Sunny Technology Co., Ltd. (“Sunny“) and the employee Angela signed an “Employment Dissolution Agreement” (“Agreement”) on 15 March 2018. The Agreement mainly stipulates that the employment contract between the two parties will be terminated on 31 March 2018 after friendly negotiation.
On 1 April 2018, Angela went to the hospital for a medical check-up as she did not feel well, and on 9 April 2018, she was told “being pregnant.” According to the outcome of the medical examination, Angela was pregnant on 15 March 2018 already, meaning when she signed the Agreement.
On 12 April 2018, Angela called Sunny to inform them of her pregnancy and made it clear that she did not know about the pregnancy when she signed the Agreement. Thus, she requested that the agreement be revoked and the employment relationship be reinstated on the grounds that there was a significant misunderstanding at the time of signing the Agreement. But Sunny believes that the Agreement was a true and exact declaration of intention of both parties and therefore, did not agree to the resumption.
After many unsuccessful negotiations, Angela filed for a labor arbitration on 4 May 2018, requesting to revoke the Agreement and restore the employment relationship.
Focus of the controversy:
Whether Angela signed the Agreement without knowing that she is pregnant constitutes a “significant misunderstanding” as set out in the 《General Principles of Civil Law 》, and whether the Agreement should be revoked.
Expert’s opinion:
Article 59 of the <General Principles of Civil Law> stipulates that in the event that any party has a significant misunderstanding, the party shall have the right to request the court or the arbitration organ to change or revoke it. Then what exactly is a “significant misunderstanding”? In this regard, article 71 of the <Opinions of the Supreme People’s Court on the Implementation of the General Principles of the Civil Law of the People’s Republic of China (Trial Version)> clearly defines that the party’s misperception of the nature of the act, the other party, the variety, quality, specification and quantity of the subject matter, etc., makes the consequences of the act contrary to its own intention and causes greater losses, which may be regarded as a significant misunderstanding.
In this case, although Angela was pregnant before signing the Agreement, and was not aware of it at the time. However, according to the legal definition of the aforementioned “significant misunderstanding”, this is not a false understanding of the nature of her act of negotiating the termination of the employment contract, neither the wrong understanding of the counterparty or the subject matter, etc. Therefore, Angela’s claim that she succumbed to a significant misunderstanding while signing the Agreement was invalid.
Of course, one might argue that given the truth that it would have disadvantaged Angela to find a new job during pregnancy, Angela would not have agreed to dissolute the employment contract if she had known she was pregnant. This argument seems tenable. However, let’s look at the following example: suppose someone has bought a relatively expensive property while the market price of real estate was actually going down, but he was unaware of it. Then he asked for the cancellation of the property purchase agreement because of the price going down, could he cancel it? Obviously, he couldn’t. This person has a false understanding about the objective factors which exist when he made his decision, and the adverse consequences of such misperception can only be borne by himself. In other words, he has no right to request the cancellation of the purchase agreement on the grounds of a “significant misunderstanding”.
In addition, Article 42 of the <Labor Contract Law of PRC> provides special protection to female employees during three special times ( pregnancy, childbirth, lactation, please check our post “Female employee rights in China” for more information), that is, the company may not terminate the employment contract in accordance with the provisions of Article 40 of the <Labor Contract Law of PRC> about dismissal of employees without fault ( please check our previous post “How to Fire an Incompetent Employee Properly?” for more information ) and the provisions of Article 41 about economic layoffs. However, the law also respects the true declaration of the intention of both parties, and does not therefore prohibit the parties from terminating the contract through friendly negotiation.
Under the Chinese labor law, the only prerequisite for an employee to seek a resumption of an employment relationship is that the company illegally terminated the employment contract. However, Sunny and Angela terminated the employment contract through negotiation, which obviously, was not a violation of the law.
In summary, the fact that Angela being unaware of her pregnancy did not constitute a “significant misunderstanding”, and Sunny’s termination of the employment contract with Angela was in line with the law, and the declaration of intention between the two parties was true and valid, so Angela’s request for arbitration was denied.
Useful link:
Ministry of Human Resources and Social Security of the People’s Republic of China
