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Can a Company Recover Unpaid Consulting Fees and Contractual Penalties? A China Service Contract Dispute

Overview

An investment consulting company provided project positioning and consulting services for a resort development project under a written service agreement.

The consulting company completed and delivered the agreed final report, but the client failed to pay the contractual service fee despite repeated demands for payment.

The dispute raised several practical issues commonly encountered in commercial service contracts:

  • Whether the service provider had fully performed its contractual obligations;
  • Whether the agreed daily penalty for late payment was enforceable;
  • Whether contractual provisions requiring the losing party to bear legal and related costs could be enforced;
  • How a service provider can protect its ability to recover a judgment debt when the counterparty refuses to pay.

Representing the consulting company, Yu Yuting, Attorney at NEO-ARK Law Firm, pursued both the substantive claims and the necessary asset-preservation and enforcement measures.

The court ultimately ordered the resort investment company to pay the outstanding service fees, contractual penalties, legal fees and guarantee-related costs. After the judgment became effective, enforcement measures resulted in the defendant's bank funds being seized and transferred to the client.

Case Snapshot

ItemDetails
Practice AreaCommercial Litigation & Contract Disputes
Case TypeService Contract Dispute
JurisdictionGuangzhou, China
ClientInvestment Consulting Company
CounterpartyResort Investment Company
Core IssuesUnpaid Consulting Fees, Contractual Penalties, Legal Fees, Property Preservation and Enforcement
Dispute ValueApproximately RMB 300,000
CourtGuangzhou Haizhu District People's Court
Key OutcomeContract Fees, Contractual Penalties and Litigation-Related Costs Recovered
EnforcementBank Funds Seized and Directly Transferred
Lead LawyerYu Yuting / Sun Jianhui
Law FirmNEO-ARK Law Firm

Client's Situation

1. Consulting Services Were Completed but Payment Was Withheld

In December 2020, the parties entered into a Project Positioning Report Special Research and Consulting Services Agreement.

Under the agreement, the consulting company was engaged to provide positioning and consulting services for a resort project.

The agreed service fee was RMB 250,000.

The contract provided that payment would be made within 15 working days after the final report had been completed, delivered and accepted.

The consulting company completed the report and delivered it as agreed.

However, the resort investment company failed to make the contractual payment.


2. The Contract Contained a Late-Payment Penalty

The agreement provided for a contractual penalty of 0.04% per day for overdue payment.

It also contained a provision under which the losing party would bear litigation-related costs, including legal fees.

After repeated demands for payment produced no result, the consulting company commenced litigation before the Guangzhou Haizhu District People's Court.


Legal Strategy

Legal IssueStrategy
Contract performanceEstablish that the consulting company had completed and delivered the agreed services
Outstanding service feesEnforce the contractual payment obligation
Contractual penaltyDefend the agreed daily penalty rate against the defendant's request for reduction
Legal and related costsRely on the contractual cost-allocation provision
Asset preservationApply for preservation of the defendant's bank assets during litigation
Judgment enforcementPursue direct enforcement against the preserved funds after judgment

Property Preservation and Enforcement

1. Asset Preservation Was Initiated at the Litigation Stage

Because the defendant had failed to make payment despite repeated demands, the consulting company did not wait until the end of the litigation to consider enforcement risks.

A property preservation application was filed together with the lawsuit.

The court subsequently approved the preservation and froze approximately RMB 298,000 in the defendant's bank funds.

This measure helped prevent the relevant assets from becoming unavailable for enforcement.


2. Judgment Was Enforced Through the Preserved Funds

After the judgment became effective, the defendant still did not voluntarily comply.

The consulting company therefore applied for compulsory enforcement.

Because the relevant bank funds had already been preserved, the court was able to directly seize and transfer the preserved amount through the enforcement process.

After deduction of enforcement costs, approximately RMB 300,000 was ultimately returned to the client.

The case therefore achieved actual recovery rather than merely obtaining a paper judgment.


Why This Case Matters

For consulting companies and other service providers, obtaining a favourable judgment is only one part of commercial dispute resolution.

The more practical question is often:

Can the judgment actually be enforced and the money recovered?

