In a recent case, a company in Beijing was reportedly ordered to make an additional payment in the amount of RMB 15,000 after the company had signed an employment contract non-renewal agreement and had paid severance, year-end bonus and other payments totalling RMB 50,000 to an employee. 

The employment contract non-renewal agreement specified the severance amount and year-end bonus amount; however, it did not itemize a payment of RMB 18,000 as any particular payment but simply labelled it as “other payments”.  The employee later claimed for additional payments for unused annual leave compensation, underpaid salary and a safety bonus.  The company argued in court that those payments had all been covered by the “other payment” amounts while the employee  asserted that the payment was just a good-will payment.  The court ruled in favor of the employee and ordered the company to pay the unused annual leave compensation, underpaid salary and safety bonus.

Key Take-Away Points:

There is a risk that employees may still claim additional payments if a settlement agreement is not well drafted and the settlement payments are not well defined. To mitigate the risk, companies are recommended to clearly define and itemize each payment under the termination agreement and include a comprehensive and specifically-worded waiver and release from the employee.