international employment law firm alliance L&E Global

China: Employee was held by court to lose entitlement to last annual bonus based on labor contract and employer’s policy

The Employee entered into an employment contract with the Employer (the “Employment Contract”). It was prescribed in the Employment Contract that, in the event of termination or expiration, the employee will not be entitled to the prorated annual bonus based on his actual service days in the current year. Afterwards, the Employer implemented a New Compensation and Benefit Policy (the “C&B Policy”) that employees who leave the Company will not be eligible for performance bonus of the current year. The Employee did not receive any bonus from the Employer for the year of his exit, and filed a lawsuit against the Employer for recovery of the same. Through the litigation proceedings, the court ruled that the Employee shall not be entitled to annual bonus pursuant to the Employment Contract and the C&B policy. The court came to this decision based on: (a) the Employee and Employer’s agreement on annual bonus in the Employment Contract did not contravene any existing laws or regulations and thus shall be valid; (b) the Employee signed recognition of the C&B Policy and did not raise any objection; and (c) implementation of the C&B policy was approved by the Employer’s trade union.