This case demonstrates the value of combining contractual rights with procedural measures.

A well-drafted service contract can provide a basis for claiming:

  • Outstanding service fees;
  • Contractual late-payment penalties;
  • Legal fees where contractually recoverable;
  • Other agreed litigation-related costs.

At the same time, timely property preservation can materially improve the prospects of recovering the judgment debt when the counterparty refuses to pay voluntarily.

For companies providing consulting, investment advisory, project research or other professional services, the case highlights the importance of considering contract drafting, dispute resolution and enforcement strategy together.


Frequently Asked Questions

Can a consulting company recover unpaid fees if the client refuses to pay after receiving the final report?

Yes, where the service provider can establish that it performed the contractual obligations and the contractual payment conditions have been satisfied.

The specific payment terms, acceptance mechanism and evidence of performance are important.

Can a contractual late-payment penalty be enforced in China?

Potentially, yes.

The enforceability of a contractual penalty depends on the agreement, applicable law and circumstances of the dispute. A party seeking to reduce the agreed amount may need to establish the legal basis for adjustment.

Can legal fees be recovered in a commercial contract dispute?

They may be recoverable where the contract contains an appropriate provision and the relevant legal requirements are satisfied.

This case demonstrates the practical value of expressly addressing litigation-related costs when drafting commercial service agreements.

Why is property preservation important in a contract dispute?

A judgment does not necessarily result in voluntary payment.

Where there is a legitimate enforcement risk, timely preservation of the counterparty's assets can help ensure that assets remain available if compulsory enforcement becomes necessary.

What should service companies include in their contracts?

Service agreements should clearly address, among other matters:

  • Scope of services;
  • Delivery and acceptance procedures;
  • Payment deadlines;
  • Late-payment consequences;
  • Dispute resolution;
  • Allocation of legal and related costs;
  • Evidence and documentation of service completion.

Key Takeaways

  • A completed consulting service can support a claim for unpaid contractual fees.
  • Clearly drafted payment and late-payment provisions can strengthen a service provider's position.
  • Contractual provisions concerning legal and related costs may reduce the financial burden of litigation.
  • Asset preservation should be considered before a judgment where there is a meaningful enforcement risk.
  • Effective dispute resolution should focus not only on obtaining a judgment but also on actual recovery.

About the Author

Yu Yuting
Partner | NEO-ARK Law Firm

Lawyer Yu focuses on foreign-related litigation, cross-border disputes, commercial matters, and legal services for overseas individuals and businesses in China.

Email: [email protected]

About NEO-ARK Law Firm

NEO-ARK Law Firm provides legal services in foreign-related litigation, commercial disputes, family law, and cross-border legal matters, assisting both international and domestic clients throughout China.

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Seven Neo-Ark Attorneys Appointed to the 11th-Term Work Committees of the Guangzhou Lawyers Association

Recently, the Guangzhou Lawyers Association (GLA) conducted the application and selection process for supplemental members of its 11th-Term Work Committees and certain Professional Committees.

Following the procedures of application, review, selection, and deliberation by the President’s Council and the Board of Directors, seven attorneys from Guangdong Neo-Ark Law Firm were selected as supplemental members of the 11th-Term Work Committees of the Guangzhou Lawyers Association.

Supplemental Members of the Work Committees

Foreign-related Affairs Work Committee

Yuting Yu (余宇婷)

Practice Areas: Foreign-related Disputes; Civil and Commercial Litigation; Criminal Defense; Corporate Legal Counsel

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Chengwan Li (李成万)

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Qing Yao (姚青)

Practice Areas: Civil and Commercial Litigation and Arbitration; Labor Disputes; Matrimonial and Family Law; Ongoing Corporate Legal Counsel

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Practice Areas: Tax Administrative Reconsideration and Administrative Litigation; Tax-related Criminal Defense; Ongoing Corporate Tax and Legal Counsel; Bankruptcy and Distressed Assets; Tax Audit Response

Culture, Sports and Member Welfare Work Committee

Xingming Yu (于兴铭)

Practice Areas: Civil and Commercial Disputes; Matrimonial and Family Disputes; Inheritance and Estate Disputes; Family Wealth Succession Planning; Corporate Legal Disputes; Corporate Legal Counsel; Housing Sale and Purchase Contract Disputes

Culture, Sports and Member Welfare Work Committee

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Practice Areas: Corporate Legal Counsel Services; Construction; Labor Disputes; Matrimonial and Family Law; Civil and Commercial Dispute Resolution

The supplemental appointments further strengthen Neo-Ark Law Firm’s participation in the self-regulation and professional development of the legal profession, reflecting the firm’s commitment to industry affairs and the professional expertise of its attorneys.

