Case Information:

Plaintiff: Lin Guoxi

Defendant: Beijing Ruide Xianfei Technology Co., Ltd.

Court: Beijing Dongcheng District People’s Court

Case Ref.: [2013] Dong Min Chu Zi No. 01126

Key Points of the Judgment:

  1. After an employer and an employee established employment relations, the employer is obligated to sign a written employment contract with the employee. The employment contracts signed and held by the employer and the employee shall maintain consistent, otherwise the employer is liable for adverse consequences;
  2. Employers increased the employees’ vacation time, but did not clearly state that paid national holidays shall not count toward the employees’ annual vacation time. The employer should compensate the employees for outstanding annual leave.

Key Facts:

On October 6th, 2008, Lin Guoxi was recruited by Beijing Ruide Xianfei Technology Co., Ltd. (the "Company"). The parties signed a "Trial Period Employment Contract." Lin Guoxi’s position is agreed as sales engineer, with a trial period of three months, the location of work is Beijing. On April 12, 2011, Lin Guoxi resigned.

On March 19, 2012, Lin Guoxi filed a complaint to the arbitration committee on the grounds that, between January 9, 2011 to the time of his resignation, the company did not sign a employment contract with him and failed to schedule annual leaves for him. He requested for the company to pay:

  1. For the period of January 9, 2011 to April 2011, the company did not sign employment contracts with him , the company should pay him twice the wage difference, totaling RMB72,825;
  2. For the period of October 2008 to April 2011, the company should have paid for paid annual leave of RMB4,800 and a 25% economic compensation of RMB1,200.

On November 21, 2012, the arbitral award was:

  1. The company shall pay Lin Guoxi twice the wage difference of RMB 8866.67 for not signing employment contracts with him during the period of January 2011 to April 2011;
  2. The company shall compensate Lin Guoxi for his paid annual leave between October 2008 and April 2011, totaling RMB3200.

The company refused to accept the award and brought the case to Dongcheng District People's Court.

Lin Guoxi and the company each submitted an employment contract signed on January 7, 2009. Aside from different termination dates, all other terms of the employment contract are identical. The employment contract submitted by Lin Guoxi has a termination date of January 8, 2011. The employment contract submitted by the company has a termination date of January 8, 2012.  Neither party validated the truthfulness of the employment contract submitted by the opposing party.

The company questioned the authenticity of the company seal on the employment contract submitted by Lin Guoxi. After investigation, the fourth page of the employment contract does not have red ink, the other four pages do not have complete stamps, therefore, the authenticity of the stamps could not be validated.

The company contended that it has arranged for all of its employees to take paid annual leave during the New Year holidays, and provided the 2009 and 2010 vacation schedule of the company. The company believes that adding an additional week of vacation to the national New Year holiday satisfies the annual leave requirement. Lin Guoxi states that he has never seen the evidence, and does not admit it.

Judgment:

  1. The company shall pay Lin Guoxi twice the wage difference of RMB 8866.67 for not signing employment contracts with him during the period of January 2011 to April 2011;
  2. The company shall compensate Lin Guoxi for his paid annual leave between October 2008 and April 2011, totaling RMB 3200.

Reasoning:

Although the authenticity of the seal on the employment contract provided by the employee cannot be validated, the seals on the cover pages were authenticated. The company could not deny their authenticity. There are a total of 5 pages on the employment contract, only the 4th page lacked red ink, which is insufficient grounds to deny the continuousness of the previous two pages. The company is liable for inconsistencies in employment contracts, therefore, it should be concluded that the employment contract signed on January 7, 2009 has an effective period of 2 years.

The company contended that it has arranged for all of its employees to take paid annual leave during the New Year holidays. But the 2009 and 2010 vacation schedule provided by the company only stated that it will increase the company’s vacation time by a week, but did not clearly state that this increased week of vacation is each employee’s annual paid leave as stipulated under national law. Therefore, the courts do not agree with the company’s contention that Lin Guoxi has had his annual paid leaves.

Source: Judicial Opinions Website

KWM Comments: If an employer proactively arrange vacation for its employees but does not specify the vacation is annual leave, the employees may claim for compensation for unused annual leave. It is advisable that the employer specify the nature of vacation when arranging its employees to take rest days, so as not to offer benefit in good faith but end up with undertaking extra responsibility.