Should Employee Compensate upon Resignation without Prior Notice?

Nutshell

Mr Xu was employee by a Shanghai Company as designer in May 2013. Both parties entered into labour contract on May 21^st 2013. The term of the contract is May 1^st 2013 to April 30^th 2016, and monthly salary is 10000RMB before tax, exclusive of commission for projects counted according to completion.

On December 4^th 2015, Mr Xu resigned for personal reason by written notice and asked the company to handle the termination procedure. The company replied that the resignation is accepted but since there are still ongoing project, Mr Xu shall continue work for 30 days more but not leave office the same day for the company need time to find replacement. Mr Xu didn’t come to office after December 7^th 2015 and didn’t transfer work either. The company had no choice but to hire a professional designer to handle Mr Xu’s work by a high cost of 15000RMB. The company claims the 15000RMB damage afterwards to labour arbitration.

Issue

The issue of this case is whether the employee shall compensate the company if he resign without 30 days prior notice.

Mr Xu defends that the law only provides the employee shall terminate with 30 days prior notice but no legal result if employee breaches, therefore there is no base for the company’s claim.

The company holds that there is causation between Mr Xu’s breach of the duty of 30-day prior notice and the high salary the company paid for the professional designer to finish the project temporarily, therefore Mr Xu shall compensate.

Judgment

The arbitration holds that Art 37 of the Labour Contract Law provides that an employee may terminate his employment contract upon 30 days’ prior written notice to his employer. Mr Xu’s resignation on the same day obeys the related regulation. Art 90 of the Labour Contract Law also provides that if an employee terminates his employment contract in violation of this Law or breaches the confidentiality obligations or competition restrictions stipulated in his employment contract, and if such violation or breach causes his employer to suffer loss, he will be liable for damages. In this case, the company provides their project design contract with the customer, temporary service contract and the payment certification to prove that the company have to hire someone else temporarily to finish the project under the circumstance that Mr Xu resign immediately. The damage is related to Mr Xu’s resignation immediately, therefore the company’s claim is supported.

Comment by Lawyer Tang

This is a dispute arisen from employee resignation.

Termination by employer is what we generally see in cases and legal practice where the company shall compensate twice the rate of severance or resume labour relation if terminates or ends an employment contract in violation of law according the Art 87 of the Labour Contract Law. But if an employee fails his duty, he shall also bear the result.

Art 37 of the Labour Contract Law provides that an employee may terminate his employment contract upon 30 days’ prior written notice to his Employer, during his probation period, an employee may terminate his employment contract by giving his employer three days’ prior notice. The purpose of this clause is to give reasonable time to the employer to find new staff the handle the employee. The 30-day and 3-day prior notice is duty for the employee and right for the employer. That is to say the employer can give up the right to request the employee to fulfill the duty of prior notice by assigning any time to terminate during the period. The employee shall transfer his work and handle termination procedure.

In the mean time, Art 90 of the Labour Contract Law also provides that if an employee terminates his employment contract in violation of this Law or breaches the confidentiality obligations or competition restrictions stipulated in his employment contract, and if such violation or breach causes his employer to suffer loss, he will be liable for damages. We shall pay attention to “cause his employer to suffer loss” in this clause. The precondition for the employee to compensate is to cause his employer to suffer loss, the company bears the burden of proof of such loss. In this case, the company fulfill the duty of proof by providing their project design contract with the customer, temporary service contract and the payment certification to prove that the company have to hire someone else temporarily to finish the project under the circumstance that Mr Xu resign immediately. If the company fails to prove the loss or the causation between its loss and the behavior of the employee, then the legal organ would not confirm the claim. On the contrary, in the case of illegal termination by employer, the employer would compensate or resume labour relation according to Art 87 of Labour Contract Law directly without prove employee causing losses.

We wish in the relation of employer and employee, both parties could negotiate friendly complying with the principle of fairness, to build a harmonious labour surrounding by fulfilling the legal duty.