About the Author

Yu Yuting
Partner | NEO-ARK Law Firm

Lawyer Yu focuses on foreign-related litigation, cross-border disputes, commercial matters, and legal services for overseas individuals and businesses in China.

Email: [email protected]

About NEO-ARK Law Firm

NEO-ARK Law Firm provides legal services in foreign-related litigation, commercial disputes, family law, and cross-border legal matters, assisting both international and domestic clients throughout China.

2026-08-24

Navigating Generative AI: Attorney Yu Yuting Hosts Special Seminar on AIGC Legal Risks and Practical Strategies

On August 18, 2026, the Youth Working Committee of Guangdong Neo-Ark Law Firm hosted a specialized training seminar focused on the legal risks and compliance requirements of Generative Artificial Intelligence (AIGC). Hosted by Partner Chengwan Li, Vice Chair of the committee, the session featured a keynote analysis by Yuting Yu, Partner and Head of the International Legal Affairs Department at Neo-Ark.

The seminar systematically explored AI platform regulatory compliance, copyright ownership of AI-generated content, and emerging legal exposure across commercial applications like AI short dramas and AI-powered office workflows, grounding theoretical discussion in recent judicial precedents and domestic and international case law.

I. Core Legal Framework & Judicial Trends in AIGC

  • Dual-Track Analysis Model: The lecture structured AIGC legal practice along two primary axes: administrative regulations and judicial precedents. This approach mapped regulatory baselines alongside real-world court rulings to illustrate changing judicial attitudes toward AI innovation.
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  • Copyright Ownership & AI Output: The presentation examined judicial criteria for determining whether AI-generated works qualify for copyright protection, analyzing the degree of human creative input, prompt engineering standards, and original artistic contribution required to establish ownership.
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II. Expert Insights & Legal Professional Guidance

1. Applying Traditional Legal Principles to Emerging Tech

Attorney Yuting Yu emphasized that while AI technology introduces novel application scenarios, the underlying legal issues remain firmly grounded in established legal principles. The key challenge for practitioners lies in adapting core legal logic to rapid technological shifts.

2. Strategic Advice for Young Lawyers & Law Students

  • Maintain Sensitivity & Global Perspective: Young practitioners are encouraged to track technological developments, cultivate an international legal perspective, and actively connect AI compliance topics with their primary practice areas.
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III. Commitment to Young Talent Development

Neo-Ark Law Firm’s Youth Working Committee remains dedicated to supporting the professional growth of emerging legal talent. By hosting targeted seminars on frontier legal issues, the committee continues to build an open, practical exchange platform that equips attorneys to navigate evolving regulatory landscapes effectively.

About the Author

Yu Yuting
Partner | NEO-ARK Law Firm

Lawyer Yu focuses on foreign-related litigation, cross-border disputes, commercial matters, and legal services for overseas individuals and businesses in China.

Email: [email protected]

About NEO-ARK Law Firm

NEO-ARK Law Firm provides legal services in foreign-related litigation, commercial disputes, family law, and cross-border legal matters, assisting both international and domestic clients throughout China.

2026-08-19

Legal Compliance Guide for Korean Businesses at the 140th Canton Fair 2026

In 2026, China–Korea economic and trade cooperation has deepened across the board. In January, South Korean President Lee Jae-myung made his first visit to China after taking office. The two sides signed 15 cooperation documents covering technological innovation, industrial collaboration, intellectual property, transportation and ecological environment, and food safety. More than 200 Korean entrepreneurs formed an economic delegation to accompany the visit. Negotiations on the second phase of the China–Korea Free Trade Agreement have accelerated. In April 2026, the two sides completed the 14th round of negotiations, with in-depth consultations on cross-border trade in services, investment, and financial services. Visa facilitation has been implemented, and there are currently more than 600 scheduled flights per week between the two countries. In the first quarter of 2026, total China–Korea merchandise trade reached RMB 701.69 billion, up 32% year on year.

