Companies Cannot Refuse to Pay Double Based on Employee’s Non-Initiative to Re-Contract

By:Lawyer: Zhang Tao – Shanghai Ganus LawDate:2017-09-15

Applicant: Xu xx
Lawyer: Zhang Tao – Shanghai Ganus Law
Respondent: Shanghai xx Machinery Company

I Facts

The Applicant started working at Respondent’s company on 14th April 2010 operating machines. Both parties entered into an employment agreement on May 2012 for the period between 13th April 2012 and 13th April 2014. On the 13th April 2014, the employment agreement came to an end, however the applicant continued working at the company, although he did not request for a re-contract. On 7th February 2015, the Applicant resigned. The Applicant had a pay of not less then RMB 5,000. After which, the Applicant applied for arbitration in Shanghai requesting the Respondent to pay double (due to non-contractual work) for the period of 15th May 2014 to 6th May 2015, to pay for compensation and to pay for annual leave salary from 1st January 2015 to 6th February 2015.

The Applicant stated: he resigned on 6th February 2015; the Respondent only paid his salary till 10th February 2015 which includes the salary for the Bank Holidays which he worked on. The Respondent believes that the Applicant resigned willingly therefore does not meet the requirement for annual leave. The Applicant’s request of double pay due to non-contractual work has no legal basis in law or in reality. The Applicant did not request for Contract renewal after the end date. The Respondent had paid social insurance for the Applicant, therefore did not pose any losses for the interest of the Applicant.

II Arbitration Results

According to Clause 82, companies who employs more than a month but less than a year without an employment contract has to pay double. This law also incudes those who continue working in the same company after the end of their initial contract but have not signed renewal contract. 

The employment contract ended on 13th April 2014, the Applicant did not sign a renewal contract with the Respondent, therefore infringing the legal benefits of the Applicant, and should pay the Applicant double for the time period of 15th May 2014 to 6th February 2015. 

The calculations should be based on the normal pay as agreed by both parties, hence it should be calculated without overtime pay.

Additionally Clause 38 states that, under the following clauses, employee can terminate the employment contract
(a) A breach of the Employment Contract itself;
(b) Late salary payments;
(c) Non-payment of social insurance for employee;
(d) Company’s breach of laws and regulations, causing harm to employee;
(e) Situations under Clause 26 that cause the contract to be invalid;
(f) Other laws or regulations that calls for the termination of the contract.

If the employer were to use threats, abuse, or other illegal measures to force an employee to resign against his/her will, or to command employees to engage in illegal or dangerous activities, the employee can resign without notice. 

Under Clause 46, under the following clauses, employees are entitled to compensation
(a) Employees who resign under Clause 38;

In this case, the Applicant resigned based on a lack of employment contract, which is not under Clause 38 or 46. Therefore the law does not support the Applicant asking for economic compensation.

According to regulation, when employers terminate the employment contract with employees, shall calculate compensation for annual leave or bank holidays according to the exact working days. 

In this case, the Applicant resigned willingly; therefore he will not enjoy annual leave benefits. Therefore the laws and regulations do not support Applicant’s application annual leave compensation.

III Reflections

Shanghai People’s Court decided that on the issue of double pay, we believe Clause 82 subclause 1 states that “employees who work without a contract for more than a month but less than a year shall be entitled to double pay”. From the analysis of this clause, double pay is not a normal compensation for employees, but rather it is a responsibility for employers who did not re-contract with their employees.

Hence, it is already a breach of Employment Law by not signing a re-employment contract; therefore double pay is also a form of fine. Additionally, being the stronger party, the employer should be responsible for this rather than to blame the employee for not initiating to sign a re-contract

Ganus’Value:Lawyers are guardian angels rather than business partners.

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