Llinks Corporate Compliance & Legal Alert (December 2025)

Spotlight on News

1. Supreme People's Court released typical civil cases involving the employer's compensation liability for unjustified job offer revocation.

The Supreme People's Court of China released five typical civil cases on 16 December 2025. Among the five cases, case 2 which reflects a labor dispute over "an employer rescinding a job offer", merits particular attention.

In this case, the employee Mr. Zhang submitted his resignation to his former employer and completed the resignation procedures the day after receiving an "Offer Letter" from a technology company. Subsequently, the technology company informed Mr. Zhang that the offer was cancelled due to financial difficulties. Mr. Zhang then filed a lawsuit seeking 60,000 RMB in damages. The court held that during the process of forming a labor contract, employees are in a relatively disadvantaged position and generally bear higher risks than employers, who consequently have an obligation to negotiate in good faith. The court found that Mr. Zhang had reasonable grounds to believe the technology company would establish an employment relationship with him and resigned from his former job based on that belief. The technology company's withdrawal of the offer without just causes violated the principle of good faith and should bear liability for fault in contract negotiation. Considering factors such as Mr. Zhang's previous income level, a reasonable period for finding new employment, and the degree of fault on the part of the technology company, the court ordered the technology company to pay 20,000 RMB in compensation.

This judgment unequivocally establishes that an employer's recruitment and hiring practices are not only regulated by labor laws and regulations but are also strictly bound by the principle of good faith under the Civil Code. In legal terms, a Letter of Employment constitutes an offer. When an employee, in reliance on this offer, undertakes significant preparations, forfeits existing job opportunities, and thereby acquires reliance interests, the employer's unilateral revocation of the offer without just cause constitutes a violation of the fundamental civil law principle of good faith. The compensation of 20,000 RMB is not a mere substitute for lost wages but the result of the court's comprehensive deliberation. It encompasses the employee's potential income loss during a reasonable job-search period, possible costs incurred in preparing for the new position, and reflects the judiciary's negative assessment of the employer's breach of good faith obligations. This sentencing benchmark sends a clear signal to the market: an employer's act of rescinding an offer without proper justification will be subject to legal restraint.

2. AMAC issued Guidelines on Performance Appraisal of Fund Management Companies (Draft for Comment), improving long-term incentive and restraint mechanisms.

On 6 December 2025, the Asset Management Association of China (AMAC) issued the revised Guidelines for Performance Appraisal and Compensation Management of Fund Management Companies, which has been renamed as the Guidelines for Performance Appraisal Management of Fund Management Companies (Draft for Comment) (hereinafter referred to as the "Guidelines") and distributed to fund managers. The Guidelines consist of 7 chapters and 32 articles, with the main revisions as follows: clarifying the compensation management requirements for fund companies; reforming the performance appraisal mechanisms of fund companies; establishing mechanisms to align interests with investors; and specifying requirements for indicator calculation methods, personnel scope, and other related aspects

The Guidelines primarily guide fund managers in establishing and improving a performance appraisal and compensation management system centered on fund investment returns. For example, regarding fund manager compensation, if a fund's performance over the past three years falls more than ten percentage points below its performance benchmark and the fund's profit margin is negative, the fund manager's performance-based compensation should see a significant year-on-year decline, with the reduction being no less than 30%. Simultaneously, the Guidelines require fund companies to comprehensively establish an appraisal system centered on fund investment returns, incorporating indicators such as actual product gains/losses and comparisons against performance benchmarks. It explicitly states that medium-to-long-term indicators covering a period of three years or more should account for no less than 80% of the overall assessment. Furthermore, the Guidelines clearly stipulate that fund companies should establish a total compensation management mechanism, optimize their internal compensation distribution structure, and extend the scope of personnel subject to deferred payment of no less than 40% of their compensation to include the chairman of the board, senior executives, heads of major business departments, heads of branches, and core business personnel.

