Can it still be used to claim economic compensation?

Case Summary

Zhang was hired by a certain technology company on January 15, 2015, where he worked in human resources management. In the first few months after he joined, the company did not timely handle the social security contribution registration formalities. Starting in April 2015, the company began to handle the social security contribution formalities for Zhang and make payments. In January 2026, the company intended to adjust Zhang’s job position, but the two sides were unable to reach agreement. On January 31, 2026, Zhang, on the ground that the company had not legally paid the social security premiums for the period from January 15, 2015 to March 2015, demanded that the company terminate his employment contract, and filed for arbitration, requesting that the arbitral tribunal rule that the company pay him an economic compensation for the termination of the employment contract.

During the handling of the case, the company argued that Zhang had worked for more than 10 years at the company, and that he was responsible for human resources management. As such, it was one of his job duties under law to pay social security premiums for the company’s employees. During his employment, Zhang never requested the company to make up any unpaid social security premiums, nor did he report to the company, based on his job duties, any employment-related risk arising from the company’s failure to pay social security premiums in accordance with the law. Zhang’s true reason for leaving was that the parties failed to reach agreement on the job reassignment negotiations, so the company had no obligation to pay economic compensation.

Outcome

The arbitral tribunal dismissed Zhang’s request.

Key Issue Analysis

Whether the company should pay Zhang economic compensation?

One view holds that during the course of employment, there is indeed the fact that the technology company did not pay social security premiums for Zhang in some months. Zhang’s decision to terminate the employment contract on that basis fully complies with the provisions of Articles 38 and 46 of the Labor Contract Law regarding cases where the employer has not made payment in accordance with the law and the employee may terminate the employment contract and claim economic compensation; therefore, the company should pay economic compensation.

Another view holds that as of the time Zhang proposed terminating the employment contract, he had been continuously employed for more than 10 years. Although there were cases where the company did not pay social security premiums in some months, according to Zhang’s job duties, he also bore a certain responsibility for the payment of social security premiums, yet he had never raised any objection to the company regarding the payment of social security premiums. Combined with the company’s job reassignment situation before Zhang’s departure, it can be seen that the social security premium payment situation was not the direct critical factor forcing Zhang to terminate the employment contract. Therefore, Zhang’s arbitration request should not be supported.

The arbitral tribunal supported the second view.

Article 38, Paragraph 1 of the Labor Contract Law provides: “Where the employer has any of the following circumstances, the laborer may terminate the employment contract… failure to pay social insurance premiums for the laborer in accordance with the law…” Article 46 of the same law provides: “Where any of the following circumstances occurs, the employer shall pay economic compensation to the laborer: (1) the laborer terminates the employment contract in accordance with Article 38 of this Law…”

The author believes that when a laborer exercises the right to terminate an employment contract, it should be done within a reasonable period of time. Although the labor security laws and regulations do not expressly specify the period for exercising the right to terminate employment contracts, by referring to general principles in the civil law regarding the exercise of rights, the right holder may not abuse the right and should assert the right within a reasonable period. Moreover, in the context of labor relations, the assertion of rights by laborers is also subject to certain time limits. For example, Article 27 of the Law on Labor Dispute Mediation and Arbitration provides that the limitation period for applying for arbitration of labor disputes is one year; the arbitration limitation period starts to run from the date on which the party knew or should have known that its right was infringed. Therefore, when a laborer applies the above legal provisions to terminate the employment contract and claim economic compensation, the prerequisite should be that the employer has committed an unlawful act of failing to pay social insurance premiums in accordance with the law, and that such unlawful act is in a continuing state.

In this case, the technology company only had a brief period of failure to pay social security premiums at the initial stage of establishing the labor relationship. Starting in April 2015, the company corrected the unlawful behavior in a timely manner and has continued, in a sustained and sufficient manner, to pay social security premiums for Zhang for more than 10 years. The unlawful state has already ended. Zhang waited more than 10 years to exercise the termination right. If Zhang’s claims were supported, it would cause labor relations in similar situations to remain in a long-term state of instability, which also does not conform to the fairness principle in handling labor dispute cases.

In addition, Zhang, as a person engaged in human resources management, is familiar with the relevant laws and regulations regarding social insurance premium payments and the process by which employers pay social security premiums. After joining the company, Zhang did not make any request or raise any objection to the company regarding the matter of making up unpaid social security premiums, nor did he claim termination of the employment contract on that basis. It was not until January 2026, when the parties’ job reassignment negotiations failed, that Zhang terminated the labor relationship by citing the issue of social security premiums that had been unlawfully not paid years earlier but had been corrected. This clearly violates the principle of good faith and should not be supported.

Based on the foregoing reasons, the arbitral tribunal dismissed Zhang’s arbitration request.

(Author’s unit: Hebei Province Shijiazhuang Labor and Personnel Dispute Mediation and Arbitration Institute)

【Source: China Labor Security News】