Employers are not the Sole Arbiter of Liquidated Relationship Damages

Jan 24, 2022

Wang joined a company after graduating from university. Based on the contract, the company required Wang to work for at least 5 years. If Wang resigned due to personal reasons within 5 years, he should pay the company the compensation of 15,000 yuan a year. 


Wang proposed to resign after 3 years of work and submitted a written resignation application to the company one month in advance. Three months later, the company refused to go through the resignation formalities and refused to issue a written certificate for the termination of the labor relationship on the grounds that Wang did not pay the liquidated damages as agreed.

After investigation by the labor inspection department, it was found that Wang’s company violated the terms of the contract. Wang had submitted a resignation application one month in advance in accordance with labor laws and regulations. The labor supervision department determined that the fact of the termination of the labor relationship was established. So the company should give the release letter and conduct the resignation process. The labor inspection department issued a correction notice.

The labor inspector explained: 

There are two situations where the employer provides special training for the employees and stipulates that the employee has an obligation via the ‘Business Strife Limitation Clause,.  Otherwise the employer shall not require that the employee shall bear the liquidated damages. It is illegal for the employer to agree on liquidated damages by itself.

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