As a pivotal institutional arrangement marking the public fund industry's entry into a phase of high-quality transformation, the Guidelines systematically strengthen the linkage between the compensation of fund industry professionals and fund performance. Through a series of quantitative indicators and binding requirements, and by optimizing compensation structures and establishing long-term incentive and restraint mechanisms, the Guidelines steer fund management companies to deeply align employee incentives with the long-term performance of their funds, thereby fostering the stable operation of fund companies and advancing the high-quality development of the public fund industry

Legislation Updates

1. Supreme People's Court promulgated Revised Provisions on Causes of Action in Civil Cases to cover disputes of new employment forms.

On December 17, 2025, the Supreme People's Court officially issued the Decision on Amending the Provisions on Causes of Action in Civil Cases(Fa [2025] No. 226) and the Notice on Issuing the Revised Provisions on Causes of Action in Civil Cases (Fa [2025] No. 227), marking the third revision of the Provisions on Causes of Action in Civil Cases. The aforementioned documents were reviewed and adopted at the 1960th meeting of the Judicial Committee of the Supreme People's Court on December 4, 2025, and will come into effect on January 1, 2026. The revised Provisions on Causes of Action in Civil Cases (hereinafter referred to as the "Provisions") comprise a total of 1,055 causes of action, including 12 first-level causes of action, 59 second-level causes of action, 514 third-level causes of action, and 470 fourth-level causes of action.

The Provisions adhere to three core principles—compliance, necessity, and practicality—and, in light of evolving socio-economic realities, the Provisions introduce a series of new cause-of-action categories. For instance, under "Labor Disputes", new categories such as "disputes involving employment in new employment forms" and "disputes involving employees beyond retirement age" have been added. In the "Corporate Disputes" section, specific types like "disputes over removal of company registration (or filings)" are introduced, and "shareholder capital contribution disputes" are further subdivided into: "(1) failure to fully fulfill capital contribution obligations," "(2) withdrawal of contributed capital," and "(3) accelerated maturity of shareholder capital contributions." These updates precisely address the growing complexity of employment relationships together with corporate governance and shareholder liability disputes, providing clear guidelines for case filing and judgement.

This revision is an important initiative by the Supreme People's Court to provide high-quality judicial services that support the high-quality development of the economy and society. It holds significant practical importance for facilitating civil litigation for parties, standardizing civil case filing, adjudication, and judicial statistics in the people's courts, and enhancing the quality and efficiency of civil adjudication work.

2. SASAC issued Measures for the Investigation of Responsibility for Illegal Operation and Investment in Central State-Owned Enterprises, specifying 98 punishable scenarios.

On December 18, 2025, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) issued the Measures for the Investigation of Responsibility for Illegal Operation and Investment in Central Enterprises (hereinafter referred to as the "Measures"). The Measures specify the responsibilities that relevant management personnel in central enterprises shall bear for losses of state-owned assets or other adverse consequences caused by violations, failure to perform duties, or incorrect performance of duties. These provisions cover 13 areas, including financial business, scientific and technological innovation, fixed asset investment, and equity investment, encompassing 98 specific scenarios.

The Measures clearly define the classification criteria for the amount of asset losses resulting from illegal business operations and investments: losses below 5 million yuan are classified as minor asset losses; losses of 5 million yuan or more but below 50 million yuan are classified as significant asset losses; and losses of 50 million yuan or more are classified as major asset losses. The classification of other adverse consequences is divided into three categories: minor adverse consequences, significant adverse consequences, and major adverse consequences. These correspond respectively to violations that are relatively minor, relatively serious, or severe in nature, and their impacts are primarily at three levels: the enterprise involved, the industry or central enterprises as a whole, and society or the nation.

