[Gist of the Verdict]
Article 27 of “the People’s Republic of China Labor Dispute Mediation and Arbitration Law”: the time limitation period for application for arbitration of a labor dispute shall be one year. The time limitation period for arbitration shall be counted as of the date when a party knows or should know that its right has been violated. --- During the existence of the labor relations, a dispute arises over the default in payment of labor remuneration, application for arbitration by the worker concerned shall not be restricted by the limitation period for arbitration prescribed in the first paragraph of this Article.
The twofold salary of unused vacation is not the remuneration that the laborer should have earned for provision of normal labor, but belongs to welfare and shall be governed by one-year limitation of arbitration.
[Introduction and Verdict]Mr. Liu joined Company A as the Chief Supervisor on 21st August 2009. Both parties have then executed three labor contracts in writing and the contract term was until 9th Oct. 2015. On 13th Nov. 2017, Company A requested to dissolve the labor contract, and then discussed and agreed with Mr. Liu to dissolve their labor contract. On 25th Oct. 2018, Mr. Liu submitted the labor dispute to Dalian Labor Dispute Arbitration Committee, requesting Company A to pay the salary of unused annual vacation from 2010 to 2017 The Arbitration Committee didn’t accept the dispute by the reason that it didn’t fall into its scope of jurisdiction. Mr. Liu didn’t accept the award and filed a lawsuit with the court. . The first instance court issued the verdict that Company A shall pay the salary of unused annual vacation for the year of 2017 and dismissed other claims of Mr. Liu. Mr. Liu appealed and the second instance court affirmed the original verdict and dismissed the appeal. [Interpretation of Hengxin Lawyer]1. Applicable laws and rules with regards to payment of salary for unused annual vacation. In accordance with 5.3 of “If the unit does not arrange for the annual leave of staff due to the needs of the job, it may not arrange for the workers’ annual leave without the consent of the employees themselves. For employees whose annual vacation days should not be taken off, the unit shall pay annual wages and salary in accordance with 300% of the daily wage income of the staff and workers. In accordance with 10 of “Implementation Measures for Paid Annual Leave for Employees of Enterprises”-Article 10: Where an employer does not give annual leave to an employee or gives him days of annual leave less than the days of annual leave due upon the consent of the employee, it shall pay the employee 300% of his daily wage income for each day of the annual leave due and not taken in the year, which includes the wage income to be paid by the employer to the employee per day in normal working days. In accordance with above rules, the employer needs only to pay an additional 200% of the daily wage income to an employee since the employer has already paid the daily wage income during normal working days. In accordance with 11 of “Implementation Measures for Paid Annual Leave for Employees of Enterprises”, the formula for calculating the daily wage income of an employee which is used for calculating the payment for his annual leave time due but not taken shall be dividing the monthly wage income of the employee into the working days (21.75 days). The monthly wage income mentioned in the preceding paragraph refers to the average monthly wage for 12 months, which deducted the overtime pay, before the employer pay to the employees the wage income of the annual leave not taken. If the working days of employees are less than 12 months for their employer, the monthly wage income mentioned in the preceding paragraph refers to the average monthly wage in accordance with the actual working days. 2. Application of the time limitation of arbitration to the salary of unused annual vacation. In accordance with Article 27 of “the People’s Republic of China Labor Dispute Mediation and Arbitration Law”, the time limitation period for arbitration is divided to general and special time limitations. The general time limitation period for arbitration shall be one year. The special time limitation for arbitration is that “During the existence of the labor relations, a dispute arises over the default in payment of labor remuneration, application for arbitration by the worker concerned shall not be restricted by the limitation period for arbitration prescribed in the first paragraph of this Article. However, where the labor relations are terminated, such application for arbitration shall be submitted within one year from the date the labor relations are terminated. Hence, the focus of dispute in this case is whether the payment for unused annual leave belongs to “salary” or not. If the answer is yes, the one-year time limitation doesn’t apply, but the special time limitation shall apply. Otherwise, it will be subject to one-year time limitation. In accordance with Article 4 of “Rules about Composition of Total Salary”, total salary is made up of six parts: 1. hourly salary, 2. piece salary, 3. bonus，4. subsidy and allowance, 5. overtime salary, 6. salary paid under special conditions. In accordance with above rules, there are different understandings on the salary for whether the payment for unused annual leave belongs to “salary” or not in judicial practice. In recent years, it has reached a consensus in Dalian that the additional twofold payment for the unused annual leave is not the remuneration that an employee shall get from provision of normal labor, but belongs to welfare, and thus is subject to one year time limitation. In this case, Mr. Liu claimed for the salary of annual paid leave from 2010 to 2017. The laborer shall apply for arbitration for the salary of unused annual vacation for the year of 2016 no later than 31st Dec. 2017. However, Mr. Liu delayed the claim for the salary for the annual paid vacation from 2010 to 2017 until 25th Oct. 2018. The claim for the annual paid vacation from 2010 to 2016 has exceeded the statutory time limitation of the arbitration. Moreover, Mr. Liu didn’t present any evidence for suspension or interruption of the time limitation of arbitration. Thus, the court supported only the salary for the unused annual vacation in the year of 2017. First instance: (2018) Liao 0204 MC No. 7679 Civil Verdict
Second instance: (2019) Liao 02 MZ No. 6692 Civil Verdict