Employer Ordered to Pay Double Wages for Failure to Sign Labor Contract, Loses Appeal in 24,382 RMB Dispute

Employer Ordered to Pay Double Wages for Failure to Sign Labor Contract, Loses Appeal in 24,382 RMB Dispute

CASE OVERVIEW

A bus manufacturing company in Northern China lost its appeal and was ordered to pay 24,382 RMB in double wages to a former employee. The court also required the company to pay interest on a security deposit. The ruling was issued by the intermediate court in 2011, affirming the original judgment.

CASE BACKGROUND AND FACTS

The employee, Mr. Deng, began working for the company on August 20, 2008. According to Chinese labor law, an employer must sign a written labor contract with an employee within one month of the start of employment. The company failed to do so. Mr. Deng continued working without a signed contract until his departure on August 2, 2009.

The company had also collected a security deposit from Mr. Deng. When the employment relationship ended, the company returned the deposit but did not pay any interest for the period it held the funds.

Mr. Deng filed a labor dispute claim seeking compensation for the employer’s failure to sign a written labor contract. He also requested interest on the security deposit.

COURT PROCEEDINGS AND EVIDENCE

The case first went to the labor arbitration committee, which ruled in favor of Mr. Deng. The company then filed a lawsuit in the local district court. The district court found in favor of Mr. Deng and ordered the company to pay 24,382 RMB as double wages for the period from September 20, 2008 to August 2, 2009. The court also ordered the company to pay interest on the security deposit.

The company appealed to the intermediate court. During the appeal, the company argued that the failure to sign the labor contract was the fault of Mr. Deng, not the company. The company also argued it should not have to pay interest on the security deposit.

The company did not provide any evidence to support its claim that Mr. Deng was responsible for the missing contract. The appellate court reviewed the case records and confirmed that the original trial court had correctly found the facts.

COURT FINDINGS AND JUDGMENT

The intermediate court held that the company bore the burden of proof. Since the company failed to provide evidence showing Mr. Deng refused to sign the contract, the court rejected the company’s argument.

According to Article 82 of the Labor Contract Law, if an employer fails to sign a written labor contract with an employee for more than one month but less than one year from the start of employment, the employer must pay the employee double wages each month.

The court calculated the double wage period from September 20, 2008 (one month after Mr. Deng started work) to August 2, 2009 (the date Mr. Deng left). The total amount of 24,382 RMB was correct.

Regarding the security deposit, the court found that the company had held Mr. Deng’s money without justification. The company was required to pay interest for the period it held the deposit.

The court dismissed the appeal and upheld the original judgment. The company was ordered to pay the litigation costs for the appeal.

KEY LEGAL PRINCIPLES

This case illustrates several important legal principles under Chinese labor law. An employer has a legal duty to sign a written labor contract with an employee within one month of the start of employment. Failure to do so triggers a penalty of double wages for each month without a contract, up to a maximum of eleven months.

The burden of proof falls on the employer to show that the employee was at fault for the missing contract. If the employer cannot produce evidence, the court will assume the employer is responsible.

Security deposits collected from employees must be returned with interest. Employers cannot hold employee funds without compensation.

PRACTICAL INSIGHTS

Employers should ensure that all new employees sign a labor contract within 30 days of starting work. A written record of the signing process should be maintained. If an employee refuses to sign, the employer should document the refusal and consider terminating the employment relationship to avoid liability.

Companies should not collect security deposits from employees. If a deposit was already collected, it must be returned with interest when the employment ends.

Employees who work without a written contract for more than one month may be entitled to double wages for the period without the contract. Legal action should be taken promptly, as there are time limits for filing claims.

LEGAL REFERENCES

Labor Contract Law of the People’s Republic of China, Article 82, Paragraph 1.
Civil Procedure Law of the People’s Republic of China (2007 Revision), Article 153, Paragraph 1, Item 1.

DISCLAIMER

This article is for informational purposes only and does not constitute legal advice. Laws and regulations may vary by jurisdiction. Readers should consult a qualified legal professional for advice on specific legal matters.