China: Employee Was Held Not Liable for Company’s Economic Loss Suffered due to Criminal Fraud

The Employee worked as a cashier in the Company. Someone impersonated legal representative of the Company and frauded the Employee to transfer RMB 480,000 out from Company’s account. The public security department initiated criminal investigation against the fraud. Pending the criminal investigation, the Company terminated the employee for gross negligence and filed a lawsuit against the Employee for recovery of RMB 480,000. Through the litigation process, the Court eventually ruled in favor of the Employee.  The Court came to this decision based on the followings: (a) the Employee was not in collusion with the fraud; (b) the Employee’s transfer of money shall be deemed as performance of job duty; (c) the Employee is not liable to any loss caused by performance of job duty unless otherwise provided in the Employment Contract; (d) the Employee’s mistake is neither intentional nor out of gross negligence as the Employee is new to the Company and the Company’s financial management system is flawed per se; and (e) the Company shall bear the operative and personnel risk of using different employees.