Top Employment Law Insights from 5 New PRC Labor Dispute Cases (April 2025)

On 16 April 2025, China’s Supreme People’s Court (SPC) and the Ministry of Human Resources and Social Security jointly released five typical labor and employment dispute cases to guide courts nationwide and highlight emerging trends in employment law. These cases cover critical issues – from medical leave for work injuries to protections for pregnant workers, social insurance contributions, post-termination non-compete agreements, and employer liability for compliance lapses. Below we summarize each case, the legal issues and reasoning, the outcomes, and key takeaways for employers operating in China.

Case 1: Work-Injury Medical Leave Extension Requires Official Assessment

Legal Issue: Can an employee unilaterally extend statutory medical leave for a work-related injury without the mandated government assessment?

Summary: Under Chinese law, an employee injured at work is entitled to up to 12 months of fully paid medical leave, with extensions allowed only for severe injuries and only after an official work-capability assessment by the labor authorities. In this case, an employee had exhausted the 12-month medical treatment period but sought to extend it by providing a hospital medical certificate – without undergoing the required government assessment. The employer repeatedly reminded the employee to get the official assessment; when the employee refused, the company stopped paying full salary after 12 months and instead paid a reduced sick-leave wage.

Outcome and Reasoning: The employee challenged the pay reduction, but the labor arbitration commission rejected his claim for full wages beyond the 12-month period. The tribunal reasoned that a doctor’s note alone could not extend the statutory work-injury leave; only an official labor capacity assessment can justify extending paid medical leave beyond one year. Since the employee failed to follow the legal procedure for extension, the employer was justified in reverting to sick-leave pay after the statutory period.

Takeaways for Employers:

• Follow statutory procedures strictly when managing work-related injury leave. Extensions of work-injury medical leave must be supported by a government-sanctioned labor capacity assessment, not just a medical certificate. 
• If an injured employee refuses to undergo the required assessment, an employer may lawfully transition the worker to normal sick-leave wages after 12 months, thereby avoiding unwarranted salary liability. 

Case 2: No Unilateral Reassignment or Pay Cut for Pregnant Employees

Legal Issue: Can an employer remove a pregnant employee from her role or cut her pay due to pregnancy-related reasons without consent?

Summary: Chinese law provides special protections for women during pregnancy, maternity leave, and nursing periods. Employers cannot arbitrarily change a pregnant employee’s job role or reduce her salary during these protected periods except under special circumstances and with consent. In this case, a female engineer’s compensation consisted of a base salary (RMB 3,000) plus a substantial project bonus. After she informed her company of her pregnancy, the employer unilaterally removed her from her project, effectively stripping away her project allowance and reducing her monthly pay from about RMB 17,000 down to RMB 3,000. The reassignment was done without her consent and over her objections, and she eventually stopped reporting to work. She filed for arbitration seeking the unpaid portion of her salary during pregnancy.

Outcome and Reasoning: The labor arbitration commission upheld her claim and ordered the company to pay the salary shortfall from the unauthorized pay cut. The authorities emphasized that the employer had no lawful basis to remove the employee from her project and reduce her pay simply because of her pregnancy. Because the company neither obtained her consent nor proved any exception applied, its actions violated women’s labor rights protections, rendering the pay cut illegal.

Takeaways for Employers:

• Do not reassign or reduce the pay of pregnant employees without a legitimate reason permitted by law and the employee’s consent. Any adjustment to a pregnant worker’s role or compensation must be handled delicately and lawfully, given the heightened legal protections. 
• Unilateral changes that disadvantage a pregnant employee can lead to liability for back pay and damages. Employers may also face administrative penalties and reputational harm for violating pregnancy protection laws. In short, maintain the status quo of a pregnant employee’s position and benefits unless a proper agreement or statutory exception is in place. 

Case 3: Incomplete Social Insurance Contributions Result in Liability for Death Benefits

Legal Issue: Is an employer responsible for missing death benefits when it fails to make full social insurance (pension) contributions for an employee?

Summary: By law, employers must contribute to all mandatory social insurance programs for their employees, including the basic pension fund. If an employee enrolled in the pension scheme dies during employment, their family is entitled to funeral subsidies and bereavement allowances (death benefits) based on the years of pension contributions on the employee’s behalf. In this case, a taxi company had employed a driver for over five years, but the company only paid four years’ worth of pension contributions for him. When the employee sadly passed away due to illness, his family received a smaller bereavement allowance than they would have if all five years had been fully contributed. Discovering the one-year gap in contributions, the family sued to recover the shortfall in the death benefit.

