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Managing sick leave and medical treatment periods can be a big headache for companies ¨C cured only by preemptive policy clarification

Sick leave management is one of the trickiest and most sensitive areas of workforce management, leading easily to the risk of disputes. This article clarifies the difference between sick leave and the medical treatment period (MTP), summarising how courts and arbitrators assess typical cases in practice.

It also suggests systematic, actionable recommendations for businesses to minimise risk of misunderstanding by employees and remain safely compliant with the employment law and local practice.

Definition and applications

Sick leave and the MTP. Sick leave is the factual act of an employee taking time off due to illness. It depends on the condition and medical advice, and the employer has the right to review and manage it. The MTP, by contrast, is a statutory time limit designed principally to protect sick employees from dismissal. Its length is set by law based on the employee¡¯s overall years of service and/or years with the employer, and the employer cannot change it at will.

Put simply, sick leave is a matter of fact; the MTP is a matter of law.

Rules for calculating the MTP and local variations. Under the national standard, the MTP is calculated on a stepped, cumulative basis. It increases in tiers depending on the employee¡¯s total years of service, and years with the employer. This is subject to a ¡°cyclical accumulation¡± rule. Employees are entitled to three to 24 months of MTP, which must be counted cumulatively within a six to 30-month cycle.

Unlike the national standard, Shanghai has a special rule for MTP calculation. It depends mainly on years of service with the current employer. Shanghai also does not apply the national ¡°cyclical accumulation¡± rule. Companies with workforces spanning Shanghai and elsewhere should take care to distinguish the applicable rules.

Notably, there are significant local differences in how the MTP is determined for serious illnesses, such as cancer and severe mental illness. Companies should follow the local approach carefully to avoid legal risk caused by applying the wrong MTP.

Disputed scenarios

Scenario 1: If an employee¡¯s sick leave note is defective and they do not correct it as required, does it constitute unauthorised absence? If the note lacks a doctor¡¯s signature or a clear rest period, the employer is usually entitled to ask the employee to provide a corrected document. If the employee refuses and does not return to work as instructed, the employer may, under its internal rules, refuse to approve the leave and treat the absence as unauthorised.

Scenario 2: If a company discovers an employee is taking ¡°sham¡± sick leave, can it unilaterally terminate the employment contract? In practice, ¡°sham¡± sick leave typically refers to situations where, during sick leave, the employee engages in activities clearly unrelated to recovery, like travelling. In essence, such conduct breaches the principle of good faith in performing the employment contract. Arbitration tribunals and courts generally focus on whether the employee¡¯s conduct during sick leave is in substantive conflict with the recovery needs implied by the claimed condition. Where the conflict is clear and the employee cannot provide a reasonable explanation, unilateral termination by the employer will usually be upheld.

Scenario 3: Unlawful termination caused by miscalculating or misapplying the MTP for serious illnesses. Beijing and Shanghai take markedly different approaches to the MTP standard for serious illnesses. In Beijing, a 24-month MTP tends to apply directly, during which employees enjoy ¡°dismissal protection¡±. Shanghai applyies a 24-month MTP only where the employee has been assessed as having totally lost work capacity. Employers should monitor the latest developments in local adjudication practice.

Scenario 4: If an employer suspects sick leave is not genuine, can the employee be required to undergo a re-examination at a designated hospital? After the employee has duly provided sick leave note, any compulsory re-examination request must be based on reasonable suspicion, otherwise it may be viewed as an abuse of managerial authority.

Reasons commonly accepted by arbitration tribunals and courts include: (1) sick leave exceeding a generally reasonable duration; (2) leave period not matching the actual condition; (3) repeated non-compliance with medical advice; and (4) inconsistencies between the medical diagnosis and other sick leave documents. In these circumstances, an employee¡¯s refusal to be re-examined can usually be treated as misconduct or unauthorised absence.

Compliance advice

To avoid or reduce sick leave management risks, employers should consider the following compliance measures.

Standardise application and approval with a tiered approval mechanism requiring employees to enter reasons for leave, start and end dates, and to upload valid supporting documents. Add a tick-box to vouch for sick leave authenticity in the system, stating that sham sick leave constitutes serious misconduct. For urgent verbal requests, set a strict deadline for supplementing written documents, and adopt a process for monitoring return to work sign-off.

Timely on-site checks and visits. For long-term or questionable sick leave, the employer may formally write to the medical institution to verify the situation, or arrange for dedicated staff to conduct an on-site visit.

Institutionalise misconduct scenarios. Employers should provide that certain conduct constitutes serious misconduct, including: refusing to provide documentation without justification; refusing a reasonable employer-designated re-examination; and engaging during sick leave in activities clearly unrelated to recovery, such as travelling or freelancing.

Ensure internal rules are lawful and effective. For policies and related disciplinary action, the employer should strictly follow statutory consultation procedures and ensure this is properly communicated to all employees ¨C with records kept by way of acknowledgement signatures, intranet publication or training to preserve legal enforceability of the management policy.

Fulfil the duty of care. Maintain regular communication with the employee during the MTP, keep up with their medical condition and any updates, and strike an appropriate balance between workforce management needs and humane support.

In addition, when handling disputes, employers should not only focus on the factual basis for the sick leave, but also keep up with the local arbitration and judicial approach to ensure management actions comply with both the law and local practice.