The high penalty is troubling Wang Yu. Photo by reporter Zhang Yi
To pursue his doctorate, Wang Yu (a pseudonym) signed an agreement with his employer, the Changsha Normal School of Hunan Province, committing to a service period of no less than 8 years. Now, he may have to pay a penalty of hundreds of thousands for changing jobs.
Wang Yu believes that signing this clause at the time was a "tyrannical clause," "After all, if I didn't sign it back then, I wouldn't be able to work or pursue my doctorate; I belonged to the weaker group." However, the employer believes that since both parties agreed to the terms of the contract, the penalty should be paid as stipulated.
Is the "astronomical penalty" in Wang Yu's eyes reasonable? In today's world where similar labor disputes are increasing, how can we ensure the mobility of talent while protecting the legitimate interests of organizations? Written and organized by reporter Wen Naifei.
Party involved: Signed under employment pressure
"I admit that moving to another school is a breach of contract, but if I follow the school’s unilateral requirement, I would have to pay a penalty of 600,000 RMB, which is astronomical! It is very unreasonable! The state does not have such policies." Wang Yu told reporters that after graduating with a master's degree in June 2004, he started working at Changsha Normal School. The school agreed for him to pursue a doctoral degree at a certain university on a directed basis and signed an agreement with him. He has already worked at Changsha Normal School for two years and now plans to leave, only to discover that there is a "tyrannical clause" in the agreement.
Wang Yu took out the agreement he had signed with the school, and the reporter saw that Article 10 of the agreement states, "If Party B needs to transfer away from Party A, for each year less served, Party B must pay Party A double the total salary and allowance of the previous year as a penalty, and also return any related benefits given by Party A." Wang Yu said that he has no objections regarding the return of benefits, but disagrees with the "astronomical" penalty resulting from this clause.
He recalled the situation when he first signed the agreement, "With the great employment pressure, if I didn’t sign this agreement, the school wouldn’t accept me, and I couldn’t continue pursuing my doctorate, so I had to sign such a clause under duress." He said that he was part of the "weaker group" facing employers when seeking employment, and the method of agreeing on penalties in the agreement violates the principle of "equality, voluntariness, and mutual agreement" stipulated in the Labor Contract Law, making it an invalid clause, and also an invalid clause confirmed by the Interpretation on Issues Concerning the Implementation of Personnel Employment System in Public Institutions (hereinafter referred to as the Interpretation).
School Party: Jointly agreed upon, no coercion
"This hurts the school's feelings, and also the leaders' feelings." When talking about Wang Yu's resignation, Zhou Zhixiang, Director of the Organization and Personnel Department of Changsha Normal School, said.
According to the school's handling opinion on Wang Yu's transfer, the school requires Wang Yu to refund the training fees, salaries, welfare, settlement fees, special allowances, and other benefits received during his doctoral studies. In addition, the school also demands that Wang Yu pay the penalty. According to Article 10 of the agreement, "For each year less served, Party B must pay Party A double the total salary and allowance of the previous year (52,000 RMB) as a penalty, calculated as 104,000 RMB per year x 6 years = 624,000 RMB." However, Zhou Zhixiang, Director of the Personnel Department of Changsha Normal School, stated that considering Wang Yu's actual difficulties, they currently only require him to pay half, i.e., 312,000 RMB.
Regarding Wang Yu's claim of a "tyrannical clause," Zhou Zhixiang did not agree, "Initially, it was jointly agreed upon by both parties. If it was considered unreasonable at the time of signing, one could choose not to sign or find a better place for employment. No one forced anyone." He believed that the school is a public institution and cannot fully apply the Labor Contract Law. He indicated that regarding the issue of penalties, the school had consulted relevant government departments and made decisions based on the spirit of the Opinion on the Implementation of the Personnel Employment System in Public Institutions (hereinafter referred to as the Opinion), the school's relevant management systems, and agreements.
At the same time, he expressed that the school has already made significant concessions, agreeing to reduce the penalty by half, and there is still "room for further negotiation."