(Source: Canton Fair official website)

The Canton Fair is the first window for Korean businesses to share in China’s dividends. In each of the past five sessions, about 8,000 Korean buyers attended. Leading companies such as Samsung Electronics and Lock&Lock have participated for more than 30 consecutive sessions. The 139th Canton Fair was successfully held from April 15 to May 5, with more than 32,000 exhibitors, including 279 leading procurement companies such as Samsung Electronics. The 140th Canton Fair (Autumn) will open on October 15, 2026. This is an unmissable opportunity for Korean businesses. This article examines the core legal compliance issues for Korean buyers and sellers in China trade.


I. Overview of China–Korea Trade

In 2025, bilateral imports and exports between China and Korea totaled RMB 2.37 trillion, up 1.7% year on year. China’s exports to Korea reached RMB 1.03 trillion, while imports from Korea reached RMB 1.34 trillion. Korea has been China’s second-largest trading partner for two consecutive years, accounting for 5.2% of China’s total foreign trade. In the first 11 months of 2025, China–Korea trade in electromechanical products reached RMB 1.43 trillion, up 5.9%, accounting for 67% of bilateral trade.

On the import side from Korea: electronic components grew by 9.9%, computer parts and accessories by 7.4%, and pharmaceutical materials and drugs by 8.9%. On the export side to Korea: electronic components grew by 10%, auto parts by 8.9%, the “new three” products (electric vehicles, lithium batteries, and photovoltaic products) by 12.4%, and medical instruments and equipment by 1.1%.

(Source: Sina Finance)


II. Key Legal Considerations for Contracting at the Canton Fair

Contracting at trade fairs moves quickly, but the faster the pace, the more important it is to hold the bottom line. The following four compliance actions must be implemented when signing contracts on site:

First, verify the counterparty’s signing qualifications. Request a copy of the business license and check whether the business scope includes trade or production. If necessary, entrust a professional institution to obtain a credit report.

Second, clarify payment terms, quality standards, and acceptance deadlines. Specify the payment method and deadline to avoid breach of contract caused by cross-border payment issues. Clearly cite specific national or industry standards, and agree on an acceptance period to avoid disputes caused by delays.

Third, pay attention to dispute resolution clauses. The contract should specify the applicable law and the dispute resolution method.

Fourth, make good use of on-site legal services. The Canton Fair has a “Legal Consultation” booth on site, where duty lawyers can provide immediate and effective legal advice. Companies may also engage their own legal team with cross-border service capabilities to provide contract review, business negotiation support, and other assistance.


III. Legal Compliance for Korean Exports to China: Semiconductors and Medical Aesthetic Devices

Korea’s exports to China are dominated by semiconductors, while medical aesthetic devices are a high-growth category. The following sections examine the core legal risks in these two industries.

(1) Semiconductors: Five Major Compliance Risks for Exports to China

Semiconductors are Korea’s largest export category. In the first four months of 2026, exports to China reached USD 32.3 billion, accounting for 29.3% of the industry’s total exports. Korean companies exporting to China must focus on the following compliance risks:

1. Origin determination. When exporting semiconductors to China, Korean companies should accurately determine the origin based on the specific product, processing techniques, and trade arrangements, and provide supporting documents such as certificates of origin, commercial invoices, purchase orders, and production and processing records. Incorrect declaration may lead to supplementary taxes, penalties, or cargo detention.

2. Equipment import licensing. Before importing semiconductor manufacturing equipment and components, companies should accurately determine the HS code based on the specific product model, technical parameters, and use, and verify whether it involves compulsory product certification, import licenses, dual-use item controls, inspection and quarantine, or other regulatory requirements. For products with unclear regulatory conditions, a professional compliance review should be completed before import.

