A Shanghai-based fitness company implemented a "department competition" scheme, mandating weekly contributions of 500 yuan from employees, with the worst-performing department losing their money entirely. A manager who refused to pay was demoted and had his salary cut, leading to his resignation. The court has now ruled definitively: the company must return the money.
Mandatory Competition: 500 Yuan Weekly, Lost if Performance Lags
The fitness company where Mr. Wang worked operated three city-center outlets. Each outlet had departments for personal training, sales, and swimming. The plaintiff in this case, Mr. Wang, was the manager of the personal training department at one outlet. In 2024, the company formally rolled out an inter-outlet, same-department performance competition and incentive system. It stipulated that the corresponding departments across the three outlets each contribute 500 yuan weekly to form a 1,500 yuan prize pool. Funds were distributed weekly based on performance rankings: first place received 1,000 yuan, second place received 500 yuan, and third place received nothing, effectively incurring a 500 yuan weekly loss.
As Mr. Wang's outlet was smaller and consistently ranked last in performance, his team was effectively "losing 500 yuan net" almost every week. Mr. Wang bore this cost himself and did not pass it on to his subordinate employees.
Court Verdict: The Money Must Be Returned
Refusal to Pay Leads to Demotion, Pay Cut, and Resignation
In September 2024, when the company again demanded the competition fee, Mr. Wang explicitly refused and stated he would no longer participate. The company, however, deemed this "non-compliance with management systems" and directly demoted him and reduced his salary. Left with no alternative, Mr. Wang resigned in December of that year. He subsequently applied for arbitration with the Songjiang District Labor Arbitration Commission, demanding the company return the competition fees and compensate for the wage shortfall caused by the salary reduction. The arbitration commission ruled in Mr. Wang's favor. The company, dissatisfied, filed a lawsuit in court.
Court Judgment: Competition Fee System Illegal, Company Must Compensate
The Songjiang District People's Court, after hearing the case, determined that the competition fee system essentially constituted forced employee fundraising for rewards and penalties. This violates the mandatory provision in the Labor Law that "employers must not collect property from workers." The court ultimately ruled that, after deducting any competition rewards Mr. Wang had already received, the company must return his remaining actual contributions, totaling approximately 8,000 yuan, and compensate for the salary shortfall caused by the pay cut.
Sijing People's Tribunal Deputy Chief Judge Sha Sha stated that the court does not reject an employer's right to autonomous management, but incentive systems must be conducted within reasonable bounds and forms, hoping for healthy development for both labor and management.
Remember, Such "Systems" Are Illegal
Companies may conduct performance competitions, but they cannot force employees to contribute money. Demoting or cutting the salary of an employee who refuses to pay on grounds of "non-compliance with management" is unlawful. If encountering a similar situation, retain evidence such as deduction records and chat logs, and apply for labor arbitration or file a lawsuit.
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