Perspective | After the medical treatment period expires, does the employer need a labor capacity assessment to terminate the labor contract according to Article 40 of the Labor Contract Law?
Published:
2025-04-11
According to Article 40 of the Labor Contract Law of the People's Republic of China, "If an employee suffers from illness or non-occupational injury and, after the expiration of the prescribed medical treatment period, is unable to perform their original work or any other work arranged by the employer, the employer may terminate the labor contract after providing thirty days' written notice to the employee or paying the employee one month's wages.". According to the text, the above-mentioned legal provision does not stipulate that a labor capacity assessment is a prerequisite for termination of the labor contract.
According to Article 40 of the "Labor Contract Law of the People's Republic of China," "If an employee suffers from illness or non-occupational injury and, after the expiration of the prescribed medical treatment period, is unable to perform their original work or any other work arranged by the employer, the employer may terminate the labor contract after providing a thirty-day written notice to the employee or paying an additional month's salary." The legal provision does not stipulate that a labor capacity evaluation is a prerequisite for terminating the labor contract.
However, Article 35 of the "Opinions on Several Issues Concerning the Implementation of the Labor Law of the People's Republic of China" stipulates: "Employees on extended sick leave who can resume their original work after the medical treatment period may continue to perform the labor contract; those who still cannot perform their original work or any other work arranged by the employer after the medical treatment period shall undergo a labor capacity evaluation by the Labor Identification Committee, referring to the standards for evaluating the degree of disability caused by work-related injuries and occupational diseases. Those evaluated as grades one to four should leave their work posts, terminate the labor relationship, complete retirement or resignation procedures due to illness or non-occupational injury, and enjoy corresponding retirement or resignation benefits; those evaluated as grades five to ten, the employer may terminate the labor contract and pay economic compensation and medical subsidies according to regulations." Article 7 of the "Notice of the Ministry of Labor on Issuing the 'Regulations on the Medical Treatment Period for Enterprise Employees Suffering from Illness or Non-occupational Injury' (No. 479 [1994] issued by the Ministry of Labor)" stipulates: "For enterprise employees with non-occupational disabilities or those diagnosed by a doctor or medical institution as having incurable diseases, after the medical treatment period, a labor capacity evaluation should be conducted by the Labor Identification Committee, referring to the standards for evaluating the degree of disability caused by work-related injuries and occupational diseases. Those evaluated as grades one to four should leave their work posts, terminate the labor relationship, complete retirement or resignation procedures, and enjoy retirement or resignation benefits." Article 3 of the "Notice of the Shandong Provincial Labor Department on Forwarding the Ministry of Labor's Notice on Issuing the 'Regulations on the Medical Treatment Period for Enterprise Employees Suffering from Illness or Non-occupational Injury'" stipulates: "Employees who are diagnosed as grades five to ten due to illness or non-occupational injury shall not have their labor contracts terminated during the medical treatment period; after the medical treatment period, if they cannot perform their original work or any other work arranged by the employer and have their labor contract terminated, economic compensation and medical subsidies shall be paid by the enterprise in accordance with the provisions of document No. 481 [1994] issued by the Ministry of Labor." The above opinions and notices stipulate that a labor capacity evaluation is required for terminating the labor contract for employees with "incurable diseases" or those on "extended sick leave".
Therefore, different views exist in current judicial practice. One view holds that Article 40 of the "Labor Contract Law of the People's Republic of China" concerning the termination of labor contracts after the expiration of the medical treatment period does not make a labor capacity evaluation a condition for terminating the labor contract, and whether or not a labor capacity evaluation is conducted does not affect the legality of the termination of the labor contract. Another view holds that the "Regulations on the Medical Treatment Period for Enterprise Employees Suffering from Illness or Non-occupational Injury" are still valid, and based on the fundamental purpose of protecting the interests of employees, these regulations should still be applied.
Taking Jinan as an example, after reviewing some court cases, most cases adopt the second view. For example, in case (2018) Lu 01 Min Zhong 644, the second-instance court held that "Article 7 of the 'Regulations on the Medical Treatment Period for Enterprise Employees Suffering from Illness or Non-occupational Injury' stipulates: 'For enterprise employees with non-occupational disabilities or those diagnosed by a doctor or medical institution as having incurable diseases, after the medical treatment period, a labor capacity evaluation should be conducted by the Labor Identification Committee, referring to the standards for evaluating the degree of disability caused by work-related injuries and occupational diseases. Those evaluated as grades one to four should leave their work posts, terminate the labor relationship, complete retirement or resignation procedures, and enjoy retirement or resignation benefits.' Article 3 of the 'Notice of the Shandong Provincial Labor Department on Forwarding the Ministry of Labor's Notice on Issuing the 'Regulations on the Medical Treatment Period for Enterprise Employees Suffering from Illness or Non-occupational Injury' stipulates: 'Employees who are diagnosed as grades five to ten due to illness or non-occupational injury shall not have their labor contracts terminated during the medical treatment period; after the medical treatment period, if they cannot perform their original work or any other work arranged by the employer and have their labor contract terminated, economic compensation and medical subsidies shall be paid by the enterprise in accordance with the provisions of document No. 481 [1994] issued by the Ministry of Labor.' According to the above legal provisions, even if the company claims that the employee cannot perform their original work or any other work arranged by the employer, if the company wishes to terminate the labor contract with Zhang, it should first conduct a labor capacity evaluation and make corresponding decisions based on the evaluation level." Cases (2021) Lu 01 Min Zhong 2254 and (2021) Lu 01 Min Zhong 10147 hold the same view.
Therefore, to reduce corporate risk, it is recommended that employers conduct a labor capacity evaluation for employees with incurable diseases whose medical treatment period has expired when terminating the labor contract in accordance with Article 40 of the "Labor Contract Law of the People's Republic of China." Those evaluated as grades one to four should leave their work posts, terminate the labor relationship, complete retirement or resignation procedures due to illness or non-occupational injury, and enjoy corresponding retirement or resignation benefits; those evaluated as grades five to ten, the employer may terminate the labor contract and pay economic compensation and medical subsidies according to regulations.
(The above content is only an analysis and discussion in judicial practice and does not constitute legal advice to any unit or individual)
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