China: The Employee was Held Obligated to Refund the Housing Subsidy Regardless his Being Wrongfully Terminated

The Company and the Employee entered into a housing subsidy agreement (the “Agreement”). Pursuant to the Agreement, the Employee agreed to serve from 2014 to 2022 at the Company, in consideration of which, the Employee would receive the housing subsidy of RMB 400,000 in a lump sum. Pursuant to the Agreement, if the Employee resigns or voluntarily leaves the Company prior to 2022, the housing subsidy shall be refunded on a prorated basis. The Company later terminated the Employee for underperformance and was ruled as wrongful termination and paid the Employee indemnification based on Employee’s request. Thereafter, the Company filed another case to claim refund of housing subsidy on a prorated basis from the Employee. The Employee argued that his failure to fulfill service period was due to the Company’s wrongful termination, and thus he shall not be liable to refund any of the housing subsidy. Through the arbitration and litigation process, the Court eventually ruled in favor of the Company. The Court came to this decision based on the followings: (a) the housing subsidy is benefit in nature; (b) the rule on the housing subsidy is up to parties’ agreement; and (c) the Employee’s request for indemnification rather than reinstatement as remedy for wrongful termination shall not be deemed as involuntary leaving of the Company.