112.I resigned earlier, breaching the service period set in the training service agreement. Should I compensate for it?

Answer: Penalty for training service agreement violation is the legally permissible liability for employers to recover their dedicated expenses in training employees and to penalize employees for breaches of mutual agreements on training service.

In principle, the penalty for an employee’s violation of a training service agreement shall be calculated based on actually incurred training expenses in proportion to fulfilled and unfulfilled service duration. For example, in the case of He Mengyuan before Beijing Xicheng District Court in 2017, the pilot resigned before the service period set in the training agreement expired, and the court ordered the employee to pay RMB 1.31 million as the penalty. ¹

Whether employees have actually received training must be judged comprehensively according to the employment contract agreement and the nature of employees’ participation in activities.²In principle, the training under training service agreements refers to trainings conducted through a third party training organization and paid by the employer to the third party, or trainings that are not conducted through a third party organization but require special, expensive equipment, or training process, and for which the employers bear significant costs (such as pilot training). The general induction training or activities for employees within an employer’s workplace are mainly ordinary internal trainings for production and operation, and should not be recognized as the training in this regard.

Employers are responsible for providing evidence for the amount of training fees incurred, such as evidence of payment and receipt of training-related fees. When the amount of fees is hard to ascertain, the court may also decide on the basis of discretion or industry standards. For example, in the case of Xu Haiming before the Third Intermediate Court of Beijing in 2017 and the case of He Mengyuan before the Xicheng District Court of Beijing in 2017, the courts found the amount of training fee according to the actual costs and industry practices.³In addition, the Employment Contract Law explicitly stipulates that the scope of training fees only includes direct expenses related to training, such as training course fees, travel expenses, etc. Therefore, both parties’ mutual agreements on an discretionary training fee amount, or the wages of employees during the training period constituting the training fees, in the employment contract or training service agreement, shall invalid.⁴

The reasonableness of the length of the service period stipulated in the training agreement is also a problem that often arises in practice. The courts have different approaches. For example, Henan Pingdingshan Court held that the 15-year service period was not unreasonable in the case of Lan Jiajia in 2017, while Jiangsu Yancheng Intermediate Court held that it was obviously unreasonable for the employer to train employees for only two days but require them to serve for three years in the case of Zhou Min in 2022, ordering that the service period agreement was invalid.⁵Therefore, for the reasonableness of a training service period stipulated in the training service agreement, we should comprehensively examine the specific circumstances of the case, including the amount of training investments or expenses, the substitutability of training skills, and the length of required service period.

The amount of liquidated damages stipulated in a training service agreement must not exceed the training expenses, and must be calculated according to the proportion of served period in the agreed-upon service period.⁶That is to say, even if the liquidated damages exceeding the actual training fees, the courts are still likely to calculate the compensation according to the proportion of served period and the amount of the actual training fees. For example, Mr. Zhang has agreed on a four-year training service period, and the employer has spent RMB 100,000 on the training for Mr. Zhang. If Mr. Zhang resigns at the end of the first year, the liquidated damages should be RMB 75,000 ( (4-1)/4 * 100,000). Even if the training agreement between the two parties stipulates a liquidated damages of RMB 200,000, the court is likely to find the liquidated damages as RMB 75,000.

However, if the parties stipulate both compensation for training fees and liquidated damages in the training service agreement, there are two distinct court practices on whether both items can be upheld or just one. In the case of He Mengyuan in 2017, the Xicheng District Court of Beijing held that the employer could only selectively claim one of them, but the Pingdingshan Court of Henan Province upheld the employer’s both claims in the case of Lan Jiajia in 2017.⁷

Of course, the precondition for employees’ being liable to compensate the employers for the penalty is that the employees breach the contract in resigning in advance. If the employer can not prove the employee’s resignation, and neither can employee prove the employer’s dismissal, the court may find that both parties terminate the employment contract by mutual agreement (please refer to My boss fired me, but now he claims I resigned. What can I do?). In addition, if the employee has a legitimate reason to terminate the contract, such as being forced to resign because of the employer’s unjustified wage deduction, the employee is not liable for the liquidated damages for breaching the training service agreement.⁸If the employer takes the initiative to terminate the employment contract, of course, the employee also does not have to bear the responsibility, unless the employer legally terminate the employee.⁹

This article is a part of our new book

“Employment Law in China: A Practical Guide. A book about “What should I do” with case laws.”

Stay tuned, and the book will soon be published as an electronic books!

Mr. Wangdong

Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.

