——Judgment of second instance byBeijing Third Intermediate People’s Court

[(2013) San Min Zhong Zi No. 00654]

Key Points of the Judgment:

  1. In case of reinstatement after wrongful termination, when the employment contract expires, the employer should pay severance to the employee. The court did not support the 50% compensation if the employer failed to pay severance in a timely manner;
  2. In case of reinstatement after wrongful termination, the employer should pay the salaries and bonuses during the period of arbitration and litigation but is not obligated to pay 25% extra compensation. If the employee claim the salaries during the period of arbitration and litigation when the employment contract expires, the statute of limitations should be counted as of the expiry of the employment contract;
  3. Any new claims will not be dealt with by the court.

Key Facts:

Wang Jie joined Zhongsheng Jaixin Company (“Company”) on September 21, 2009, with his employment contract expiry date on November 20, 2011. On February 23, 2010, the Company terminated the employment contract with Wang Jie on the ground of dereliction of duty and double employment relationship. Wang Jie filed arbitration against the Company. After the whole arbitration and litigation process, Beijing Second Intermediate Court ruled that the Company withdrew the termination and reinstated the employment contract.

On November 20, 2011, the employment contract expired and the Company did not pay severance to the employee.

In February 2012, Wang Jie filed arbitration and claimed for salaries and bonuses for the period between September 14, 2010 and November 20, 2011, 25% extra compensation for the salaries between the period February 23, 2010 and November 20, 2011, severance for termination of employment, 50% extra compensation and appraisal cost during the arbitration procedure.

The first instance court did not deal with the claim for payment in lieu of notice, ruled in favor of Wang Jie’s claims for salaries and bonuses, as well as severance, and rejected Wang Jie’s other claims.

Both parties were dissatisfied with the judgment and appealed to Beijing Third Intermediate Court.

Judgment:

Beijing Third Intermediate Court upheld the original judgment.

Reasoning:

If the termination of employment is withdrawn, it should be regarded that there still existed employment relationship between the parties. During the period of arbitration and litigation, although the employee did not provide labor to the employer, it was attributable to the employer. Therefore, the employer should pay salaries to the employee for the period of arbitration and litigation based on the employee’s normal salaries when he worked. Moreover, if the employment contract expired and the employee claimed for salaries between the period of arbitration and litigation, the statute of limitations should be counted as of the expiry date.

If the employment contract expired and the employer decides to end the fixed-term employment contract, it should pay severance to the employee, unless the employee does not agree to renewal despite that the employer offers the same or better terms and conditions.

The 25% extra compensation for the salaries during the period of arbitration and litigation, as well as the 50% extra compensation for severance due to expiry of employment contract have no legal basis and should not be supported. The claim for payment in lieu of notice is an independent claim and should go through the pre-required arbitration procedure.

Source: http://www.court.gov.cn/zgcpwsw/

KWM Comments: Local practice varies regarding the application of 25% compensation across the country. According to this case, Beijing Third Intermediate Court did not support the 25% compensation during the period of the arbitration and litigation when the employment relation had been resumed.