After a phone conversation, the company terminated the employment contract with the employee, and the court ordered the company to pay more than 500,000 in compensation.

Beijing News (Reporter Zhang Jingshu, Correspondent Li Chaoqiang) China’s Labor Contract Law stipulates that an employer and employee can terminate the labor contract through mutual agreement. Mutual agreement termination is an important way to end a labor contract, but improper application can easily lead to labor disputes. Lan Tian Company (pseudonym) communicated with employee Zhang Liang (pseudonym) by phone regarding resignation matters, including severance pay, last working day, and work handover. After the communication, the company sent Zhang Liang a “Mutual Agreement Termination Notice” email and asked him to hand over his work. Later, Zhang Liang applied for labor arbitration, and both parties filed lawsuits after being dissatisfied with the arbitration ruling. Recently, the Haidian District People’s Court in Beijing, after trial, ruled that the company pay Zhang Liang more than 500,000 yuan in compensation for illegal termination of the labor contract.

Zhang Liang claimed that he objected to the basis for the severance pay and other issues, and that no agreement was reached on mutual termination. The company’s termination was illegal, so he demanded that the company pay more than 500,000 yuan in compensation for illegal termination.

Lan Tian Company argued that the two parties only failed to agree on the basis for the severance pay; the amount could be determined by the court. The company and Zhang Liang mutually agreed to terminate the labor contract, which does not constitute an illegal termination.

After review, the court found that both parties had indeed negotiated regarding the termination of the labor contract, including discussions on the last working day and severance plan. However, they did not reach an agreement on the amount of severance pay, and the company did not submit evidence proving that both parties had finally agreed on the mutual termination and signed a termination agreement. The court could not determine that the parties had mutually agreed to terminate the contract based solely on preliminary consensus and work handover actions. Therefore, the court ruled that the company pay Zhang Liang more than 500,000 yuan in compensation for illegal termination.

After the verdict, both parties appealed, and the second-instance court upheld the original judgment. The ruling is now in effect.

Editor: Gan Hao

Proofreader: Li Lijun