An employee had in fact separated from the company, yet he somehow managed to clock in for work for two consecutive years. Where did these anomalous attendance records, performance metrics, and meeting-attendance logs come from? What legal consequences await this scheme of insider-outsider complicity?

[Case Review]

LI, formerly a salesperson of a company, tendered his resignation for personal reasons but failed to complete required exit formalities in a timely fashion. Between May 2023 and May 2025, ZHANG, the company¡¯s sales director, took advantage of his position and conspired with the already-departed LI to deliberately conceal LI¡¯s resignation from the company. ZHANG arranged for third-party persons to clock in on LI¡¯s behalf and fabricated sales performance data. LI cooperated by submitting clock-in photos, completing false field-visit reports, and regularly attending company meetings, jointly manufacturing the pretence that he remained an employee. By way of this scheme, the two defrauded the company into continuing to disburse salary and bonuses to LI and make contributions to his social insurance and housing provident fund. They cumulatively misappropriated company funds in excess of RMB 270,000. LI transferred approximately RMB 200,000 out of the salary and bonuses he had received to ZHANG. Upon discovery of the case, the people¡¯s procuratorate brought a public prosecution against ZHANG and LI on the charge of duty embezzlement.

[Ruling of the People¡¯s Court]

After trial, the people¡¯s court held that ZHANG, acting in collusion with LI, had taken advantage of ZHANG¡¯s position to unlawfully appropriate the company¡¯s property for themselves. Given the relatively substantial amount involved, both of their acts constituted the crime of duty embezzlement. In view of the fact that both accused truthfully confessed the criminal facts upon being appearing before the authorities, proactively made full restitution for the economic losses sustained by the victim company, and voluntarily pleaded guilty and accepted punishment, and having comprehensively weighed their respective criminal circumstances and remorseful conduct, the people¡¯s court ultimately sentenced ZHANG to fixed-term imprisonment of one year with a one-year suspension of sentence, and a fine of RMB 15,000; and LI to fixed-term imprisonment of ten months with a one-year suspension of sentence, and a fine of RMB 10,000, for the crime of duty embezzlement.

(All mentioned herein are pseudonyms.)

[Judge¡¯s Insights]

I. Positional Authority Is No Private Prerogative¡ªDuty Embezzlement Condemned by Law

The approval-making power, signing power, and other such authorities held by managers are management prerogatives conferred by job responsibilities. They are never ¡°private rights¡± or ¡°favor-trading chips¡± for one¡¯s free personal disposal. Once abused, where job-related convenience is converted into a profit-making tool, such conduct goes beyond mere managerial dereliction of duty and amounts to custodial-style duty embezzlement, which shall incur severe legal punishment.

In this case, ZHANG, the sales director, wielded authority over performance and personnel management. Taking advantage of his position, ZHANG deliberately concealed his subordinate¡¯s departure from the company, instructed others to clock in on LI¡¯s behalf, fabricated performance records, and colluded to siphon off corporate salary and benefits for private division. His conduct fully satisfies the constitutive elements of the crime of duty embezzlement, and he shall bear corresponding criminal liability in accordance with law.

II. Passive Participation Offers No Excuse from Liability¡ªComplicity in Fraud Also Incurs Culpability

In practice, many persons involved harbour a misconception: they believe they are only passively complying with orders, merely assisting by supplying photos, filling in reports, or attending meetings under false pretenses. Deeming themselves non-ringleaders who retained little of the illicit gains, they argue that they ought not to be held accountable.

In joint occupational crimes, so long as a person joins the conspiracy and assists in executing fraudulent acts, thereby jointly inflicting property losses on the enterprise, criminal liability cannot be escaped even with minor gains and a subordinate role. When confronted with unlawful or irregular requests, sticking to principles and refusing firmly is the best way to protect oneself in the workplace.

III. Closed-Loop Corporate Management Is Indispensable¡ªInstitutional Deficiencies Breed Hidden Risks

The illegal appropriation persisted for two years before it came to light, thanks in large part to deliberate evasion by the perpetrators. It also lays bare inherent management vulnerabilities within the company, including poor inter-department information flow and excessive concentration of management power. Enterprises should draw lessons from this case and improve closed-loop management systems covering resignation filing, dynamic attendance checks, performance authenticity verification, and joint review of salary and social-security contributions. By tightening internal control and supervision mechanisms, enterprises can plug management loopholes at source and secure corporate property.

Reminder from the Judge: Integrity is the bedrock of professional careers and the cornerstone for a well-functioning market economy. All professionals ought to observe the professional ethic of ¡°honest labour and legitimate gain,¡± and uphold integrity as the core value for workplace practice and market operations.

[Comments from a Deputy]

ZOU YONG, Deputy to the Shanghai Municipal People¡¯s Congress and Deputy General Manager of Legal Risk Management, Shanghai Guosheng (Group) Co., Ltd.

Nowadays, many enterprises are adopting flexible employment models to energize their workforce. Yet supporting management systems remain imperfect, giving rise to illegal practices in which a small number of individuals exploit loopholes to misappropriate corporate property. This case is a typical one of duty embezzlement, in which a superior and subordinate colluded to siphon off corporate salary payments and social security contributions by covert means. The people¡¯s court¡¯s lawful judgment effectively safeguards the company¡¯s legitimate rights and interests, rectifies workplace norms, and cleans up the business environment. Through judicial authority, it also sends a clear-cut ¡°zero-tolerance¡± message to society at large against self-serving dishonesty and misappropriation of corporate assets, constituting a firm defence of the baseline of social integrity.

Judicial rulings deliver a clear value-oriented signal and sound an alarm for industry-wide governance. Stakeholders should draw lessons from this case to drive improvements in governance through multi-party collaboration: enterprises should refine and standardize employment mechanisms; judicial organs should keep up stringent punishment; and society should strengthen collaborative governance and supervision. Jointly, these measures will establish a long-term governance safeguard under which misappropriation is deterred, prevented, and disavowed, nurturing a workplace and business environment characterized by integrity, law-abiding conduct, and sound ethical standards.

[Relevant Laws]

Criminal Law of the People¡¯s Republic of China

Article 271 Where a staff member of a company, an enterprise, or any other unit takes advantage of their position to misappropriate the property of such unit for their own possession, if the amount involved is relatively large, they shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be fined; if the amount involved is huge, they shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years, and shall also be fined; if the amount involved is especially huge, they shall be sentenced to fixed-term imprisonment of not less than ten years or life imprisonment, and shall also be fined.