Employees successfully seek court relief for unpaid social benefits

In a recent case reported on 17 September 2013, the Chongqing Intermediate People’s Court upheld a retired employee’s claim against his former employer for compensation of pension losses resulting from unpaid pension insurance contributions. This is reportedly the first successful claim in this type of case in Chongqing.

The employee worked with a manufacturing company from 1 January 1995 until he retired on 20 May 2011, but the company only made social insurance contributions on his behalf starting from January 2008. Since current social insurance laws and regulations entitle an employee to a pension only if social insurance contributions are made for a minimum of 15 years, the employee did not qualify for statutory pension benefits. Moreover, the local labour bureau decided that it could not process any back payment of the unpaid social insurance contributions as the employee had retired. Therefore, the employee had no administrative recourse to receive his pension.

The employee decided to sue the company for RMB208,800 (US$34,000) to compensate for loss of pension benefits. When deciding the case, the court was faced with the problem of how to calculate the employee’s pension losses. In the end, the court decided that the employee was entitled to the equivalent of 15 years of pension benefits based on the retirement age for male employees in China being 60 years old and the local average lifespan in Chongqing being 75 years. Based on the average pension benefits in Chongqing in 2011, the court found that the employee was entitled to RMB287,640 in compensation, but since the employee did not claim that full amount, the court only awarded him the RMB208,800 that he claimed.

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mail at: Zhang Danian (Shanghai) danian.zhang@bakermckenzie.com