3. New customs declaration rules. Since May 1, 2025, GACC Order No. 277 has been in effect, comprehensively revising the time limits and document requirements for import and export declaration. Many local customs authorities have implemented special inspections for semiconductor companies importing spare parts.

4. Rare earth export controls. In February 2025, China imposed export controls on key items such as tungsten, molybdenum, and indium. Exports with end uses involving chips at 14 nanometers and below require case-by-case approval, directly affecting Korean semiconductor companies’ access to raw materials.

5. Anti-dumping risk. China’s Ministry of Commerce has continued to impose anti-dumping duties on solar-grade polysilicon originating in Korea (initial rates of 2.4%–48.7% in 2014, adjusted to 4.4%–113.8% in 2017). The semiconductor sector may face similar risks in the future.

(Korea Pavilion at the Canton Fair – Source: Wuhan Institute of Design and Sciences)

(2) Medical Aesthetic Devices: Meeting China’s Compliance Threshold

Although medical aesthetic devices are smaller in export volume than semiconductors, Korea’s technical strength in the medical aesthetics industry has already penetrated Chinese consumer awareness through the consumer market. According to the 2025 Insight Report on China’s Medical Aesthetics Industry released by the China Association of Plastic and Aesthetic Surgeons, the proportion of Chinese people traveling abroad for medical aesthetics increased continuously from 2023 to 2025, with Korea remaining the top destination. In 2024, Korea received 261,000 Chinese medical aesthetics customers, up 132.4% year on year, and the number further climbed to about 620,000 in 2025.

End-consumer demand will inevitably flow upstream to device trade. For Korean medical aesthetic device companies hoping to enter the Chinese market, registration with the National Medical Products Administration (NMPA) is an unavoidable core threshold. Imported Class II and Class III devices must complete registration, appoint a domestic agent in China, and the agency agreement must be notarized in Korea and authenticated by the Chinese embassy or consulate in Korea, with joint liability clearly specified. Technical documents must include a China–Korea standards comparison table, and instructions and labels must be in Chinese and indicate the registration certificate number. Korean clinical trial data usually need to be supplemented with clinical evaluation data for the Chinese population, and the specific sample size requirements depend on the product risk level and review requirements. In 2025, skin-piercing devices and consumables such as skin booster injections were included in Class III medical device management, and the requirements have been fully implemented. Products without registration approval are prohibited from being marketed and sold. Customs conducts inspections of imported medical devices in accordance with the law, and non-compliant products are not permitted to be imported. In March of the same year, NMPA Announcement No. 30 allowed imported registration holders to use original application materials for domestic registration, providing Korean companies with a new path for localized production. Compliance speed determines market opportunity.


IV. Compliance Risks in Other Key Industries

1. Cosmetics: Since May 1, 2025, a full version of the safety assessment system has been fully implemented for cosmetic registration and filing, and companies may no longer use simplified reports. The requirements for raw material toxicological data are extremely high, and a domestic responsible person must be designated to complete filing or registration.

2. Electronic components: Pay attention to intellectual property compliance. Exported products must not infringe Chinese patent rights. Make good use of RCEP and China–Korea FTA rules of origin to choose the most favorable tariff preferences. Under the RCEP framework, 86% of products between the two sides enjoy zero tariffs.

3. Auto parts: Some accessories require compatibility certification. Since the China–Korea FTA entered into force in 2015, ten rounds of tariff reductions have been completed, with auto parts and chemical products benefiting significantly. Certificates of origin should be applied for early.


(Semiconductor-related products – Source: Canton Fair official website)

V. Practical Guide to Cross-Border Dispute Resolution between China and Korea

(1) Typical Cases and Lessons

Case 1 (Equity): A shareholder capital contribution dispute involving a Korean health industry group. The parties established a cross-border cross-shareholding structure combining “capital + technology.” Due to differences in corporate governance philosophy, they reached a deadlock and litigated against each other domestically and overseas for more than ten years, with total claims of several hundred million yuan. The case was ultimately retried and mediated by the Supreme People’s Court. Lesson: Cross-border equity structures must be designed carefully, and evidence preparation must be systematic.