Additionally, Article 36 of the Measures introduces a disclaimer clause for the first time. This Article applies under the premise that the relevant personnel have adhered to the prescribed procedures, acted diligently and responsibly, did not pursue personal gain, and did not cause significant losses or severe adverse consequences. While reinforcing regulatory accountability, this clause addresses the previous gap in similar management regulations concerning fault tolerance in the performance of duties. In practical terms, this Article also provides guidance on the related processes of evidence provision and determination: when individuals claim the applicability of the disclaimer clause, they must submit materials that demonstrate their completion of the required procedures and fulfillment of their duty of diligence, such as work approval records, documentation of the duty performance process, and communication records related to the work. Meanwhile, the authorities responsible for determination must assess whether all conditions for exemption are met by considering the specific context of the incident as well as the actual extent of the losses or impact.

Case Study

1. Supreme People's Court Releases Representative Cases: Dismissal for sexual harassment under company rules shall not be regarded unlawful.

• Facts

Wu was employed by a food company in Guangdong as a restaurant waiter, and both parties had signed a labor contract. The company's Employee Handbook stipulated specific content prohibiting sexual harassment and explicitly defined sexual harassment as a serious violation of company rules and regulations, which could lead to termination of employment. Wu had signed a declaration letter confirming that he had read and understood all the contents of the Employee Handbook. Interview records with five employees indicated that Wu had engaged in inappropriate behavior toward female employees. In the interview record, Wu himself admitted that during a break, he rested his head on female employee Chen, for which he was scolded by Chen. The Guangdong food company terminated its labor relationship with Wu on the grounds that Wu had repeatedly engaged in sexual harassment toward female employees during his employment, violating the relevant provisions of the company's Employee Handbook. Wu applied for arbitration, claiming that the company had unlawfully terminated the labor relationship and requested compensation for damages and unemployment position subsidies. The arbitration ruling rejected all of Wu's claims. Dissatisfied, Wu filed a lawsuit with the court, requesting the Guangdong food company to compensate him with three months' salary, one month's economic compensation, a position subsidy of 3,200 yuan for middle-aged and elderly employees, and interest of 650 yuan.

• Judge's Viewpoint

The court held that the Civil Code explicitly prohibits sexual harassment, which not only infringes upon the personal rights of workers but also undermines a safe and civilized working environment, seriously deviating from the core socialist values. Where a worker engages in sexual harassment in the workplace, the employer may lawfully terminate the labor relationship. In this case, the evidence provided by the Guangdong food company, including interviews with female employees, video footage, and Wu's own interview record, corroborated each other and could confirm that Wu had engaged in multiple instances of sexual harassment, constituting a serious violation of the company's rules and regulations. Accordingly, the company's termination of the labor relationship with Wu constituted lawful dismissal, and no compensation for unlawful termination of the labor contract needed to be paid to Wu. The court ultimately ruled to dismiss all of Wu's claims.

.2. Shenzhen Intermediate People's Court: Rehired employees with unchanged job position and responsibilities are not obliged for a second probation.

• Facts

In July 2023, Chen joined Company A as a "Crawler Engineer", signing a one-year labor contract with a twomonth probation period. His probation salary was set at 12,000 yuan per month, increasing to 15,000 yuan per month upon becoming a regular employee. Later, due to disagreements over project timelines and other issues, the parties failed to reach a consensus, and Chen resigned. Subsequently, Chen did not find other employment, while Company A faced a staff shortage, leading to Chen being rehired. In December 2023, Chen rejoined Company A as a "PHP Engineer", signing another one-year labor contract with a two-month probation period. The salary terms remained the same as before, and his job responsibilities were substantially identical to those of his previous role.

In May 2024, Chen requested the termination of the labor contract and filed an arbitration application with the labor arbitration commission. He claimed that the company had unlawfully stipulated probation periods and requested Company A to pay 30,000 yuan in compensation. The labor arbitration commission ruled in favor of Chen's request. Dissatisfied with the arbitration result, Company A filed a lawsuit with the court, arguing that Chen had joined the company as a "Crawler Engineer" and later as a "PHP Engineer", and that stipulating two probation periods was not unlawful. The company requested a court ruling exempting it from paying compensation.

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