Trends in Judicial Decisions regarding Labor Disputes that involve Overtime Salary (Mainland China)

Jolene Chen and Teresa Huang[1]

The Ministry of Human Resources and Social Security and Supreme People’s Court issued on June 30th, 2021, the “Typical Cases of Labor and Personnel Disputes,” announcing several judicial decisions regarding labor disputes that involve overtime salary.  By considering our years of experience handling similar cases, we hereby summarize the announcement as follows:

First of all, laws and regulations regarding claims of overtime pay still base the provision of evidence regarding the laborer’s performance of overtime work on the principle that the burden of proof lies with the claimant.  However, provided that the laborer can sufficiently prove his/her employer’s possession of evidence regarding such performance, its existence can be presumed if, when required, the employer refuses to provide the said evidence. 

The issue of overtime payment has always been rather important in cases of labor disputes.  The law applicable for dealing with the distribution of the burden of proof in these cases is Article 6 of the “Labor Dispute Mediation and Arbitration Law of the People’s Republic of China,” which stipulates that “in a labor dispute, the party bringing the claim is responsible for providing evidence.  Furthermore, if relevant evidence is controlled by the employer, the employer shall provide the evidence.  The employer shall bear adverse consequences if he/she refuses to do so.”  Article 42 of the “Interpretation (I) of the Supreme People’s Court of Issues Concerning the Application of Law in the Trial of Labor Dispute Cases” (Judicial Interpretation [2020] No. 26) stipulates: “laborer claiming for overtime pay shall bear the burden of proof regarding the existence of his/her overtime work.  However, if they can sufficiently prove the existence of relevant evidence under employer’s control, the employer shall bear adverse consequences if he/she refuses to provide such evidence.”

In the announced case concerning overtime pay between Lin and an education consulting company, the arbitration committee held that even though the salary records provided by the laborer is a printed copy and doesn’t show any overtime payment, its content matches the personal leave records in the real-name authenticated APP, which also indicates Lin’s work attendance from Monday to Saturday of each week.  Thus, this sufficiently proves that the education consulting company possesses evidence on the existence of the laborer’s overtime work.  Since the company has provided no counter-evidence or reasonable arguments on the existence of the overtime work, they shall bear adverse consequences.  Accordingly, the arbitration committee ruled that the company shall pay for Lin’s overtime work.

Secondly, courts have increasingly loosened the condition—that overtime payment is applicable only if the employer has arranged the laborer for overtime work—via considering the facts of the case instead of whether an overtime approval procedure is strictly followed in determining whether the overtime work in a case constitute “employer’s arrangement” to prevent employers from using its dominant position to infringe the legitimate rights and interests of the laborer to claim overtime pay. 

The legal provisions on “employer’s overtime arrangement” mainly refers to Article 13 of the “Interim Regulations on Wage Payment” (Ministry of Labor Fa No.489, 1994), which states that “after a laborer finishes his/her work under the agreed job description, arrangement of works outside the legal standard working hours shall follow the following salary payment standards: ……” This provision suggests that a laborer has to provide evidence showing that the overtime work was arranged by the employer.

However, in the case between Wu and a pharmaceutical company, the company had not actually performed the approval procedure after Wu submitted an overtime application form per rules and regulations. Yet, materials submitted by Wu—including attendance records, Wechat history between him and his department’s director and colleagues, meeting minutes, etc.—show a rather comprehensive chain of evidence regarding arrangements of overtime work by the employer.  Thus, the fact that the company had not performed the approval procedure has no effect on the truth of an “employer arranged” overtime work.  Accordingly, the arbitration committee ruled against the pharmaceutical company to pay for Mr. Wu’s overtime work.

Moreover, regarding a laborer’s claim on overtime payment, notwithstanding whether the laborer signed a waiver of overtime pay upon entering a contract with the employer or signed on his/her resignation document to confirm that any overtime pay is settled, the court will take into account facts of a case in reviewing relevant contracts; and determine whether such contracts constitute standard terms, violate the fairness principle, or if it represents the laborer’s true intentions to decide the legality of such waiver agreements. 

The provision on the legality of overtime pay waiver agreement by the parties mainly refers to Article 26 of the “Labor Contract Law of the People’s Republic of China,” which states that “the following labor contracts are invalid, or partially invalid: …… (2) Exempting employer’s legal responsibilities and excluding laborer’s rights.” Furthermore, Article 35 of the “Interpretation (I) of the Supreme People’s Court of Issues Concerning the Application of Law in the Trial of Labor Dispute Cases” (Fa Shi [2020] No. 26) stipulates that “agreements concerning labor contract termination, salary payments, overtime payments, economic compensation, or indemnity made between the laborer and employer are legitimate if it does not violate the law and mandatory provisions under administrative regulations; and if there is no fraud, coercion, or inappropriate exploitation.”

In the labor dispute case between Zhang and a technology company, when entering a labor contract, the company demanded Zhang to sign an additional agreement whose content includes: “I voluntarily apply to join the company’s arduous-worker program and give up overtime payment.”  The arbitration committee ultimately concluded that, since the employer has the legal responsibilities to pay its employees for their overtime works, the above waiver agreement exempted the employer’s legal responsibilities and excluded the laborer’s rights; it is thus unfair and invalid.  Accordingly, the arbitration committee ruled against the tech company to pay for Zhang’s overtime work.

Additionally, in another labor dispute case between Xiao and a technology company, both parties recognize the fact of overtime work.  Still, the defendant uses the resignation document as its defense, citing Xiao’s signature in confirming that “the employer has settled all salaries, overtime payment, and economic compensation; there are no other disputes against the employer, and he shall not by any reason claim his rights against the employer.”  The court ultimately concluded that since the aforesaid employee confirmation section conflicts with the stated reason of the resignation application — “no overtime pay,” by considering other relevant facts, the aforementioned confirmation regarding Xiao’s overtime payment is inconsistent with the facts.  Thus, the confirmation does not constitute Xiao’s true intention.  Accordingly, the appellate court ruled in favor of Xiao.

The above suggests that the arbitration committee and the Court will focus more on the actual facts of the case and loosen the restrictions of written documents or contracts in handling labor dispute cases.  This is something employers should pay attention to when designing policies related to overtime payment.

[1] The authors are lawyer and of-counsel at Shanghai Lee, Tsai & Partners.  However, the contents of this article merely reflect personal opinions and do not represent the position of this law firm.