In a recent case reported in Shandong on July 17, 2013, a local intermediate court dismissed an employee’s claim for compensation for unused annual leave on the ground that the company had put the employee on leave from time to time and paid the employee the local minimum wage during such leave. Therefore, the employee should be deemed to have taken up all her annual leave entitlements during such paid leave periods.

The employee joined a media company as a project-based employee in 2009. According to her employment contract, if there are no sufficient work assignments in the company, the company may put her on leave and pay her the local minimum wage. During her employment, the company put her on leave from time to time during slow periods in business. In July 2012, her employment with the company was terminated. After termination, the employee sued the company alleging that she never took any paid annual leave during employment, and therefore she should be compensated for her unused annual leave entitlements.

The labor arbitration tribunal ruled against the employee. It found that during employment, the employee was put on paid leave from time to time. Even though the pay during such leave periods was lowered to the minimum wage standard, it should still be recognized as “paid leave.” Therefore, the company should be deemed to have arranged the employee to take annual leave during low periods in business. The disgruntled employee appealed the case to the court of first instance and then to the court of appeal, both of which sustained the ruling of the arbitration tribunal and dismissed the claim of the employee.