Email: wangdong@royalaw.com

1
He Mengyuan and China Post Aviation Co., Ltd. Civil Judgment of the First Instance of Labor Dispute, Beijing Xicheng District People’s Court Civil Judgment (2017) Jing 0102 Minchu No.5100. The pilot resigned in advance after signing the training agreement. The court ordered the employees to pay the training fee of RMB 1.31 million in proportion to the implementation of services according to the documents of the Civil Aviation Administration, rejecting the claim on liquidated damages. The court of the second instance of the case upheld the original judgment.
2
Shenzhen Yataixing Industrial Co., Ltd. and BYD Automobile Industry Co., Ltd. Luo Zhikai Labor Dispute Second Instance Civil Judgment Shenzhen Intermediate People’s Court of Guangdong Province Civil Judgment (2018) Yue 03 Min Zhong No.4428. The court found that the employer’s arrangement of employees to attend exhibitions abroad could not constitute training.
3
Xu Haiming and Aokai Airlines Co., Ltd. Labor Dispute Civil Judgment of Beijing Third Intermediate People’s Court (2017) No.8973. ¡°Regarding the determination of the amount of training fees, Aokai Airlines has submitted relevant evidence. It is not improper for the court of first instance to make a decision on the training fee payable by Xu Haiming based on the specific factors of the case, such as Xu Haiming’s length of service, age and industry practice, taking into account the particularity of the aviation industry.¡±
4
Guangdong High-tech Senior Technical School, Lin Yanghao Labor Dispute Civil Judgment of Second Instance Civil Judgment of Guangzhou Intermediate People’s Court of Guangdong Province (2021) Yue 01 Min Zhong No.22833. “According to Article 16 of the Regulations on the Implementation of the Employment Contract Law of the People’s Republic of China, ¡®the training expenses provided in the paragraph 2 of Article 22 of the Employment Contract Law include the training expenses with invoices and paid by the employer for the professional and technical training of the workers, the travel expenses during the training period and other direct expenses incurred by the training for the workers. ‘The above provisions have clearly defined the scope of the raining expenses. Although the Teacher Training Contract stipulates that wages and performance allowance during the training period will be included in the scope of training expenses, the provisions are inconsistent with the above statutory provisions. Therefore, the court of the first instance did not upheld the the high-tech school’s claim that Lin Yanghao’s wages during the training period should be included in the training expenses to calculate the liquidated damages.”
5
Dongtai Hongxue Art Training Co., Ltd. and Zhou Min Labor Dispute Civil Judgment of Second Instance Civil Judgment of Yancheng Intermediate People’s Court of Jiangsu Province (2022) Su 09 Min Zhong No.2265.
6
Article 22 of the Employment Contract Law of the People’s Republic of China “Where an employer provides special training fees for a worker and carries out professional and technical training for him, it may conclude an agreement with the worker to stipulate a service period. If a worker violates the agreement on the service period, he shall pay liquidated damages to the employer in accordance with the agreement. The amount of liquidated damages shall not exceed the training expenses provided by the employer.¡±
7
The labor disputes Lantao v. Tianrui Group Co., Ltd., Henan Pingdingshan Intermediate People’s Court Civil Judgment Yumin 04 Minzhong No. (2017) 927. The agreement stipulates that the service period is 15 years and the breach of contract shall lead to liquidated damages. The court ruled that there was no basis for the employee to request such a long service period, and ordered that the employee compensated the employer training fee in proportion and a discretionary liquidated damages of RMB 5,000.
8
The first paragraph of Article 26 of the Regulations on the Implementation of the Employment Contract Law of the People’s Republic of China stipulates that if an employer and a worker have agreed on a service period and the worker terminates the employment contract in accordance with the provisions of Article 38 of the Employment Contract Law, it is not a violation of the agreement on the service period, and the employer shall not require the worker to pay liquidated damages.
9
Civil Second Instance Judgment on the Labor Dispute Case between Gao Wang and Jiangmen Dejun Petrochemical Transport Co., Ltd., Guangdong Province, Jiangmen Intermediate People’s Court, Civil Judgment (2019) Yue 07 Min Zhong 3118. The training agreement stipulates that the company should reimburse training expenses, and the employee is required to serve for at least one year. The court determined that due to the employee’s severe violation of company rules leading to the termination within 1 year of the commencement of the employment, the company is not obligated to reimburse the training expenses to the employee.

Royal Law Firm

112.I resigned earlier, breaching the service period set in the training service agreement. Should I compensate for it?

Leave a Reply Cancel reply