal for enterprises to pay less than the minimum wage. In the same way, state intervention focuses on statutory compensation, as well as the lower limit, not the upper limit, of the number of years of compensation and the base of compensation. Of course, there is an upper limit on compensation for workers who exceed three times the average wage of local workers in the previous year. Moreover, there is no upper limit on compensation.

Labor law does not interfere with employers' behavior when compensation is given for rescission or termination of labor contract other than the statutory compensation situation. And the labor administration almost always appreciates and encourages all kinds of compensation or compensation that is beneficial to workers. For those who compensate workers beyond the statutory number of years and the base of compensation, labor law does not interfere with employers' behavior except for the second item of Article 47 of the Labor Contract Law.

Third, the understanding of violation of mandatory provisions of the law in labor law.

According to Article 26.1 (3) of the Labor Contract Law, a labor contract shall be invalid in whole or in part if it violates the mandatory provisions of laws and administrative regulations. The same provision is found in Article 52 (5) of the Contract Law of the People's Republic of China. In the field of the Contract Law, there are generally differences between mandatory provisions on effectiveness and mandatory provisions on administration. A contract in violation of mandatory provisions on administration is not necessarily invalid. Only acts in violation of mandatory provisions on effectiveness are identified as invalid.

How to determine the violation of mandatory provisions on effectiveness?

Generally speaking, the first thing to consider is whether there are direct provisions in the law. If the law directly provides that a contract in violation of a certain clause is invalid, then this provision is undoubtedly a mandatory provision on effectiveness. For example, Article 26.1 (1) and (2) of the Labor Contract Law provides that a labor contract shall be invalid if the labor contract is concluded or amended by fraud, coercion or exploitation of the other party's unfavorable position to the other party against the true intentions of the other party, or if the employer exempts the legal liability or excludes the employee's rights. Both of these are typical mandatory provisions on effectiveness.

What if there is no direct provision on how to identify it? That depends on whether the act violates the mandatory provisions and whether continuing to perform the contract will harm the interests of the state, the collective, the third party and the public. The performance of the contract cannot harm the interests of other subjects other than the counterparty, which is the need of the law for the protection of broader social relations.

In addition, we can also see whether violating the mandatory provisions will violate the legislative purpose of the relevant laws in our country.

Compared to these three standards, the act of paying financial compensation higher than the standard stipulated in the Labor Contract Law does not fall under the circumstance of invalidity or partial invalidity of the contract stipulated in the first and second paragraphs of Article 26 of the Law. Exclude the recognition that financial compensation is invalid. Second, such compensation does not harm the interests of the state, the collective, the third party and the public interests other than the two parties to the contract, and the state does not need to intervene. Third, such compensation does not violate the legislative purpose of Article 1 of the Labor Contract Law, on the contrary, it fully protects the rights and interests of employees. From the perspective of building harmonious labor relations, labor disputes are reduced, and labor administrative authorities need not prohibit such compensation but need to encourage.

(Ref: Standards for Determining Mandatory Provisions on Effectiveness of Contracts, by Shi Xiuyong, www.chinacourt.org)