[Case Summary]This case involves a labor dispute (the legality of the termination of the labor contract). Liu Li joined the Tianjin branch of A Insurance Company in 2020. In 2023, the head office of the company ceased to operate life insurance business and dissolved the branch. In March 2024, A Insurance Company terminated the contract with Liu Li in accordance with Article 40(3) of the Labor Contract Law on the grounds of "major changes in objective circumstances" and paid her economic compensation and notice pay totaling 23,521.14 yuan. After arbitration, Liu Li sued for compensation for the illegal termination of the contract. The first-instance court ruled that the termination was legal, and Liu Li appealed. A Insurance Company appointed Beijing Henglu Law Firm to handle the case.Chen PingThe lawyer acted as the agent, and the second-instance court dismissed the appeal and upheld the original judgment. The core dispute is whether the suspension of business operations constitutes an objective change in circumstances, and whether the consultation procedure was carried out. Applicable legal provisions: Article 40(3) of the Labor Contract Law.

I. Review of the Case

The companyDismissing employees due to changes in objective circumstancesCompanies often search for questions such as "Is it legal to dismiss an employee due to major changes in objective circumstances?", "Does the suspension of business operations count as a change in objective circumstances?", and "Can the contract be terminated if the consultation on job transfer fails?". In November 2020, Liu Li joined A Insurance Agency Tianjin Branch as an institutional manager. In November 2023, she signed a new labor contract with the head office, which was valid until October 2025. Due to the impact of the economic downturn, A Insurance Company's life insurance business continued to suffer losses. In November 2023, the company decided to suspend operations and initiate liquidation. In March 2024, the company terminated the contract in accordance with Article 40(3) of the Labor Contract Law, citing "operational difficulties and the full suspension of life insurance business", and committed to paying Liu Li a total of 23,521.14 yuan in economic compensation and notice pay.

Liu Li believes that the termination of the contract was illegal, and after arbitration, she sued for compensation of 35,470.40 yuan. However, the first-instance court ruled that the termination was legal and only required her to pay economic compensation. Liu Li appealed against the judgment. As the attorney representing A Insurance Company,Chen PingThe lawyer launched a precise counterattack on a legal level.

II. The focus of the case

  • Focus 1: Is the cessation of life insurance business an "objective situation of major changes"?Liu Li argued that it was an adjustment to her own business operations and a response to market risks, and it did not meet the criteria of force majeure and other circumstances.
  • Focus 2: Whether the employing unit fulfills its statutory obligation to negotiate contract amendments.The company claimed that it had communicated with Liu Li about transferring her to the property insurance department, but they failed to reach an agreement. However, Liu Li claimed that no such negotiation had ever taken place and that the evidence provided by the company was flawed.
  • Focus Three: Is the dismissal legal?If the objective circumstances change and the consultation procedure is legal, the termination does not require the payment of compensation.

III. Professional intervention by Hengluo Law Firm

The appellant (Liu Li) claimed that:The company's decision to discontinue its life insurance business is an adjustment to its independent operations and is related to market risks, which does not conform to changes in objective circumstances. The company has never negotiated job transfers with employees, and the termination of the contract was illegal. The company requests the court to revise the judgment and order the defendant to pay compensation of 35,470.40 yuan.

The appellee (A Insurance Company) argued and the lawyer's opinion are as follows:Chen PingThe lawyer submitted evidence such as the Tianjin branch's application for lease termination and the industrial and commercial registration for business withdrawal, to prove that the branch had ceased operations and terminated the lease of its original premises in preparation for liquidation, and that the original positions no longer existed. Through video testimonies from the former general manager of the life insurance department, personnel testimonies, and transfer notifications, a chain of evidence was established to prove that the company had repeatedly communicated with Liu Li about transferring her to the property insurance department but failed to reach an agreement. It was emphasized that Liu Li's explicit refusal to accept the transfer met the conditions for termination. Regarding the witnesses' failure to appear in court, it was pointed out that Xiao Ming's testimony and written evidence corroborated each other, and the cloud platform registration proved the objective fact of business withdrawal.

IV. Outcome of the case

The court of second instance held that: A Insurance Company terminated its life insurance business due to losses and dissolved its branch, resulting in the disappearance of Liu Li's original position, which constituted a "major change in objective circumstances"; and the existing evidence was sufficient to prove that the parties had negotiated and failed to reach an agreement on matters such as job transfer. In the end,Reject the appeal and uphold the original verdict(That is, it is a legal termination, and the employer only needs to pay economic compensation). In this case, through rigorous evidence chains and legal application, the court not only protected the enterprise's right to adjust to market risks, but also avoided excessive protection of workers' rights, thus realizing the original intention of "balanced protection" in labor law.

5. Hengluo Law Firm's Reminder

This case is handled by Beijing Henglu Law Firm.Chen PingThe lawyer (practice license number: 11101201411619680, subject to the document issued by the judicial administrative organ) acts as the agent. For the employer to terminate the contract on the grounds of "major changes in objective circumstances", the following conditions must be satisfied: the changes are objective and non-attributable, resulting in the contract being unable to be performed; the employer must follow the consultation procedure and give notice 30 days in advance or pay the notice compensation and pay the economic compensation. The company should retain evidence of its operating difficulties and strictly follow the consultation procedure when adjusting its business operations.

VI. Common Questions about Unlawful Resolution of Labor Disputes - FAQ

  1. Q:Is it legal to dismiss an employee due to major changes in objective circumstances?
    A:If the business is terminated due to losses and the positions are cancelled, resulting in the contract being unable to be performed, and the consultation process has been carried out, it is legally permissible to terminate the contract, and the employer only needs to pay the employee economic compensation.
  2. Q:Is the suspension of business operations considered an objective change in circumstances?
    A:When an enterprise encounters difficulties in operation, suspends its business, or closes down its branch, which results in the disappearance of the original position, it is usually regarded as a major change in objective circumstances.
  3. Q:If the consultation on job transfer fails, can the contract be terminated?
    A:If the objective circumstances change and the contract cannot be performed, and if no agreement is reached after substantive consultation, the employer may terminate the contract and pay compensation.
  4. Q:Does an employee's refusal to sign the transfer notice mean that the negotiation has failed?
    A:If the employer provides evidence that it has proposed a reasonable job transfer, but the employee clearly refuses it, it can be determined that the consultation has not reached an agreement, and the conditions for termination are met.
  5. Q:When the objective circumstances lead to the termination of the contract, do I need to pay the notice period compensation to the employee?
    A:A written notice must be provided 30 days in advance, or a notice fee must be paid. Economic compensation must also be paid in accordance with the law, which is not the same as compensation for damages.