Dispute Over Employment Duration and Severance Pay in Eastern China Chemical Company Case

Dispute Over Employment Duration and Severance Pay in Eastern China Chemical Company Case

Case Overview
A chemical company in Eastern China challenged an arbitration ruling that ordered it to pay severance to a former employee, arguing the employee had worked only three years. The court ruled against the company, finding it failed to prove the employee’s shorter tenure. The employee was awarded severance based on a six-and-a-half-year work period, totaling 8,202.22 yuan.

Case Background and Facts
The plaintiff, a chemical industrial company based in Eastern China, employed the defendant, Mr. Huang, as a worker. The company claimed Mr. Huang first worked for it, left, and then returned in October 2007, working continuously until November 22, 2010. The company asserted his actual work period was three years. Mr. Huang disputed this, stating he began working in May 2004 and never left. He claimed a two-month leave in 2007 for personal reasons was approved, and his employment relationship remained continuous. The company acknowledged it had not signed a labor contract with Mr. Huang, nor maintained formal entry or exit records.

On November 3, 2010, the parties signed an agreement stating the company would decide by November 22, 2010, whether to continue operations. If no decision was made, the company would be deemed closed, and employees would receive severance under the law. The company failed to make a decision, leading to the termination of the employment relationship on November 22, 2010.

Court Proceedings and Evidence
The company initiated the lawsuit after the local labor arbitration commission ruled in favor of Mr. Huang. The company sought a court order to pay severance based on three years of service, amounting to 3,785.64 yuan. Mr. Huang demanded severance based on seven years of service.

During the trial, the company presented a single piece of evidence: a copy of a May 2007 payroll record, which it argued showed Mr. Huang was not employed at that time. Mr. Huang challenged the authenticity of this document, noting it lacked his signature. The court also reviewed records from the arbitration case, including the application, hearing transcripts, and the arbitration award. Both parties accepted these records as accurate.

The company conceded it had no records of when Mr. Huang started, left, or returned to work. It also agreed to pay Mr. Huang 733.33 yuan in wages for November 3-22, 2010, and to arrange a pre-departure health check. Both parties accepted that Mr. Huang’s average monthly wage for the twelve months before termination was 1,261.88 yuan.

Court Findings and Judgment
The court applied the legal principle that the employer bears the burden of proof in disputes over an employee’s length of service. The company failed to provide credible evidence to support its claim that Mr. Huang worked only three years. The court therefore accepted Mr. Huang’s statement that he began work in May 2004. Since Mr. Huang did not specify an exact start date, the court set May 31, 2004, as the starting point. This gave Mr. Huang a total service period of 6 years, 5 months, and 22 days.

The court held that because the parties mutually agreed to terminate the employment relationship, the company was required to pay severance. Using the agreed average monthly wage of 1,261.88 yuan and a multiplier of 6.5 months (rounding up the partial year), the court calculated the severance at 8,202.22 yuan.

The court ordered the company to pay Mr. Huang 733.33 yuan in wages for the final work period, 8,202.22 yuan in severance, and arrange for a pre-departure health check at its own expense. All payments were to be made within ten days of the judgment taking effect. The court dismissed the company’s other claims.

Key Legal Principles
The court relied on the principle that in labor disputes concerning the calculation of an employee’s length of service, the employer has the burden of proof. When an employer fails to maintain proper records or provide evidence, the court may accept the employee’s account. The court also applied the rule that when an employer and employee mutually agree to terminate the employment relationship, the employer must pay severance based on the employee’s actual years of service.

Practical Insights
This case highlights the critical importance for employers to maintain accurate and complete employment records, including start dates, leave periods, and termination dates. Without such documentation, courts are likely to favor the employee’s version of events. Employers should also be aware that a mutual agreement to terminate employment, particularly when triggered by a business closure, obligates them to pay severance. Failing to keep proper records can lead to significantly higher severance costs than anticipated.

Legal References
Labor Contract Law of the People’s Republic of China, Articles 46 and 47, paragraph 1. Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases, Article 13.

Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.