Court Finds Demotion and Unilateral Pay Cut Illegal - International Law Office

In a recently published case a People’s Intermediate Court in Beijing ruled that the demotion of an employee and the imposition of a unilateral pay cut constituted a breach of contract.

Li Shukai was a department manager of Beijing Linrui Health Materials Co, Ltd. Due to a company reorganization, Li’s position was eliminated and he was not assigned to another position. The company then reduced his monthly salary from RMB 2,200 to the minimum wage of RMB 580.

The court upheld the original arbitration decision and ordered the company to restore Li to a position similar to that of a department manager. It also ordered the company to resume paying him his original salary. The court reportedly concluded that the company had breached Li’s contract by changing the key terms of his position and salary without his consent.

For further information on this topic please contact Andreas Lauffs at Baker & McKenzie's Hong Kong office by telephone (+852 2846 1888) or by fax (+852 2845 0476) or by email (andreas.lauffs@bakernet.com).