640,000 RMB as Compensation for not getting Release Letter in China

640000 RMB as Compensation for not getting Release Letter in China

Brief of Facts:

Ms Yang signed an employment contract with a fixed term (from Mar, 2014 to Feb, 2019) with Dalian Bank Chengdu Branch, and the contract provided that the employee can resign with written notice 30 days in advance.

When the contract is terminated, the employee shall timely perform the duty of work handover within a reasonable period of time.

If the employee fails to do as thereof, the employer has the right to require the employee to compensate for the loss.

On Feb 10, 2017, Puno Company issued a Notice of Recruitment to Ms Yang, which showed that Ms Yang had been recruited by the company and required Ms Yang to work on Mar 22nd, 2017. The salary for Ms Yang is 80,000 RMB per month.

On Feb 15, 2017, Ms Yang resigned formally to the bank and got the receipt. During March, Ms Yang performed the work handover.

But at the same time, the bank initiated the investigation for misconduct toward Ms Yang. With the excuse of unsolved problems, the bank delayed to issue the Release Letter, and finally Ms Yang lost the position in Puno Company.

Holding:

1. The bank shall issue the Release Letter and transfer personnel files and social security formalities.

2. The bank shall compensate the economic loss of 640,000 RMB to Ms Yang.

3. The bank shall pay 11,000 RMB as the compensation for confidentiality to Ms Yang.

Key points for reasoning:

  1. Ms Yang had performed the formalities of resignation. The employee has the freedom to choose one’s work whether there is the consent from the employer or not.  
  2. Investigation and off office auditing shall not impede the process of resignation. Any investigation and auditing shall be in a reasonable time of period. And the leaving of Ms Yang will not influence the investigation.
  3. The Release Letter was prerequisite for Ms Yang to be recruited formally in the company. The company had once postponed the deadline for Ms Yang to begin work, but Ms Yang failed to get the Release Letter from the bank. There is causal links between the refusal of issuing Release Letter and the loss of the position. Therefore, the bank shall compensate the loss of Ms Yang during the period.
  4. In this case, the bank stopped paying salary to Ms Yang from April. So the calculation of compensation is from April to November, when the award was rendered.

What we can learn from this case:

1. You are entitled to the Release Letter after your resignation. But keep the receipt of your Resignation Letter or any other evidence that could prove you has resigned formally.

2. When you get the invitation from another company, ask them to send you a Recruitment Notice with key articles such as salary, the documents needed, etc.

3. When you file a case in the Labor Arbitration Tribunal, don’t forget to include the compensation in your complaint if you have Recruitment Notice in your hand as mentioned above .

4.  All in all, find a job before you resign and you will have good cards to play.

If you have more questions about china labor/employment contract law, welcome to contact me.