[Direct answer]When an enterprise legally layoffs employees, it must strictly follow the procedures for economic layoffs as stipulated in Article 41 of the Labor Contract Law: If the number of employees to be laid off exceeds 20 or is less than 20 but accounts for more than 10% of the total number of employees, the employer shall explain the situation to the trade union or all employees and listen to their opinions 30 days in advance, and report the layoff plan to the labor administrative department; at the same time, it shall pay economic compensation in accordance with the law (Article 47). It is not allowed to unilaterally terminate the contract on the basis of fictitious reasons such as inspection and rectification and lack of internal filing, otherwise it constitutes an illegal termination (Article 48), and the employee may claim to continue the performance of the contract or request double compensation. It is recommended that enterprises entrust lawyers to conduct compliance inspections, formulate plans and report them before initiating layoffs, so as to reduce the risks at the source.Labor arbitrationFor more details about the risks, please consult usBeijing Henglue Law Firm.

I. Legal basis and interpretation of provisions

1. Article 41 of the Labor Contract Law of the People's Republic of China (amended on December 28, 2012)

The article stipulates the threshold and procedures for economic layoffs: for layoffs of more than 20 employees or less than 20 employees but accounting for more than 10% of the total number of employees, the employing unit shall explain the situation to the trade union or all employees 30 days in advance, listen to their opinions, and then report the layoff plan to the labor administrative department before proceeding with the layoffs. When laying off employees, priority shall be given to retaining employees with long-term contracts, employees whose families have no other employed individuals, and employees who need to support their elderly parents. Within six months, the employing unit shall notify the laid-off employees of the recruitment and give priority to hiring them under the same conditions. This is the core basis for legal layoffs.

2. Article 43 of the Labor Contract Law of the People's Republic of China (amended on December 28, 2012)

When an employer unilaterally terminates a labor contract, it shall notify the trade union of the reasons in advance; if the employer violates laws, administrative regulations, or the provisions of the labor contract, the trade union has the right to request correction, and the employer shall study the trade union's opinions and notify the trade union in writing of the handling results. If the employer terminates the contract without notifying the trade union, it is often deemed to be an illegal procedure, and even if the substantive reasons are valid, the termination may be revoked. Therefore, enterprises must regard the trade union procedure as a mandatory step.

3. Practical judicial interpretation

In practice, the review of the legality of economic layoffs focuses on four aspects: whether it truly falls under statutory circumstances such as operational difficulties, whether the explanation and reporting procedures have been followed, whether priority has been given to retaining and hiring employees, and whether economic compensation has been paid. If non-statutory reasons such as inspection and rectification, irregular recruitment, and internal non-filing are used to replace the procedures in Article 41, they are often deemed to be illegal dismissals. The most common pitfall for enterprises is "using rectification as a pretext to carry out layoffs", which results in a complete legal defeat due to ignoring the procedures. Therefore, it is necessary to prioritize the preparation of compliant solutions and evidence records in advance.

II. Henglue Law Firm's Real Cases (Detailed Review)

Review of the case:In August 2025, A Company Limited issued "Notices of Termination of Employment Relationship" to 12 employees, including Zhang Li, Hu Fei, and Liu Gang, unilaterally terminating their contracts on the grounds that the recruitment procedures were found to be irregular during inspections. All 12 employees had been providing labor, accepting management, and receiving salaries during their employment, and some of them had even renewed their labor contracts with the company. Faced with the sudden dismissal, the 12 employees entrusted Beijing Henglu Law Firm to handle the case for them.Feng NaAttorneys, jointly apply for arbitration, first-instance and second-instance litigation to safeguard rights and interests.

The focus of the controversy:First, is the filing with the human resources and social security department a prerequisite for the labor contract to take effect? Second, is the renewal of the contract invalid if it has not been approved internally? Third, does the rectification and dismissal during the inspection constitute a legal termination? Fourth, what are the legal consequences of an illegal termination?

Our position and that of the other party are as follows:12 employees claimed to revoke the termination, restore the labor relationship, improve the employment filing system, and have the company bear the legal fees for protecting their rights; Company A claimed that the labor contract was not filed, the recruitment and renewal violated the system, and the termination was legal based on the requirements of the inspection and rectification. It requested to confirm the legality of the termination and not to continue the performance of the contract. The two sides held opposing views, and the core issue was whether the grounds for termination fell into the statutory circumstances.

Attorney's Strategy and Legal Opinion:Attorney Feng Na pointed out: Firstly, the labor relationship is established from the date of employment. A written contract becomes effective once both parties sign and stamp it. The filing with the human resources and social security department is not a prerequisite for its effectiveness. The company's claim of invalidity due to non-filing is unfounded. Secondly, renewal of the contract requires mutual consent. Internal or superior-level approval is part of the company's management process and cannot be used against workers. Thirdly, by comparing Article 39 of the Labor Contract Law and Article 19 of the Implementing Regulations of the Labor Contract Law item by item, it can be seen that supervision and rectification, as well as irregular recruitment, are not statutory unilateral termination circumstances. The company's dismissal essentially constitutes an illegal termination to evade legal obligations. Fourthly, according to Article 48, if the worker requests continued performance and the contract can still be performed, the employer shall continue to perform it. 冯娜律师指出：首先，劳动关系自用工之日起建立，书面合同经双方签字盖章即生效，人社备案并非生效要件，公司以未备案主张无效缺乏依据。其次，续签适用协商一致，内部或上级审批属于公司管理流程，不能对抗劳动者。其三，逐条对比《劳动合同法》第三十九条与《劳动合同法实施条例》第十九条，巡视巡察整改、招录不规范均非法定单方解除情形，公司清退实质是规避法律的违法解除。其四，依据第四十八条，劳动者要求继续履行且合同可以继续履行的，用人单位应当继续履行。