Discussion: Is the "astronomical" penalty reasonable?
Is the "astronomical" penalty reasonable or not? The reporter contacted the Public Institution Management Division of the Hunan Provincial Department of Human Resources and Social Security. A staff member indicated that if an employer provides specialized training expenses for a worker and conducts professional technical training, they can enter into an agreement with the worker to specify a service period. "If the worker breaches the service period agreement, the employer can only request the worker to pay a penalty that does not exceed the proportion of the training expenses corresponding to the unfulfilled portion of the service period."
This staff member stated that such a contract is unequal, "It's impossible to demand such a large amount of compensation." He also informed the reporter that if the employer demands such a high penalty, they can be asked to "provide evidence."
Subsequently, the reporter contacted the Hunan Labor and Personnel Dispute Arbitration Court. A staff member believed that some units offer generous benefits when recruiting, but there are also many workers who "exploit loopholes." Government regulations should consider both personal and organizational interests. At the same time, with the development of society, the Opinion has certain limitations, but there are currently no more operational rules and systems available. As for whether 600,000 RMB is reasonable or not, it "can't be explained in just a few words."
[Lawyer's Opinion]
The content of the agreement indeed has a tendency to be unfair.
Regarding whether the agreement was signed under coercion, the on-duty lawyer at Qin Xiyuan Law Firm believed that Wang Yu needs to provide evidence of coercion. Generally speaking, if someone threatens to cause damage to the life, health, honor, reputation, property, etc., of a citizen or their relatives, or to cause damage to the honor, reputation, property, etc., of a legal person, forcing the other party to make a decision against their true will, it can be recognized as a coercive act.
As for whether the disputed clause belongs to the invalid contract (clause) confirmed by the Interpretation, it depends on whether Wang Yu can prove that the other party coerced or threatened him, causing him to sign the clause against his true will.
Regarding the school's view that as a public institution, the Labor Contract Law cannot be fully applied, the lawyer believed that issues concerning the application of laws, regulations, rules, and relevant provisions can be handled according to Article 96 of the Labor Contract Law, which states, "For public institutions entering into, performing, changing, terminating, or ending labor contracts with employees under the hiring system, if laws, administrative regulations, or the State Council have other provisions, those provisions shall be followed; if there are no such provisions, the relevant provisions of this law shall be followed."
At the same time, the lawyer believed that both the employer and the employee should follow national regulations and adhere to the principle of fairness when signing contracts or agreements. According to the agreement, if Party B needs to transfer away from Party A, Party B not only has to bear a huge penalty but also return the training fees, salaries, welfare, settlement fees, special allowances, and other related benefits. This is actually a matter of liability for breaching the service period. Neither the Opinion nor the accompanying Interpretation specifies liability for breaching the service period, but there are regulations concerning "compensation for training fees when a hired person terminates the employment contract after being trained by the employing unit." The content of the penalty clause in this case deviates significantly from the spirit embodied in the Opinion and its accompanying Interpretation. This content also does not conform to the relevant provisions of the Labor Contract Law regarding service period penalty clauses, "Although the penalty clause in this case is a necessary clause to maintain the stability of the organization's talent, the specific content of the agreement indeed has a tendency to be unfair."
[Your Voice]
Wang Yu believes that his resignation constitutes a breach of contract, and he should indeed pay a penalty, but the "astronomical" penalty of hundreds of thousands is too high. Many personnel departments of various organizations, however, believe that leaving without notice damages the organization's interests, and without setting a penalty, people would "exploit loopholes," leading to situations where "one eats from East Master and then West Master."
As a worker, do you think the "astronomical" penalty is reasonable? Did you notice similar "clauses" when signing a labor contract with your employer? Are there situations where you were forced to sign an agreement? And as an employer, are you also facing the dilemma of having overly mobile employees with no solution? Do you have any good solutions? If you have anything to say, please feel free to call our hotline at 0731-85571188 and share your views.