Liu joined the Company in June 2010 and signed an “Offer Letter” with the Company. The “Offer Letter” stipulates Liu’s job position, salary and probation period and states that “an Employment Contract will be entered into by and between you and the Company upon the expiration of the probation period”. However, by the time Liu left the Company in May 2011, the Company still hadn’t signed any Employment Contract with Liu. Consequently, Liu applied to the Labor Dispute Arbitration Commission for arbitration, demanding the Company to pay him double salary for the period of no written employment contract. The Arbitration Commission upheld the claims of Liu. The Company was unsatisfied with the arbitral award and brought a suit before the Court.

The Court ruled as follows: firstly, the Employment Contract Law stipulates that the parties shall enter into a written employment contract upon the establishment of employment relationship, however, the “Offer Letter” can hardly be considered as an employment contract; secondly, the “Offer Letter” states that “an Employment Contract will be entered into by and between you and the Company upon the expiration of the probation period” , which indicates that the “Offer Letter” is not the employment contract. Therefore, the Company shall pay double salary for not entering into an employment contract with Liu.

KWM Comments:

Pursuant to the Employment Contract Law, the employer shall enter into a written employment contract with the employee within one month upon the establishment of the employment relationship. Where the employer fails to enter into any written employment contract during the period of more than one month and less than one year upon the establishment of the employment relationship, the employer shall pay double salary to the employee during the foregoing period. In practice, some employer only signs an offer letter with the employee which includes certain contents of an employment contract. However, such offer letter may not be recognized as an employment contract when the dispute arises. So to avoid the risk of double salary, it is suggested for the employer to execute a standard employment contract even an offer letter has already been signed.