An employee resigns due to wage arrears, whether he can demand economic compensation?

Pursuant to Articles 38 and 46 of the Labor Contract Law, if an employer fails to pay wage in full and on time, an employee may terminate the labor contract and demand the employer to make up the wage difference and pay economic compensation.

In practice, employees may terminate the labor contract and demand economic compensation on the grounds of wage issues, such as, late wage payment, non-payment of overtime pay, salary reduction after job reassignment, and so on. Whether an employer shall pay economic compensation due to such wage issues?

Let’s see a case. In 2017, Wang joined a company, and his salary consisted of a base salary and variable remuneration, with the variable part paid based on performance assessments. In January 2023, the company updated the performance appraisal plan, abolishing fixed-performance wages and replacing them with floating performance wages. In November 2024, Wang terminated the labor contract on the grounds that the company failed to pay wage in full and on time, and claimed unpaid performance wages and economic compensation. The labor arbitration commission upheld all of Wang’s claims, but both the first-instance and second-instance courts only supported Wang’s claim for the performance wage difference and rejected his claim for economic compensation (see (2025) Hu 02 Min Zhong 11106 for details).

Therefore, the answer to the above question is not positive.

The legislative purpose of Article 38 of the Labor Contract Law is to prevent employers from maliciously defaulting on wage. Therefore, in judicial practice, whether the employer acted with malice must also be considered. Three factors are keys on the determination of malice:

  1. Reasons for Wage Arrears

Article 4 of the Supplementary Provisions on Issues Related to the Payment of Wages (Tentative Provisions) issued by the former Ministry of Labor stipulates two scenarios where wage payment may be appropriately delayed: (1) The employer encounters force majeure such as natural disasters or wars beyond human control; and (2) The employer faces genuine production and operation difficulties or cash flow problems, and may temporarily delay wage payment after obtaining the consent of the company’s labor union. The maximum delay period shall be determined by the local labor administrative departments based on local conditions. For scenario (2), special attention must be paid to the procedural requirement of obtaining consent of the labor union and the local regulations on the maximum delay period.

  1. Duration of Wage Arrears

Article 7 of the Payment of Wages (Tentative Provisions) mandates that wages shall be paid on the agreed date, and if the payment date falls on a holiday or rest day, payment shall be made in advance on the nearest working day. However, some local departments have established reasonable delay period. For example, Article 12 of the Regulations on Wage Payment for Employees in Shenzhen allows a 5 days delay with justifiable reasons. Article 54 of the Answers to the Trial of Labor Dispute Cases (I) issued by the Beijing Higher People’s Court and the Beijing Labor and Personnel Dispute Arbitration Commission stipulates that the latest payment date shall not exceed 7 days after the agreed date.

In practice, even with local regulations, the reasonable delay period may be extended in individual cases, especially during economic downturns. For instance, in Case (2022) Jing Min Shen 5584, the labor contract stipulated wage payment by the 10th of each month, but wages were actually paid around the 15th or at the latest the 23rd, which was late for around 13 days. Nevertheless, the court did not uphold the claim for economic compensation. Given that the Payment of Wages (Tentative Provisions) generally requires monthly wage payment, claims for economic compensation are less likely to be supported if the arrears period does not exceed one month in individual cases.

  1. Scope of Wage Arrears

Article 9 of the Opinions on Several Issues Concerning the Application of the Labor Contract Law issued by the Shanghai Higher People’s Court stipulates that failure to pay in full and on time due to unclear or disputed calculation standards cannot serve as a basis for an employee to terminate the labor contract. This is also the judicial logic behind the aforementioned case.

There are divergent views in practice regarding the scope of wage arrears. For example, in cases related to insufficient payment of annual leave wages, courts in Beijing, Shanghai, and Guangdong have rejected such claims (see (2022) Jing 03 Min Zhong 2232, (2024) Yue Min Shen 18941, and (2024) Hu 01 Min Zhong 11005). However, courts in Chongqing have supported such claims (see (2023) Yu 01 Min Zhong 1976). In cases related to insufficient payment of high-temperature subsidies, courts in Shanghai and Qingdao have rejected such claims (see (2023) Hu 0117 Min Chu 6207 and (2022) Lu 02 Min Zhong 712). In contrast, Article 6 of the Notice on Adjusting High-Temperature Allowance Standards issued by Jiangxi Province stipulates that if an employee terminates the labor contract due to the employer’s arrears or deduction of high-temperature subsidies, the employer shall pay economic compensation in accordance with the Labor Contract Law.

In conclusion, when an employer genuinely faces payment difficulties due to objective circumstances, it is recommended to assess the risks based on the specific situation and take necessary measures accordingly.

Owner’s rights and responsibilities under the new rules for construction projects 

The issuance of the Interpretation (II) on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Contracts for Construction Projects by the Supreme People’s Court (hereinafter referred to as the “Interpretation II”) has attracted widespread attention. Most enterprises may act as the owner. Then what are the changes to the owner under the new judicial interpretation?

