Upon resignation, an employee checked a box in the system stating, ¡°I confirm that all annual leave and compensatory time off have been taken, and any unused portion is waived.¡± However, some statutory annual leave remained untaken. Can the employee still claim monetary compensation for the unused leave?

[Case Review]

Liu, an employee of a company, was legally entitled to annual leave. Between March and December 2022, the company neither arranged for him to take his statutory leave nor paid wages in lieu of the unused days.

When Liu submitted his resignation on December 8, he selected an option in the system under "Other" declaring, "I hereby confirm that all annual leave and compensatory time off have been taken; any unused portion will be deemed automatically waived." He officially left the company on December 31.

Liu later filed for arbitration, seeking compensation for the unused annual leave, but his claim was rejected. He then filed a lawsuit.

Liu argued that the "Others" section in the resignation process was a mandatory field¡ªwithout selecting it, he could not proceed to the next step. The content was a system-preset option with no alternatives. Therefore, his "promise" was made under compulsion, and he retained the right to claim wages for unused annual leave.

The company contended that Liu had confirmed all his annual leave had been used and that the "automatic waiver" clause did not violate any legal provisions. On this basis, it refused to pay compensation for the unused leave.

[Case Study]

After trial, the Shanghai Pudong New Area People¡¯s Court, held that the company had failed to arrange annual leave for Liu. The resignation system provided no alternative options, effectively forcing the employee to waive his rights and unlawfully relieving the employer of its statutory obligations. Accordingly, the court ordered the company to pay Liu CNY 9,875.13 in compensation for the unused leave.

The company subsequently appealed, but the appellate court upheld the original judgment.

I. Workers are legally entitled to paid annual leave

China implements a paid annual leave system, under which employees who have worked continuously for one year or more are entitled to paid leave. This system not only safeguards employees¡¯ physical and mental well-being but also helps improve work efficiency. When exercising employment management and approval authority, employers must comply with legal requirements and uphold the principles of voluntariness, reasonableness, and mutual agreement. They must not coerce employees into waiving annual leave or abuse their approval authority to circumvent employees¡¯ rightful leave entitlements. If an employer coerces employees into promising to waive their annual leave or restricts them from taking leave through unreasonable approval procedures, the court has the authority to legally review and rectify such actions to effectively protect workers¡¯ legitimate rights and interests.

II. Clauses that exempt employers from statutory duties or exclude workers¡¯ rights are invalid

Employers must not evade their legal responsibilities through standard clauses or internal rules, nor deprive employees of their lawful rights. In this case, the employer failed to arrange paid annual leave for employees but included a standard clause in the online resignation system requiring employees to promise an "voluntary surrender" of unused paid annual leave, thereby attempting to evade its statutory duties. Such a clause effectively deprives the employee of the right to annual leave and cannot be regarded as a genuine expression of intent. A waiver made under such preset conditions lacks voluntariness and is not legally binding. Employers shall conduct thorough reviews to ensure that any standard clauses they impose are both legal and reasonable, so as to prevent abusing their dominant position in ways that unlawfully infringe upon employees' statutory rights.

[Representative Comments]

Liu Huaixin, deputy to Shanghai People¡¯s Congress, part-time Vice Chairman of the Pudong New Area Federation of Trade Unions, President of the District Model Workers Association, secretary of the Party Committee and Chairman of the Union at Shanghai Gao Qiao SGPEC Petrochemical Engineering & Construction Co Ltd., and Chairman of the Supervisory Board.

The paid annual leave system not only safeguards workers¡¯ legal rights but also fosters a healthy balance between work, rest, and personal life. Paid annual leave is a statutory right granted to employees, and employers may not exclude this right¡ªwhether to take the leave or to receive wages in lieu of unused leave¡ªthrough labor contracts or internal company policies. While coordinating production and business operations, enterprises should make reasonable arrangements for employees to take paid annual leave and provide appropriate compensation to those who are unable to do so due to work demands. This is the proper way to implement the paid annual leave system and a key to achieving mutually beneficial outcomes for both employers and employees. Against the backdrop of national efforts to strictly enforce the paid annual leave system, the ruling in this case sets a benchmark for protecting employees¡¯ lawful rights and serves as a positive example for promoting harmonious and stable labor relations.

[Relevant Laws]

I. Labor Law of the People's Republic of China

Article 45: The state implements a paid annual leave system. Workers who have been continuously employed for one year or more are entitled to paid annual leave. The specific measures shall be stipulated by the State Council.

II. Labor Contract Law of the People's Republic of China

Article 26: A labor contract shall be null and void, or partially null and void, under any of the following circumstances:

(i) Where it is concluded or modified through fraud, coercion, or by taking advantage of the other party¡¯s difficulties, thereby causing the other party to act against their true intent;

(ii) Where the employer exempts itself from statutory obligations or excludes the lawful rights of the employee; (iii) Where it violates mandatory provisions of laws or administrative regulations. Any dispute over the nullity or partial nullity of a labor contract shall be determined by a labor dispute arbitration institution or a people¡¯s court in accordance with the law.

III. Regulations of Paid Annual Leave of Employees

Article 5 ¡­

Where an employer is genuinely unable to arrange paid annual leave for an employee due to work requirements, such leave may be forgone with the employee¡¯s consent. For any paid annual leave days that an employee is entitled to but has not taken, the employer shall pay compensation at 300% of the employee¡¯s daily wage.

(Case prepared by Chen Hao of the Pudong New Area People's Court)