Answer: An employee may still liable for compensation for unlawful terminating employment relationship or violation of the agreed contractual obligations after the termination. There may be four situations:
The first situation is that the employee did not resign according to the law, resulting in the loss of the employer. This situation encompasses the employee’s resignation with a less than three-day advance notice during the probation period and a less than one-month advance notice during the formal contract period. The critical question in determining the employee’s liability for compensation in these case is whether the employer has suffered actual direct losses and whether there is a causal relationship between the employee’s illegal resignation and the alleged losses. Seeing On the same day an employee resigned, he left his role and caused damages. Is he liable for the damages?
The second situation is that the employee fails to fulfill the terms of the training service agreement signed by both parties, resulting in their liability for the liquidated damages. The primary factors in determining employees’ compensation obligations encompass the scope of training, determination of training fees and liquidated damages, and the reasonableness of the service period agreement. Please refer to I resigned earlier, breaching the service period set in the training service agreement. Should I compensate for it?
The third situation is that the employee infringes on the employer’s trade secret. If the employee has ever contacted with the trade secret, they are subject to an absolute protection obligation to refrain from illegally acquiring, disclosing, and using the secret. Any breach of the obligation shall result in the employee’s liability for damages. Please refer to How do employers protect their trade secrets?
The fourth situation is that the employee violates the non-competition agreement signed with the employer. Non-competition is a measure permitted by law to restrict departed employees to engage in competitive industries in order to proactively protect employers’ trade secrets. Employees who violate the obligation of non-competition may be liable to pay liquidated damages to the employer. See What is non-competition and liability for breach of non-competition?
In contrast to the liability of employee in service, the liability of departed employees to their former employers is a civil liability between equal entities. It is no longer subject to the restrictive limitations of employees’ obligations to compensate for damages to employers under the employment law.
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. 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