Dispute Over Severance Pay Highlights Employer Burden of Proof in Work Duration Case

Dispute Over Severance Pay Highlights Employer Burden of Proof in Work Duration Case

Case Overview

A Chinese company challenged an arbitration award ordering it to pay over 20,000 yuan in severance to a former employee, arguing the worker had been employed for only five months. The court rejected the company’s claim, finding it failed to meet its legal burden of proof regarding the employee’s length of service. The ruling affirmed the employee’s testimony that he had worked for the company for nearly ten years and upheld the full economic compensation award.

Case Background and Facts

The plaintiff, a chemical industrial company based in Eastern China, initiated litigation after the local labor arbitration commission ruled in favor of the defendant, Mr. Zhang. The company sought a court order to reduce the severance payment to the equivalent of half a month’s salary, totaling approximately 1,007 yuan. The company claimed that Mr. Zhang began working on May 22, 2010, and that the employment relationship ended on November 22, 2010, after only five months of service.

Mr. Zhang contested this account. He stated that he had originally started working for the company on March 27, 2001. According to Mr. Zhang, he took a normal leave of over two months following the Chinese New Year in 2010 with the company’s approval. He returned to work on May 22, 2010, and continued in the same position. He argued that the employment relationship had lasted for approximately ten years and that the termination was due to the company’s inability to continue operations.

Court Proceedings and Evidence

The case was heard in a civil court in Eastern China. The company presented 14 pages of photocopied attendance records from 2010 to support its claim that Mr. Zhang had only worked from May 22, 2010. While Mr. Zhang did not challenge the authenticity of these documents, he argued that the records actually showed his attendance in January and February of 2010, which contradicted the company’s assertion that he was a new hire in May. He explained that the absence of records for March through May was due to his approved leave, not a break in employment.

Mr. Zhang did not submit any evidence of his own. The court, on its own initiative, obtained the full case file from the labor arbitration commission, including the arbitration application, hearing transcripts, evidence materials, and the final award. Both parties accepted these documents without objection.

The evidence showed that on November 3, 2010, the company and Mr. Zhang signed an agreement. The agreement stated that the company would decide by November 22, 2010, whether to continue its business. If the company failed to make a decision or decided to close, Mr. Zhang would be entitled to severance pay according to law, and the company would arrange for a pre-termination health examination.

On November 10, 2010, Mr. Zhang filed for arbitration. The arbitration commission ruled that the company must pay wages for the final period of employment, provide full severance based on ten years of service, and arrange for a health check. The company accepted the wage and health check orders but disputed the severance amount.

Court Findings and Judgment

The court applied the legal principle that in disputes over an employee’s length of service, the employer bears the burden of proof. The court found that the company failed to provide sufficient evidence to prove that Mr. Zhang had worked for only five months. The attendance records submitted by the company actually supported Mr. Zhang’s claim of earlier employment.

Accepting Mr. Zhang’s account, the court determined that his employment began on March 27, 2001, and ended on November 22, 2010, resulting in a total service period of 9 years, 7 months, and 25 days. Since the parties agreed that the employment was terminated by mutual agreement, the court held that the company was obligated to pay severance.

The court calculated the severance using the agreed average monthly wage of 2,015.02 yuan for the twelve months prior to termination. Applying the statutory formula of one month’s salary for each full year of service, with the period exceeding six months counting as a full year, the court determined the company owed ten months of salary. The total severance award was 20,150.20 yuan.

The court also ordered the company to pay 733.33 yuan in unpaid wages for the period from November 3 to November 22, 2010, and to arrange and pay for Mr. Zhang’s pre-termination health examination. The court dismissed all of the company’s claims.

Key Legal Principles

The court applied two fundamental principles of Chinese labor law. The first is that the employer bears the burden of proof in disputes regarding the calculation of an employee’s length of service. When an employer claims a shorter period of employment, it must present credible evidence to support that claim. Failure to do so results in the court accepting the employee’s version of events.

The second principle concerns the calculation of severance pay upon the mutual termination of an employment contract. Under relevant law, an employer must pay severance equal to one month’s salary for each full year the employee worked. Any period of six months or more is counted as a full year.

Practical Insights

This case serves as a clear reminder that employers must maintain accurate and complete employment records. When a company disputes a worker’s length of service, the burden of proof falls squarely on the employer. In this instance, the company’s own evidence failed to support its position and instead corroborated the employee’s account.

The ruling also demonstrates the importance of formal employment agreements. The written agreement signed by both parties, which referenced the possibility of closure and the employee’s right to severance, was a critical piece of evidence supporting the employee’s claim. Companies should be aware that any document they sign regarding the terms of termination can be used to establish their legal obligations.

Legal References

Labor Contract Law of the Peoples Republic of China, Article 46 (circumstances requiring severance payment), Article 47 (formula for calculating severance payment)

Interpretation of the Supreme Peoples Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases, Article 13 (burden of proof on employer for termination and work duration)

Disclaimer

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