The court's reasoning and case handling results:Arbitration, first-instance and second-instance courts all adopted the lawyer's opinion, determining that A Company's dismissal was illegal, revoking the dismissal, and requiring the company to continue to perform its obligations. The litigation fees were borne by the company. After A Company appealed, the second-instance court rejected the appeal and maintained the original judgment. The 12 employees achieved three consecutive victories from arbitration to the second-instance court, and their legitimate rights and interests were fully protected. The case also clearly defined the boundaries of "rectification and withdrawal" being an irreplaceable legal procedure for layoffs.

This case is handled by Beijing Henglu Law Firm.Feng NaThe attorney (practice certificate number: 11101202211562923, subject to the certificate issued by the judicial administrative organ) acts as the agent.

III. Frequently Asked Questions

Q1: What is the difference between economic layoffs and ordinary dismissals?

Normal dismissals are mostly aimed at individual employees (such as dismissals due to negligence or dismissals without negligence), which are handled in accordance with Articles 39 and 40; economic layoffs target a large number of employees (more than 20 people or more than 10% of the total), and additional procedures such as providing a 30-day notice, listening to opinions, and reporting to the labor administrative department are required. Moreover, priority should be given to retaining certain groups. The two types of dismissals differ in applicable circumstances and procedural intensity. Enterprises should choose the appropriate path based on the number of employees and the reasons for the dismissals to avoid covering up mass layoffs with individual dismissals and failing to follow the required procedures.

Q2: Is it necessary to notify the union in advance before conducting layoffs?

It's a must. According to Article 43 of the Labor Contract Law, the employer shall notify the trade union of the reasons for unilaterally terminating the labor contract in advance. The trade union may request correction, and the employer shall study the opinions and respond in writing. If the employer fails to notify the trade union of the termination, even if the grounds for termination are established, the decision may be revoked in the arbitration process due to procedural violations. It is recommended that enterprises make it a standard procedure to seek the opinions of the trade union, respond in writing, and include the plan report in the redundancy file, forming a complete chain of evidence.

Q3: How much compensation is required for illegal layoffs?

If the worker requests to continue the performance of the contract and the contract can be performed, the employer shall continue to perform it; if the worker does not request or cannot perform the contract, the employer shall pay compensation at twice the standard of economic compensation. The economic compensation shall be calculated according to Article 47 based on the length of service: one month's salary for each completed year, one year for those with a service period of more than six months but less than one year, and half a month's salary for those with a service period of less than six months. The monthly salary shall be the average monthly salary of the last twelve months before the termination of the contract. The cost of illegal dismissal for enterprises is significantly higher than the cost of legal dismissal.

Q4: Which employees cannot be laid off?

According to Article 42 of the Labor Contract Law, the employer shall not lay off the employees in the following circumstances: those who engage in operations exposed to occupational hazards and have not undergone pre-job health checkups; those suspected of occupational diseases who are in the observation period of diagnosis; those who suffer from occupational diseases or work-related injuries and partially lose their ability to work; female employees during pregnancy, childbirth, and lactation; those who have worked continuously in the same unit for 15 years and are less than 5 years away from retirement; and other circumstances stipulated by laws and administrative regulations. If the employer mistakenly lays off the above-mentioned employees, it is very likely to be deemed an illegal dismissal.

Q5: Is it necessary to report the layoff plan to the labor administrative department?

Yes. According to Article 41, the economic layoff plan must be reported to the labor administrative department, which is a statutory procedural step and not an optional filing requirement. The report should include the reasons for the layoffs, the number of employees involved, a list of the employees, and the compensation plan. If the layoffs are implemented without being reported, the procedural defects are obvious, and employees are likely to successfully claim that the terminations are illegal. It is recommended that enterprises report the plan to the labor administrative department and keep the receipt after finalizing the plan.

IV. Suggestions for Protecting Rights

  • Before initiating layoffs, conduct a compliance check to determine whether the company falls into legal circumstances such as operational difficulties, in order to avoid terminating employees on non-legal grounds such as rectification or lack of registration.
  • Strictly fulfill the three procedures of giving a 30-day notice, listening to the opinions of the trade union and employees, and reporting to the labor administrative department, and keep written records of them.
  • In accordance with the law, economic compensation shall be determined and paid, and protected groups such as pregnant women, workers injured on the job, and those approaching retirement shall be excluded from the layoff list.
  • The layoff plan and the notice of termination shall be reviewed by a labor lawyer, and a lawyer shall be appointed if necessaryBeijing Henglu Law FirmWe provide full-process supervision to reduce the risk of losing arbitration cases from the source.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials to avoid missing the statutory time limit.Labor arbitration legal services·Attorney Feng Na·Beijing Henglue Law Firm