In October 2011 the Shunyi District People's Court of Beijing affirmed the ruling of a Beijing labour arbitration commission in favour of an employee's claim for compensation for unused annual leave. The court ordered the employer to pay Rmb39,000, which represented compensation for nine days' unused annual leave.

The employer reportedly argued that the employee was not eligible for annual leave on the grounds that she had not worked for 12 consecutive months before joining the company. Under the applicable regulations, employees become eligible for annual leave once they have worked for 12 consecutive months with either their current employer or one or more prior employers. The company tried to argue that the break in the employee's service meant that she lost her eligibility for annual leave until she attained 12 consecutive months of service with her new employer.

The court rejected the company's argument and ruled that once an employee has worked for 12 consecutive months anywhere, he or she will always be entitled to annual leave, irrespective of whether he or she switches employer or takes breaks from work in future.

This case clarifies that companies should grant annual leave to all new hires once they join, provided that the employees satisfy the requirement of having worked 12 consecutive months at any time in the past for any employer.

For further information on this topic please contact Andreas Lauffs or Jonathan Isaacs at Baker & McKenzie's Hong Kong office by telephone (+852 2846 1888), fax (+852 2845 0476) or email ([email protected] or [email protected]).