Case 2 (Insurance claim): A fire insurance claim involving a Korean construction company in China. After the 2013 fire at SK Hynix’s Wuxi plant, Chinese insurance companies paid USD 860 million in compensation and sought recovery from the construction contractor. The Supreme Court of Korea ultimately ordered the contractor’s parent company to pay KRW 12.9 billion (approximately RMB 66.82 million) plus overdue interest to five Chinese insurance companies. Lesson: Companies operating in China must carry adequate insurance and clarify claim clauses.

Case 3 (Mediation): A cross-border joint venture dispute involving Korea’s ID Health Industry Group. In 2016, it established a joint venture with a Chinese company to develop the medical aesthetics market. Disputes arose due to differences in business philosophy. After ten years of litigation and arbitration involving RMB 310 million, the case was heard and mediated by the International Commercial Court of the Supreme People’s Court in 2025. Lesson: Litigation and mediation and other diversified resolution mechanisms can save time and cost.

(2) Choice of Dispute Resolution: Arbitration Is Recommended

Regarding cross-border recognition and enforcement, arbitration has clear advantages. Both China and Korea are contracting states to the 1958 New York Convention, and arbitral awards can be directly applied for recognition and enforcement in the other country, with simpler procedures and shorter timeframes. CIETAC awards have already been successfully recognized and enforced by the Busan District Court in Korea. China and Korea have not signed a dedicated bilateral treaty on the mutual recognition and enforcement of court judgments. In addition, in 2025, China Arbitration Week was held in Seoul for the first time, and CIETAC and the Korean Commercial Arbitration Board (KCAB) reached a cooperation consensus to promote the alignment of arbitration services between the two countries, further strengthening the convenience of the arbitration path.


Conclusion

The Canton Fair is a strategic window for Korean businesses to enter China. Underlying the opportunities, legal compliance is the credit foundation for long-term cooperation. We wish Korean businesses steady and sustained progress and shared success at the 140th Canton Fair.

About the Author

Yu Yuting
Partner | NEO-ARK Law Firm

Lawyer Yu focuses on foreign-related litigation, cross-border disputes, commercial matters, and legal services for overseas individuals and businesses in China.

Email: [email protected]

About NEO-ARK Law Firm

NEO-ARK Law Firm provides legal services in foreign-related litigation, commercial disputes, family law, and cross-border legal matters, assisting both international and domestic clients throughout China.

2026-08-17

Can an Employee Claim Wrongful Termination After Voluntarily Resigning? A China Work Injury Employment Dispute

Overview

A human resources service company and a related HR service entity faced a labour dispute brought by an employee who had suffered a work-related injury and was later assessed as having a Grade 9 disability.

The employee claimed that the employment relationship had been unlawfully terminated and sought compensation for alleged wrongful termination, unpaid wages, statutory work injury benefits, and an employment separation certificate.

The dispute involved an important question frequently encountered in China employment litigation: where an employee has formally submitted a resignation, can the employee subsequently claim that the employer unlawfully terminated the employment relationship?

Representing the companies, Yu Yuting, Attorney at NEO-ARK Law Firm, focused on the circumstances of the employee's departure, the distinction between termination and voluntary resignation, and the allocation of statutory work injury liabilities between the companies involved.

The court ultimately found that the employee had resigned for personal reasons rather than being unlawfully dismissed. The employee's claims for wrongful termination compensation and subsequent wages were therefore rejected.

Case Snapshot

ItemDetails
Practice AreaEmployment & Labour Law
Case TypeEmployment and Work Injury Dispute
JurisdictionShenzhen, China
ClientHuman Resources Service Companies
Core IssuesVoluntary Resignation, Wrongful Termination, Work Injury Benefits, Employer Liability
Dispute ValueApproximately RMB 90,000
CourtShenzhen Longgang District People's Court
Key OutcomeWrongful Termination and Subsequent Wage Claims Rejected
Lead LawyerYu Yuting / Sun Jianhui
Law FirmNEO-ARK Law Firm

Client's Situation

1. Employment and Work Injury

The employee joined a Shenzhen human resources service company in May 2021 as a sales employee and entered into a written employment contract.