  1. The Impact of Tendering Procedures on the validity of Contracts

Article 1 of Interpretation I stipulates that a must be tendered construction project failed to go through the tendering procedures, it shall be invalid. Interpretation II prescribes different circumstances regarding the validity of contracts. Article 2 provides that if the parties negotiate on substantive contents before tendering, the winning bid contract may be deemed invalid. This explicitly clarifies that illegal negotiation acts such as “open bidding with secret pre-determination” and “pre-determination before bidding” will invalidate the winning bid contract, aiming to force owners to comply with rules during the tendering procedures. Article 1 provides that if the project is no longer subject to mandatory tendering at the time of filing a lawsuit, the contract shall not be deemed invalid solely on the ground of failure to tender. In other words, for projects that “must be tendered”, if they have become “non-mandatory tendering” projects due to regulatory or policy adjustments at the time of litigation, the contract will not be invalidated solely because of “failure to tender”, reducing compliance risks for legacy projects.

  1. The Owner’s Knowledge Becomes Key to Determine Whether an Affiliated Party Can Sue the Owner Directly

According to Article 4, if the owner “did not know and should not have known” about the qualification lending at the time of contract conclusion, the affiliated party cannot directly break through the privity of contract to claim project payment from the owner. If the owner “knew or should have known” about the affiliation, it shall directly bear the liability for compensatory payment to the actual constructor. Therefore, owners must strictly review qualifications during the contractor selection stage. Meanwhile, at all stages of contract signing, construction, and settlement, owners should avoid contacting and transacting with personnel whose identity as contractors is uncertain to prevent being deemed “knowledgeable”.

  1. 3. Return to Privity of Contract, to Set Restrictions on Actual Constructors Suing Owners

Article 43 of Interpretation I stipulates that actual constructors may directly sue the owner as a defendant to claim rights, leading to numerous cases in practice where owners are sued unjustly. Interpretation II makes differentiated provisions.

Firstly, in principle, the privity of contract shall not be breached. Article 6 explicitly provides that in cases of prohibited subcontracting and illegal subcontracting, the court shall not support claims for payment from the owner by the party accepting the subcontracting or illegal subcontracting.

Secondly, to set the requirements for exercising subrogation rights. Actual constructors may exercise subrogation rights only if the prerequisite is met. The prerequisite is that the contractor is negligent in exercising matured claims or accessory rights related thereto, affecting the realization of its matured claims. Owners can effectively block recourse in subrogation lawsuits by strictly implementing payment milestones and improving payment ledgers.

  1. 3. Fixed Lump-Sum Contracts Are Generally Non-Adjustable, Owner’sBudgets Becomes More Controllable

Article 9 stipulates that fixed-price contracts are generally not subject to price adjustments due to fluctuations in labor and material costs. However, two exceptions are reserved. If parties have agreed otherwise, or “changed circumstances” as stipulated in the Civil Code occur, then price adjustments may be claimed.

There is a special situation, if a fixed lump-sum construction contract is terminated midway, and the parties cannot reach an agreement on the completed part (with qualified quality), Article 10 sets a rule for calculation: “the proportion of the project price of the completed part to the total project price may be determined by reference to the pricing standards, pricing methods, or relevant norms in the engineering construction field issued by the construction administrative department at the place where the construction project is located at the time of contract conclusion, and the project price of the completed part shall be determined by multiplying this proportion by the fixed lump-sum price agreed in the contract.” The rationality and practicality of this rule seem to be highly controversial.

  1. 5. Owners’ “Delaying” Settlement Behaviors Are Regulated

In practice, it is very common for owners to delay payment on grounds such as incomplete audits or postponed commencement dates for retention funds due to uncompleted completion procedures. Article 13 provides that if an audit is cited as a reason, unless otherwise agreed by the parties, the court may determine the time limit for issuing the audit conclusion based on the project scale, cost, and complexity, with a maximum of one year from the date the contractor submits the completion settlement documents. The aforementioned one-year limit does not apply if the delay is caused by the contractor’s failure to cooperate in providing materials. Article 14 provides that the retention fund refund period commences from the date the contractor exits the site; if the construction contract is terminated after the contractor exits, it commences from the date of termination.

  1. 6. Contract Termination and Quality Liability

Article 15 explicitly provides that after contract termination, the owner has the right to request the contractor to hand over the construction site and construction materials, helping the owner quickly organize subsequent construction and reduce losses. Article 16 clarifies the quality repair procedure, requiring the owner to fulfill the pre-procedure of notifying the contractor for repair before claiming quality repair costs.

In conclusion, Interpretation II clarifies the boundaries of owner’s rights and imposes higher requirements on owner’s standardized project management, namely, focusing on full-cycle management including preliminary compliance review, process performance supervision, and capital risk control.

