On May 20, 2013, an effective judgment was issued by Beijing First Intermediate People's Court, deciding that when employer wrongfully terminates an employment contract due to substantive causes, the employer should pay normal wages and 25% of wage compensation from the time of wrongful termination to the date of effective judgment.

On April 15th, 2011, the employer dismissed Mr. Zhou, the head of marketing, on the ground of incompetence. Mr. Zhou thought the termination was illegal and asked to continue to fulfill the employment contract. Regarding this dispute, the court made an effective judgment on December 2011, and decided the termination was illegal and required the employer to continue to fulfill the employment contract.

Since July 2011, Mr. Zhou filed written applications to the employer for many times to apply to returning to work, but the company refused him based the reason “obviously lack of ground for continue the performance of employment contract.” Thus Mr. Zhou filed arbitration application to the Labor Arbitration Commission, requesting the employer to pay 25% compensation of the wage of August, 2010 in arrears, and the normal wages since the employer’s wrongful termination.

For this regard, the employer argued that, its failure of paying Mr. Zhou’s wages which was claimed by Zhou as in arrears was resulted from the shortage of capital, but it did not submit any proof to prove that it had the operational difficulties; and, because Mr. Zhou did not provide any service since he was dismissed, the employer therefore disagreed to pay the wages after the termination.

After trial, the court of first instance held that: because the company cannot prove its delay of paying the wages was resulted from the operational difficulties, it shall bear the disadvantages of failure to prove, meaning it has to pay 25% compensation of the wages in arrears. After the termination decision of employment contract made by the company was revoked by Labor Arbitration Commission or the People’s Court, in the regard of the issue that the employer asks the employing enterprise to pay the wages during the period from the time when the termination decision was made to the arbitration or litigation, the court should determine the standards of paying wages according to the following principles: (1) If the termination decision is revoked due to procedural flaws , the employer shall pay the wages during the above period according to the standard of minimum wage; (2) If the termination decision is revoked due to causes in the substantive aspects, the employing enterprise shall pay the wages during the above period according to the wage standard when the employer working in the normal conditions. In this case, the termination notice of the company was revoked due to violation in the substantive aspects, and Mr. Zhou asked to return to work again for many times and was rejected clearly by the employer. Therefore, the employer shall pay Zhou the wages during the period in issue according to the standard of his/her normal wages.

The company filed appeal against the judgment in first instance, and the court of appeal upheld the judgment in first instance.

(Source of the case: Wolters Klumer legal database)

KWM comments: In the event that the termination decision is held illegal, the employee requests for salary during disputing period, there are different practices regarding the salary standards. The judgment made by Beijing First Intermediate People's Court shows that, it would review the termination decisions made by the employer and decide whether there are mere procedural flaws or there is substantive violation of law. It then will further decide during the above period, the employer should pay the minimum wages or the wages the employee could get under normal conditions. In this regard, the employer should pay attention to the legality of the termination decision in order to avoid legal risks such as continuing performance the employment contract, paying the wages from the time when the termination decision was made to the time of arbitration or litigation.