On social platforms like RedNote (Xiaohongshu), it is common to see influencers sharing their salaries. But is sharing the salary a show of happiness or a recipe for resentment? Such posts have sparked controversy, fuelling curiosity about how much their colleagues or peers earn. In practice, many companies have established salary confidentiality policies that prohibit employees from disclosing their compensation to colleagues or external parties. But should salaries really be kept confidential? A recent case from Shanghai’s No.2 Intermediate People’s Court offers valuable insights for employers.
Case overview
In 2013, an individual surnamed Ma joined a multinational chemical company referred to as H Company. In 2015, he was promoted to key account manager and placed on a flexible working schedule.
In November 2016, Ma sent an email to his supervisor stating that his annual pay, about RMB260,000 (USD36,090), was lower than that of other key account managers in mainland China, and was the lowest in the region. He cited a colleague’s RMB330,000 annual salary and RMB300,000 severance package.
Previously, on 5 August 2016, Ma arrived late for work. His supervisor reprimanded him via text message and instructed him to notify the company in advance of any future tardiness. On 4 January 2017, Ma visited Hospital A for medical treatment. On 6 January, he verbally requested sick leave from his supervisor, but did not actually visit the hospital that day.
He later sought treatment at Hospital B on 10 and 11 January. On 15 February, his supervisor sent an email requesting that he formally submit sick leave requests through the company’s system. Ma failed to do so.
On 27 February 2017, H Company issued a written warning for his violation of leave policies and, on the same day, terminated his employment on the grounds of gross misconduct under company policies.
Ma challenged the dismissal through labour arbitration, arguing that:
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- The salary confidentiality policy infringed on employees’ right to information and violated the principle of equal pay for equal work;
- His email aimed to negotiate a raise. He merely highlighted a pay disparity and estimated a colleague’s salary without malicious intent to reveal private information of other employees. Therefore, he did not breach the confidentiality policy; and
- As his position was subject to a flexible working schedule with no requirement to clock in or be physically present at the office, he had no obligation to request formal sick leave when he needed to visit the hospital. He claimed to have been working from home during that time.
Court ruling and analysis
The arbitration panel, trial court and appellate court all upheld H Company’s decision to terminate Ma’s employment. The court provided the following analysis:
Did Ma violate the company’s salary confidentiality policy? H Company had a strict compensation confidentiality policy in place, which explicitly prohibited employees from disclosing or inquiring about their own or others’ salaries. Any breach of this policy was deemed gross misconduct, justifying immediate termination.
In his email to his supervisor, Ma explicitly disclosed another employee’s salary and compared it to his own, directly violating the company’s confidentiality policy. Therefore, H Company’s decision to terminate his employment based on the employee handbook was deemed appropriate.
Did Ma refuse to comply with managerial instructions? It is a fundamental duty of employees to comply with employer management and attendance requirements. H Company’s employee handbook specified that deliberate non-compliance with a supervisor’s instructions could result in dismissal.
Although Ma was on a flexible working schedule and not required to clock in, he was still subject to attendance oversight and was obligated to follow H Company’s leave procedures. During the month in question, Ma claimed to be ill and was absent from work for several days.
Despite repeated requests from his supervisor asking him to go through proper sick leave procedures and provide medical leave documentation, he still failed to do so. His supervisor had also previously reiterated the attendance policy to him. His actions should therefore be regarded as a refusal to comply with managerial instructions. This ground for dismissal is also valid.
Key takeaways for employers
To maintain a stable compensation system and avoid unnecessary conflict, many companies adopt salary confidentiality policies. In this regard, it is recommended that employers formulate such policies through democratic procedures, clearly communicate them to all employees, enforce them rigorously in daily operations, provide regular training and retain evidence of policy implementation and compliance.
When dealing with violations of salary confidentiality, employers should evaluate the employee’s intent, the severity of the misconduct, the scope of its impact and the consequences before deciding whether to proceed with immediate dismissal or adopt other disciplinary measures.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at howard.wu@bakermckenzie.com
