Background
While an employee is pursuing a suit for wrongful dismissal, a company's head sometimes closes the business — apparently to avoid losing — and sets up a new company doing exactly the same work. The employee is then left with no position to return to and no wages to recover. Our client was in precisely that position.
What Was at Stake
Neither reinstatement nor a wage claim serves any purpose against a company that has closed. The key was whether the newly established company could be recognized as having in substance taken over the old one, so that responsibility could be imposed on it.
How Changchun Helped
Changchun added the newly established company as an alternative defendant and proved with evidence that it had taken over the old company's personnel and physical organization intact and succeeded to its business.
The court recognized that the new company had succeeded to the old company's business, confirmed that the dismissal was invalid and ordered the new company to pay the outstanding wages. The case shows that rights can be protected by looking to substance, even where a nominal closure is used to escape responsibility. (Outcomes depend on the facts of each case and may differ.)