China: Case held by The Beijing Second Intermediate People’s Court: Where an employer arranges for an employee to take leave, it should clearly inform the employee of the type of the leave. If the leave notice does not specify that the leave is paid annual leave, then the days of such leave should not be deducted from the employee’s annual leave entitlement.
Mr. Li was an employee of a company (the “Company”). Around the Chinese New Year holiday, the Company arranged for its employees to take leave from January 18, 2023, and to return to work on February 1, 2023. The statutory public holiday for the Spring Festival that year ran from January 21 to January 27. The Company granted additional days off on top of the statutory holiday and paid employees their salary in full during the leave period.
Afterwards, Mr. Li’s employment relationship with the Company was terminated. Mr. Li brought a lawsuit against the Company, claiming payment for unused annual leave. The Company argued that, every year around the Spring Festival, it arranged for all employees, including Mr. Li, to collectively take an extended holiday, which included paid annual leave. Employees were paid as usual during the holiday period, and therefore Mr. Li had already taken paid annual leave each year. The Company submitted screenshots of holiday notices posted in a WeChat group as evidence. The screenshots showed that the Company arranged for employees to take time off from January 18, 2023, and to return to work after the Chinese New Year, on February 1, 2023. Mr. Li acknowledged the authenticity of the screenshots, but disputed that, the notice did not mention that the time off was paid annual leave. Since the additional days off granted around the Chinese New Year holiday had not been identified as annual leave, those days should not be offset against Mr. Li’s annual leave entitlement.
The issue in dispute in this case was: whether the Company had already arranged for Mr. Li to take paid annual leave. The court held that, the Company argued that the days off granted around the Chinese New Year holiday in excess of the statutory public holiday should be deducted as annual leave, however, the screenshots submitted by the Company only showed that employees had been given time off for Chinese New Year, and did not show that the Company had arranged for them to take paid annual leave. Therefore, when calculating the number of days of unused annual leave, the additional days off around the Chinese New Year holiday should not be deducted as annual leave. The Company was still required to pay salary for unused annual leave. Ultimately, after calculating the number of days of Mr. Li’s unused annual leave, the court ordered the Company to pay Mr. Li salary for unused paid annual leave.
The court pointed out that an employer may, based on the specific circumstances of its production and business operations and taking into account employees’ own wishes, make overall arrangements for employees to take annual leave. Where an employer, out of humane consideration and in view of employees’ need for family reunion during the Chinese New Year, grants employees additional days off on top of the statutory public holiday, such practice should be encouraged. However, if an employer arranges for employees to take annual leave in the form of an extended Chinese New Year holiday, it should clearly inform the employees through holiday notices, company rules and policies, or other appropriate means, and should pay wages as normal during that period, so as to avoid disputes arising from ambiguity as to the type and nature of the leave. Where the employer has not clearly informed employees that the extended holiday period is to be treated as annual leave, it is inappropriate to offset those additional days against the employees’ annual leave entitlement.
Key Action Points
An employer has the right to arrange annual leave in an overall manner based on the specific production and work situation, while taking the employees’ own wishes into account. The critical point is that the “nature of the leave” must be clearly specified in advance. Whether the employer arranges annual leave around statutory holidays, collectively during the business off‑season, in advance during an employee’s suspension for investigation, or before the termination of employment, the employer must explicitly state in the leave notice that the arranged leave is “paid annual leave” and must clearly specify the exact period during which paid annual leave is taken. The leave notice shall be delivered in written form (e.g., via email, OA system, WeChat group announcement) and the employee’s confirmation record must be retained. Otherwise, even if the employer has in fact arranged leave, it may not be able to offset the employee’s unused paid annual leave days due to the failure to clearly inform the employee that the leave is designated as paid annual leave.