In July 2021, the employee was injured in a traffic accident while commuting to work.

The Shenzhen Human Resources and Social Security Bureau subsequently recognised the injury as a work-related injury. A labour capacity assessment later determined that the employee had a Grade 9 disability.


2. The Employee Subsequently Resigned

In January 2022, the employee signed a resignation application and stated that the resignation was for personal reasons.

The employee later took the position that the employer had unlawfully terminated the employment relationship.

This created a central factual and legal issue: whether the employment relationship ended through the employee's voluntary resignation or through an employer-initiated termination.


Legal Strategy

Legal IssueLegal Strategy
Nature of employment terminationEstablish that the employee voluntarily resigned rather than being dismissed
Wrongful termination compensationChallenge the legal basis for treating the resignation as an unlawful employer termination
Subsequent wage claimEstablish that wages could not be claimed on the basis of an employment relationship that had already ended through resignation
Work injury benefitsDistinguish different statutory work injury benefits and their respective payment mechanisms
Liability between companiesClarify the respective legal responsibilities of A Company and B Company
Medical benefitDistinguish the benefit subject to the social insurance procedure from claims properly determined in the employment litigation

Outcome

The Shenzhen Longgang District People's Court confirmed that the employee had voluntarily resigned for personal reasons.

As a result, the court rejected the employee's claims for:

  • Compensation for alleged wrongful termination;
  • The claimed subsequent wages.

The court also determined that the one-off disability employment benefit was payable by B Company, with A Company bearing joint and several liability.

The claim for the one-off work injury medical benefit was not dealt with as a direct payment obligation in the case because it was subject to the applicable social insurance procedure.

Overall, the court's decision substantially limited the companies' exposure by rejecting the employee's principal claims concerning alleged unlawful termination and subsequent wages.


Why This Case Matters

Work injury disputes can become significantly more complicated when an employee later challenges the circumstances in which the employment relationship ended.

For employers and human resources service companies, it is important to distinguish between:

  • A genuine employer-initiated termination;
  • A voluntary resignation by the employee;
  • Statutory work injury benefits;
  • Benefits processed through social insurance;
  • Liabilities arising between multiple companies involved in the employment arrangement.

This case illustrates that a recognised work injury does not, by itself, establish that an employer unlawfully terminated the employment relationship.

The circumstances and documentation surrounding the employee's departure remain critical to determining the nature of the termination and the resulting legal liabilities.


Frequently Asked Questions

Can an employee claim wrongful termination after submitting a resignation?

Not automatically.

If the court determines that the employee voluntarily resigned rather than being dismissed by the employer, a claim for statutory compensation for unlawful termination may not be supported.

Does a work injury automatically make an employer liable for wrongful termination?

No.

Work injury liability and termination liability are separate legal issues. The existence of a work injury does not by itself establish that the employer unlawfully terminated the employment relationship.

Can different companies be responsible for different work injury benefits?

Yes.

Where multiple companies are involved, the applicable employment relationship, work injury insurance arrangements and statutory responsibilities must be examined to determine which entity bears each obligation.

How should employers handle a resignation after a work injury?

Employers should carefully document the employee's resignation, the stated reason for departure, relevant employment records, and the handling of statutory work injury benefits.

The legal consequences depend on the specific circumstances and applicable law.


Key Takeaways

  • A voluntary resignation can be decisive when defending a subsequent wrongful termination claim.
  • Work injury status and unlawful termination are separate legal questions.
  • Different work injury benefits may have different responsible parties and payment procedures.
  • HR service companies should carefully document employee departures and work injury arrangements.
  • Where multiple companies are involved, liability should be analysed separately rather than assumed to be joint.

About the Author

Yu Yuting
Partner | NEO-ARK Law Firm

Lawyer Yu focuses on foreign-related litigation, cross-border disputes, commercial matters, and legal services for overseas individuals and businesses in China.

Email: [email protected]

About NEO-ARK Law Firm

NEO-ARK Law Firm provides legal services in foreign-related litigation, commercial disputes, family law, and cross-border legal matters, assisting both international and domestic clients throughout China.

2026-08-15

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