The newly revised Trademark Law will come into force on January 1, 2027

The draft fifth revision to the Trademark Law was adopted on June 26, 2026. This is the first comprehensive revision of the Trademark Law since its implementation in 1983. Given the large number of revisions introduced this time, we intend to sort out key amendments and their impacts on enterprises’ trademark affairs from the perspective of corporate trademark application and daily trademark use.

  1. Trademark Registration

Enterprises shall pay full attention to the following revisions when filing trademark registration applications:

Key Points Explanations
Addition of Dynamic Marks In addition to the eligible registrable signs prescribed under the current law, namely words, figures, letters, numerals, three-dimensional signs, combinations of colors and sounds, dynamic marks and combinations thereof with the aforesaid elements are newly added as registrable trademarks. Accordingly, enterprises may file applications for the registration of brand boot-up animations, dynamic short-video logos and the like based on actual business needs.

It should be noted that pursuant to Article 18 of the new law: “Where an application is filed for trademark registration based on a three-dimensional sign, color combination, sound, dynamic mark or the like, no trademark registration shall be granted to any shape, color combination, sound, dynamic effect or the like that arises inherently from the nature of the goods, is necessary to achieve a technical effect, or confers substantial value on the goods.”
Expansion of the scope of signs prohibited from registration and use A new clause is added to Article 15 of the new law, explicitly including signs identical with or similar to symbolic elements associated with the name, Party flag, Party emblem, medals of the Communist Party of China, important theoretical achievements, historical events and the like within the scope of signs prohibited from registration and use.
Regulation on the registration of misleading “scheming trademarks” Article 15 of the new law stipulates that signs that are deceptive and likely to cause the public to misunderstand the quality, craftsmanship, raw materials and other attributes of goods, or the place of origin thereof shall not be registered. Enterprises are therefore advised to refrain from applying to register signs such as “hand-kneaded” or “zero-additive”. Such applications will normally be rejected, even if registration is secured by chance, pursuant to Article 56 of the new law, using a registered trademark in a manner that misleads the public will expose the enterprise to orders to rectify within a time limit, fines, and even trademark revocation.
Stricter standards and enforcement against trademark hoarding and excessive defensive registration Paragraph 1 of Article 4 of the current law, which states “An application for malicious trademark registration filed without the intent to use shall be rejected”, is revised to Paragraph 1 of Article 19 of the new law, that is “No trademark registration shall be granted where an applicant files trademark applications without the intent to use and the applications evidently exceed the reasonable needs of normal production and operation.”

A new Paragraph 2 is added: “No person may file trademark registration applications by means of deception or other improper means.”

Article 54 of the new law prescribes that anyone who files trademark applications in violation of Article 19 and causes adverse impacts may be given a warning together with a fine of not more than RMB 100,000.

Trademark hoarding is clearly subject to such regulation, and enterprises will face greater difficulties in filing defensive trademark registrations. Applications covering classes, quantities and scopes obviously beyond an enterprise’s existing business scope and lacking realistic prospects for actual use will risk rejection, and may even adversely affect its subsequent trademark filings.
  1. Trademark Use

Enterprises shall attach particular importance to the following aspects concerning trademark use:

Key Points Explanations
Ex officio initiation of non-use cancellation proceedings Pursuant to Paragraph 2 of Article 57 of the new law, where a registered trademark has not been used for three consecutive years without justifiable reasons, the trademark administrative department under the State Council may revoke such registered trademark. Going forward, apart from non-use cancellation applications filed by competitors, trademarks left unused for a long time may also be revoked proactively by the trademark authority ex officio. It is recommended that enterprises promptly review the usage status of their registered trademarks and adopt corresponding disposal measures.
Heavier penalties for unauthorized alteration of registered particulars Paragraph 1 of Article 57 of the new law sets a clear fine cap (not exceeding RMB 50,000) for acts of unilaterally altering a registered trademark, the registrant’s name, address or other registered particulars during trademark use.
Tighter regulation on misleading trademark use Article 56 of the new law lists the act of using a registered trademark in a misleading manner as a punishable violation. Enterprises can no longer exploit loopholes under the former Trademark Law to conduct misleading promotion by combining registered “scheming trademarks” with other content; such conduct will now lead to mandatory rectification within a time limit, fines or even revocation of the registered trademark.
Trademark Licensing A new provision is added to Article 55 of the new law: “Where a licensee fails to fulfil its quality assurance obligations, the licensor shall have the right to terminate the trademark licensing contract.” This new clause enables licensors’ quality supervision to carry genuine binding force, compelling licensees to pay greater attention to product quality to avoid contract termination. Licensors may design contractual clauses to maximize the effectiveness of this new rule.
Trademark Assignment Pursuant to Article 46 of the new law: “Where a registered trademark is assigned, the trademark registrant shall assign together all similar trademarks registered by it in respect of identical goods, as well as identical or similar trademarks registered in respect of similar goods.” (Note: Not a newly introduced provision)

A new clause is added to Article 47: “For the assignment of collective marks and certification marks, the assignee shall possess corresponding subject qualification and supervision capacity.”