Mr. Han (the “employee”) entered into an employment contract with a tea company (the “company”) to work on the sales team. It has been stipulated in the company’s employee handbook that, where an employee steals products, he/she shall be fined in the amount of RMB 100. The employee’s signature is used to attest/verify that he/she has received a copy of the employee handbook. In the present case, the employee was found to have given away tea samples for free, and was therefore fined by the company for stealing. The employee filed a lawsuit against the company challenging the legitimacy of the decision to fine him accordingly. The case went through labour arbitration, then through two trials, until, eventually, the court ruled in favour of the company. The intermediary court in Shanghai came to this decision based on the following: (1) the internal policy which prescribes that a fine is not in conflict with existing laws; (2) the fine amount is considered as reasonable in view of the seriousness of the misconduct; and (3) the internal policy has obtained legal effect through democratic procedures, such as negotiation with trade unions or employees’ representatives, and has been duly notified to its employees.