Outcome and Reasoning: The court ruled in favor of the family, holding the employer liable to pay the difference in bereavement allowances that resulted from the missing contributions. The reasoning was straightforward: the company had a statutory duty to contribute for the entire period of the employee’s service. Its failure to do so directly caused the family to lose part of their entitled benefit, so the employer must make the family whole for the loss.

Takeaways for Employers:

• Ensure full and timely social insurance contributions for every employee for the entire duration of their employment. This includes pension, medical, unemployment, maternity, and work injury insurance as required by law. Gaps in contributions not only violate the law but also can deprive employees or their families of rightful benefits. 
• If an employee or their dependents cannot receive the full statutory benefits (like pension-related death benefits) due to the employer’s underpayment of contributions, the employer will be held financially responsible for the shortfall. In practice, this means that non-compliance with social insurance obligations can lead to significant unplanned payouts later on. 

Case 4: Employer Must Reimburse Employees for Unpaid Social Insurance Contributions

Legal Issue: What happens if an employer fails to pay its share of social insurance, and the employee personally covers those contributions?

Summary: In this case, a company enrolled an employee only in the work-related injury insurance program, neglecting other mandatory insurances such as pension and medical. To maintain his coverage, the employee himself paid the social insurance contributions that both the employer and employee should have been paying (for the schemes the employer failed to enroll). Essentially, the employee out-of-pocket covered the employer’s portion of contributions for several insurance programs. Later, the employee took legal action to recover the money he spent that the employer was legally obligated to pay.

Outcome and Reasoning: The court sided with the employee and ordered the company to reimburse all the contributions that it should have paid on the employee’s behalf. Even though the employee had paid these fees voluntarily to avoid gaps in coverage, the employer’s statutory duty to fund its portion of social insurance remained in force. Failing to fulfill that duty made the company liable to compensate the employee for the costs he incurred, reaffirming that an employer cannot shift its social insurance burden onto employees.

Takeaways for Employers:

• Never neglect mandatory social insurance contributions. Employers must pay their portion of all required insurance funds (pension, medical, etc.) for each employee – compliance is not optional. 
• If an employer fails to pay and an employee covers the shortfall, Chinese courts can compel the employer to compensate the employee for those payments. Skipping social insurance payments is effectively a deferred liability: the financial obligation doesn’t disappear and will catch up with the company, either through legal claims or penalties. 

Case 5: Non-Compete Clauses Invalid for Employees Lacking Trade Secrets Access

Legal Issue: Can a company enforce a post-termination non-compete clause against a rank-and-file employee with no access to confidential information?

Summary: Under PRC law, employers may only impose post-employment non-competition agreements on certain categories of employees – typically senior management, senior technical staff, or others who are privy to the employer’s trade secrets or confidential information. In this case, a security guard at a commercial building was made to sign a one-year non-compete clause in his employment contract, with a hefty liquidated damages penalty of RMB 200,000 for any breach. After his contract expired, the guard left to work for another security company in a similar role. The former employer then attempted to enforce the non-compete, arguing that the guard violated the agreement and owed the liquidated damages.

Outcome and Reasoning: The labor arbitration commission refused to enforce the non-compete and dismissed the company’s claim for damages. The employee successfully argued that as a low-level security guard, he had no access to any trade secrets of the company, and thus should never have been bound by a non-compete restriction. The company could not prove otherwise. The result reflects a clear judicial stance: if an employee did not have exposure to confidential information, any non-compete clause against them is invalid and unenforceable. In other words, simply having a non-compete agreement on paper is not enough – it must be justified by the employee’s role and access to sensitive information.

Takeaways for Employers:

• Reserve non-compete agreements for key personnel with access to confidential data or trade secrets. Imposing post-termination non-competes on employees who don’t handle sensitive information (e.g. junior or routine positions) is likely to be deemed unreasonable and void. 
• Chinese tribunals are increasingly scrutinizing non-compete clauses. Employers bear the burden to show that an employee subject to a non-compete had actual access to proprietary information justifying the restriction. If you cannot demonstrate this, the non-compete covenant (and any associated penalty for breach) will not be upheld. To avoid legal challenges, tailor your non-compete agreements to only those employees who truly pose a competitive risk post-departure. 

Conclusion

These five typical cases underscore the Chinese courts’ and regulators’ heightened focus on employee protections and employer compliance in the labor field. Multinational companies in China should take note of the trends illustrated by these cases – ensuring proper procedures for medical leave, honoring special protections for pregnant employees, fully meeting social insurance obligations, and carefully limiting non-compete agreements to appropriate staff. By internalizing the lessons from these cases, employers can better align their HR policies with Chinese law and mitigate the risk of labor disputes or legal liabilities in their operations.