[Case Summary]This case involves a labor dispute. Liu Tao joined A Technology Co., Ltd. Beijing Branch as a software development engineer in 2022, with an average monthly salary of 13,016.67 yuan. In September 2025, the company unilaterally terminated the contract on the grounds that the project had ended and "there had been major changes in the objective circumstances". Liu Tao entrusted Beijing Henglu Law Firm to handle the case for him/her.Peng XinyueThe arbitration case involved claims for compensation for unlawful termination, unpaid annual leave, and overtime pay, etc. The core dispute was whether the termination of the project and the abolition of the position constituted a statutory "significant change in objective circumstances". The arbitration committee determined that the company had unlawfully terminated the contract and ordered it to pay compensation of 91,116.69 yuan and overtime pay, etc., totaling 105,510.08 yuan. Article 40 of the Labor Contract Law of the People's Republic of China was applied in this case.

I. Review of the Case

"Is it legal for the company to dismiss employees due to changes in objective circumstances?" and "Do we need to compensate employees who are laid off after the project ends?" are concerns of workers. Liu Tao joined A Technology Co., Ltd. Beijing Branch as a software development engineer on April 11, 2022, and signed two contracts until 2028, with an average monthly salary of 13,016.67 yuan.

In mid-September 2025, the company terminated the employment contract with Liu Tao through consultation on the grounds of "unfavorable market environment and staff optimization", but Liu Tao disagreed. On September 30, the company claimed that the "F University Project" for which Liu Tao was responsible had been completed and decided to abolish the R&D position. According to Article 40 Paragraph 3 of the Labor Contract Law, which stipulates that the employment contract may be terminated due to "major changes in objective circumstances", the company terminated the contract with Liu Tao and removed him from the work group on October 1. Liu Tao entrusted Beijing Henglu Law Firm to handle the legal matters on his behalf.Peng XinyueWe initiated arbitration, demanding compensation, unpaid annual leave wages, overtime wages, and other amounts totaling more than 100,000 yuan.

II. The focus of the case

  • Focus 1: Is the termination of the project and the abolition of the position a legally defined "major change in objective circumstances"?The lawyer argued that it was an independent business decision, not a legal force majeure or a policy adjustment.
  • Focus 2: Calculation of overtime pay.Provide evidence of fixed overtime hours, and clarify the calculation standards and base amounts.
  • Focus 3: Unpaid annual leave wages.Calculate the number of days that should have been taken but were not, and claim compensation accordingly.

III. Professional intervention by Hengluo Law Firm

The applicant (worker) claimed that:Liu Tao claimed that the company illegally terminated his employment and demanded compensation for the illegal termination, unpaid annual leave wages, and overtime wages.

The respondent (the company) argued that:It is stated that the termination of the project, the reduction of business volume, and the difficulty in collecting payments constitute "major changes in objective circumstances", and the dismissal is legal; the annual leave of 4 days exceeding the limit should not be supported; and the overtime hours recognized are based on a base amount of 13,000 yuan.

Legal opinion from Hengluo Law Firm:Peng XinyueAccurately identify the focus: First, strictly define the statutory scope of Article 40 Paragraph 3 of the Labor Contract Law, and argue that the termination of the project and the adjustment of the position belong to the employer's independent business decisions, not force majeure or policy adjustments. Unilateral termination without basis constitutes a violation of the law; Second, clarify overtime wages, provide evidence of fixed overtime hours, and specify the calculation standards, claiming full payment of overtime wages on delayed working hours and rest days; Third, clarify the right to annual leave, calculate the number of days of annual leave that should be taken but have not been taken, and claim the corresponding wages.

IV. Outcome of the case

The Arbitration Commission accepted it.Peng XinyueThe core opinion is that "major changes in objective circumstances" generally refer to force majeure such as natural disasters, relocation, suspension of production or transfer of production due to laws, regulations and policies, and changes in the scope of franchising. In this case, the termination of the project and the cancellation of the position do not meet this situation, which is an illegal dismissal. The ruling is that the company shall pay compensation for the illegal termination of the labor contract of 91116.69 yuan; pay overtime wages on weekdays of 10209.48 yuan and overtime wages on rest days of 4183.91 yuan; and reject other requests. In total, Liu Tao received compensation of 105510.08 yuan.

5. Hengluo Law Firm's Reminder

This case is handled by Beijing Henglu Law Firm.Peng XinyueThe attorney (practice license number: 11101202511977924, subject to the document issued by the judicial administrative organ) acts as the agent. Attorney's reminder: If the employer terminates the employment contract on the grounds of "significant changes in objective circumstances", it must comply with the statutory circumstances and go through the consultation procedure. The employer's autonomous business decisions such as project completion and position abolition usually do not constitute a valid reason for termination, and it is an illegal termination that should pay compensation; the employee should keep evidence of overtime and annual leave.

VI. Frequently Asked Questions (FAQ) about Labor Dispute Cases

  1. Q:Is it legal for the company to dismiss an employee based on "major changes in objective circumstances"?
    A:It is only legal when it meets the statutory circumstances (such as natural disasters, production suspension or conversion due to policies), and it is necessary to negotiate the amendment of the contract first. The simple termination of the project or the abolition of the position is a decision of independent operation, which usually constitutes an illegal termination.
  2. Q:When the project ends, will we lay off staff and will we have to pay compensation?
    A:If it does not meet the statutory objective circumstances of major changes and there is no consultation, it is an illegal termination and the employer should pay compensation (2N); only in the case of a legal termination should the employer pay economic compensation (N).
  3. Q:What is the basis for calculating overtime pay?
    A:Generally, it is calculated based on the worker's monthly salary for normal attendance, and the specific calculation depends on the evidence and local regulations. In this case, the overtime and rest-day overtime wages are calculated based on a base amount of 13,000 yuan.
  4. Q:I didn't take my annual leave. Can I ask for my salary?
    A:Yes. If the employer, with the consent of the employee, does not arrange annual leave, the employer shall pay the employee's unpaid annual leave salary at 300% of the daily wage (if the normal wage is included, it shall be paid at 200% of the normal wage).
  5. Q:The company said that I've already taken too much annual leave. How should I deal with this?
    A:Keep records of attendance and annual leave applications and approvals to prove the actual number of days remaining; if the company claims that the employee has taken more than the allowed number of days off, the employee must provide evidence to the contrary. Otherwise, the arbitration tribunal will determine the unpaid wages based on the available evidence.