Article 40 Unilateral Dismissal

Employer Obligation

For an enterprise operating in this jurisdiction, the implementation of article 40 unilateral dismissal requires rigorous documentation. When an employee is deemed incompetent, the enterprise must first provide documented training or assign the worker to a different role. A second failure must occur before the enterprise can initiate the termination process.

If the grounds are based on a change in objective circumstances, the enterprise must prove that the original contract can no longer be executed due to reasons beyond its control, such as a factory relocation or a corporate restructuring. The statutory position requires the employer to prove that both parties failed to reach an agreement on amending the contract before proceeding. In practice, local authorities demand clear proof of these negotiations, such as written proposals and meeting minutes.

If the enterprise fails to provide this proof, the arbitration commission will reject the dismissal and order either reinstatement or double severance. Thus, the operational limit on the employer is high, demanding a complete paper trail of performance reviews, training logs, and negotiation attempts.

Procedural Step

The notification of the labor union is a mandatory phase before any termination under article 40 unilateral dismissal can occur. Under statutory rules, the employer must inform the enterprise trade union in writing of the reasons for the dismissal. The union holds the right to demand that the employer correct any violations of laws or collective contracts.

Although the union’s agreement is not required to execute the dismissal, the failure to notify the union before the termination takes effect constitutes a procedural defect. This defect can render the entire termination illegal, even if the substantive grounds are perfectly valid. Arbitration tribunals regularly rule in favor of employees solely because the employer failed to send the written notice to the union.

To mitigate this risk, foreign-invested enterprises must establish formal channels of communication with local trade union representatives. This operational safeguard ensures that all statutory notification requirements are completed within the designated legal timeframes.

Financial Liability

Executing a dismissal under this provision triggers specific financial obligations that the enterprise must settle immediately. These obligations consist of the statutory severance calculated under Article 47 and the payment of one month of salary if the thirty days notice period is not observed. The severance is based on the worker’s average monthly wage during the past twelve months, capped at three times the local average salary for the region.

In addition, any accrued but unused annual leave must be paid at three times the worker’s daily wage. The employer must also issue a formal release letter and update the local social security bureau within fifteen days. Failure to complete these administrative steps prevents the worker from claiming unemployment benefits, which can expose the enterprise to additional civil claims for damages.

Therefore, the total financial outlay is predictable but must be fully cleared before the local authorities will deregister the contract.