Is concealing marital status on a job application form a fraudulent misrepresentation?

The facts

Ms Yu attended an interview at a restaurant company on 1 March 2018 and completed an application form, and joined on 5 March 2018 as deputy store manager under a two-year employment contract with a two-month probation period and a salary of RMB 10,000 a month. On 24 April 2018 the company issued her with a notice of termination on the ground that she had provided false information on the application form, amounting to fraud. In May 2018 she applied for arbitration, claiming RMB 10,000 in compensation for unlawful termination.

The parties' positions

The company relies on the note printed beneath the application form, which reads that the company is entitled to learn the basic circumstances of a new employee that are directly related to the employment contract, that the new employee must complete the form truthfully, and that concealment or fabrication will constitute fraud entitling the company to terminate the contract. Ms Yu wrote "single" in the marital status box although she had in fact been married for nine months, so she committed fraud and the company was entitled to terminate, with no illegality and no compensation payable.

Ms Yu says that her educational qualifications, work experience and skill certificates are all genuine and valid and meet the company's recruitment requirements; that the recruitment requirements touched on marital status; and that marital status is a private matter which she need not disclose to the company, so that her failure to complete that box truthfully was not fraud.

The issue

Does Ms Yu's concealment of her married status on the application form amount to fraud?

The award

The arbitration commission held that Article 8 of the Labor Contract Law of the People's Republic of China gives the employer the right to learn the circumstances of an employee that are directly related to the employment contract, and imposes on the employee a duty to explain them truthfully. That article shows that the duty is confined to matters directly related to the employment contract, whereas marital status is not directly connected with the content of the contract, and whether an employee is married cannot affect whether she is competent for the post. Ms Yu's marital status was therefore not a matter directly related to the employment contract, she was under no duty to disclose it, and no fraud should be found; the termination on that ground was unlawful and compensation must be paid.

Commentary

Before an employment relationship is established, each side has both the right and the need to know whether the other has the ability and the conditions it expects for performing the contract, so as to form a reasonable forecast of how performance will go and what it will produce. An enterprise therefore sets out specific recruitment requirements for the duties and qualifications of a post, covering educational background, work experience and the relevant professional skills and qualifications. Employees likewise actively enquire about the content and place of work, working hours, remuneration, benefits and promotion prospects, the matters that concern them most. Where the contract is concluded by agreement once both sides know these things fully, that accords with Article 3 of the Labor Contract Law, under which an employment contract is concluded on the principles of lawfulness, fairness, equality, voluntariness, consensus and good faith.

Truthful disclosure by each side of matters relating to the performance of the contract is therefore an important precondition of an employment relationship. Where an employee invents a fictitious record or conceals the true extent of a particular skill before joining, inducing the enterprise to contract on a mistaken understanding and judgment, and then cannot meet the requirements of the post or complete the work because the experience does not exist or the skill is lacking, so that the enterprise's expectation that the employee will use his abilities to the full in keeping with the post comes to nothing, the recruitment conditions are rendered meaningless and the risk that the employee cannot do the job is shifted onto the enterprise, wasting human resources costs and causing operating loss. For this reason Article 18 of the Labor Law and Article 26 of the Labor Contract Law both provide that a contract concluded by fraud is void, and Article 18 of the Explanation of Certain Articles of the Labor Law of the People's Republic of China defines fraud as one party's deliberately telling the other something false, or deliberately concealing the true position, in order to induce the other to make a declaration of intention it would not otherwise have made. The legislature thus treats the contract as void and the fraudulent party as liable for the other's loss, so as to guide and press the parties to observe good faith.

The duty to refrain from providing false facts and from concealing the true position during the stage in which the parties get to know each other before contracting is, however, limited in scope. Article 8 of the Labor Contract Law provides that when recruiting, the employer shall truthfully inform the employee of the content, conditions and place of work, occupational hazards, production safety conditions and remuneration, and of other matters the employee asks about, while the employer has the right to learn the circumstances of the employee directly related to the employment contract, which the employee shall explain truthfully. The duty of truthful explanation therefore extends only to matters directly related to the employment contract, that is, the recruitment conditions set for the post, including educational background, work experience, professional skills and special vocational qualifications. Whether a person is married, whether she has given birth and any plan for the timing of childbirth fall within the sphere of privacy, are unconnected with performance of the contract and have no bearing on the enterprise's forecast of whether the employee's overall ability suits the post. Marital status is therefore not directly related to the employment contract, and the employee is under no duty to disclose it.

The reason the restaurant company included a marital status box on its application form was to avoid the special treatment enjoyed by female employees during pregnancy, confinement and breastfeeding, and the effect on its operations when an employee leaves her post because of her physical condition. From the point of view of protecting the rights of female employees and of the social obligations an enterprise should bear, that consideration plainly runs counter to the purpose of the legislation and looks like discrimination in employment, and should not be upheld. Ms Yu's marital status was not a matter directly related to the employment contract, she was under no duty to disclose it and committed no fraud, so the termination on that ground was indeed unlawful and compensation must be paid.

What the case shows

Because female employees in the "three periods" enjoy special protection, enterprises tend to prefer women who are married and have had children, which lowers the cost of employment and makes performance of the contract more stable and complete. Requiring an employee to disclose her marital status by relying on the duty of truthful explanation is, however, no different from making "married with children" a recruitment condition, and in substance amounts to controlling labor costs by evading the social responsibility an enterprise should bear for the protection the law gives to female employees. That offends Articles 12 and 13 of the Labor Law, under which employees must not be discriminated against in employment.