Five legal hurdles for enterprises to terminate labor contracts based on "incompetence"
Introduction: High-Threshold "Dismissal of Incompetence"
When enterprises launch PIP (Performance Improvement Program), many working professionals tend to view it as a prelude to terminating their labor contracts, thus falling into anxiety. However, in the practice of labor law, unilaterally terminating a labor contract on the grounds of "incompetence" is an act with an extremely high legal threshold and a heavy burden of proof for employers.
According to Article 40, Paragraph 2 of the Labor Contract Law, if an employer lawfully terminates a contract on this ground, it must simultaneously meet the following three legal conditions, and none of them can be missing:
1. The worker is incompetent for the job;
2. After training or job position adjustment;
3. The worker is still not competent.
In reality, many enterprises have flaws in their procedures during operation. As workers, mastering legal norms and identifying procedural loopholes are the keys to safeguarding their own rights and interests. This article will break down the five most error-prone key links in the enterprise's process of dissolving problems, namely the five "checkpoints" set by law.
The first stage: Is the determination of "incompetence" based on legal procedures and clear standards?
The termination procedure begins with the determination of "incompetence", which is also the most likely starting point for disputes. Enterprises must provide legal and sufficient evidence to support this conclusion. Workers should pay close attention to the following points:
• The legality of the institutional basis:
(1) Has the performance appraisal system undergone democratic procedures (such as discussions at the staff congress or among all staff members)?
(2) Have the relevant systems been lawfully publicized or delivered to the workers?
• Objectivity and rationality of standards:
(1) Does the job description clearly define the standards of "competent" and "incompetent"?
(2) Are the assessment indicators objective and quantified? Subjective evaluations (such as scores given by leaders or departmental appraisals) must not be equated with "incompetence" in the legal sense.
(3) Is the extent to which performance targets (such as performance targets) are not met reasonable? Generally, a reasonable floating range should be set rather than determining substantive non-compliance based on minor differences.
If a company lacks legal and effective systems or objective quantitative indicators, its conclusion of "incompetence" will lack legal effect.
The second stage: "Training" section, is it targeted and substantive?
The "training" stipulated by law is by no means a formality. It must be a specialized improvement measure implemented in response to the specific ability shortcomings of employees. Common flaws in practice include:
• Content does not match the position:
The training content has nothing to do with the weak points of the job that have been identified as "incompetence".
• Absence of form:
Replace targeted one-on-one tutoring with collective and general business training.
• Breakage of the chain of evidence:
The employer is unable to provide complete evidence to prove the occurrence of the training, such as training notices, sign-in records, training confirmation forms, assessment feedback, etc.
Furthermore, the specialized training required by law cannot be replaced by regular business studies; otherwise, it will constitute a procedural violation.
The third stage: Is the "job transfer" arrangement reasonable and well-intentioned?
Before dissolving, enterprises can choose to adjust job positions to give employees the opportunity to adapt again. This adjustment must conform to the principle of rationality and not be a disguised form of punishment or forced resignation.
• Job relevance:
Is there a reasonable correlation of skills or experience between the new and old positions? The rationality of job transfers with huge spans, such as from technical positions to sales positions, is prone to be questioned.
• Legitimacy of purpose:
Job transfer should be aimed at enhancing job performance capabilities and go through formal written notification and communication procedures.
• Remuneration changes:
Is job transfer accompanied by unreasonable salary cuts, marginalization or adjustments to an unsuitable working environment? A legal job transfer should ensure that the benefits match those of the new position.
If the job transfer is merely a change in name, while the actual job content, responsibilities, and assessment requirements remain unchanged, it is considered a "false job transfer" and cannot meet the legal conditions.
Stage Four: "Second Assessment", will the standards be relaxed or intensified?
The result of the second assessment after training or job transfer is the key evidence determining whether the enterprise can ultimately terminate the contract.
• Progressive nature of standards:
The second assessment standard should be lower than or at least no higher than the first assessment standard to demonstrate the sincerity of the enterprise in providing room for improvement. If the standards are raised instead, it can be claimed that the assessment is unreasonable.
• Transparency of the process:
Are there any new performance targets signed and confirmed by the workers? Is the assessment cycle reasonable? Is the assessment process open, transparent and traceable?
• Rationality of intervals:
A reasonable interval should be left between two assessments to ensure that workers have sufficient time to enhance their capabilities through training or on-the-job practice.
Stage Five: Are there any legal circumstances that prohibit the dissolution by law?
Even if the first four procedures of an enterprise are fully compliant, the circumstances prohibited by law from being lifted still need to be excluded. If an employee is within the following legal protection period, the employer may not terminate the contract in accordance with Article 40 of the Labor Contract Law; otherwise, it will constitute an illegal termination:
Female employees in the "three periods" :
During pregnancy, maternity leave or lactation.
• Medical treatment period:
Due to illness or non-work-related injury, within the prescribed medical treatment period.
• Work injury protection
Suffering from occupational diseases or work-related injuries and being confirmed to have lost or partially lost the ability to work.
Workers must pay attention to whether they possess the above-mentioned legal "protective amulets", as this directly determines the legality of the enterprise's termination behavior.
Conclusion：
"Termination due to incompetence" is a high-risk situation for employers. It requires enterprises to establish a complete chain of evidence: legal systems → clear standards → genuine training/reasonable job transfer → fair secondary assessment → exclusion of circumstances that prohibit termination. The absence or defect of any link may lead to the termination act being recognized as illegal and face the risk of paying compensation for illegal termination.
