Can you require the employee to return the paid economic compensation after the labor relationship has been restored?

Company A notified Long of the termination of the labor contract and paid the economic compensation. Long then filed a labor arbitration application requesting the restoration of the labor relationship, and the labor arbitration commission ruled in favor of Long. After the labor relationship restored, Company A required Long to return the paid economic compensation, but Long refused. Company A initiated a new labor arbitration proceeding, claiming the paid economic compensation and other payments. The labor arbitration commission, the court of first instance, and the court of second instance all upheld Company A’s claim. [(2024) Yue 01 Min Zhong No. 26256]

Company B and its employee Yu also had a dispute over the return of the paid economic compensation under the same circumstances. However, after Company B filed for labor arbitration, the arbitration commission held that the company’s claim for the return of economic compensation was not within the scope of labor arbitration and therefore dismissed the application. Then Company B filed a lawsuit on the ground of labor dispute, the court ordered Yu to return the paid economic compensation. [(2018) Jin 0116 Min Chu No. 80034]

According to Article 48 of the “Labor Contract Law “, ” Where an employer rescinds or terminates a labor contract in violation of this Law and the worker requests for performance of the labor contract to be continued, the employer shall continue to perform the labor contract; where the worker does not request for performance of labor contract to be continued or where the performance of labor contract cannot be continued, the employer shall pay compensation pursuant to the provisions of Article 87 of this Law.” Therefore, in case an employer unlawfully rescinds or terminates a labor contract, the employee has the option to either continue to perform the labor contract or obtain economic compensation. When the labor relationship is restored, the employee shall return the paid economic compensation.

Nevertheless, in judicial practice, after the restoration of the labor relationship, when a company claims the return of economic compensation, there are several different scenarios: 1. The company initiates labor arbitration on the ground of labor dispute, and the application is accepted; 2. After the company’s labor arbitration application is rejected, it files a lawsuit with the court on the ground of labor dispute to claim the return; 3. The company files a lawsuit to claim the return on the ground of unjust enrichment.

It is worth noting that besides economic compensation, there may be disputes regarding other payments the employer has already made, such as the additional double wages for paid annual leave, overtime pay, bonuses, notice pay in lieu, and other extra compensations. If the employee no longer has a legal basis for receiving such payments, he shall return relevant payments. Therefore, payments like annual leave wages, overtime pay, and bonuses cannot be claimed for return, as these payments are not made based on the employer’s unilateral termination of the labor contract. In contrast, payments such as notice pay in lieu, which are based on the termination of the labor contract, can be claimed for return.