Does a receipt for payments upon termination signed by an employee containing words “full and final settlement of any claims against my employer” bar him from bringing a claim against the employer?
Introduction
Section 70 (Contracting out) of the Employment Ordinance (Cap. 57)
(“EO”) provides:
“Any term of
an employment contract which purports to extinguish or reduce any right,
benefit or protection conferred upon an employee by this Ordinance shall be
void.”
It is settled law that section 70 only strikes down any term of a
contract of employment that seeks to do what is prohibited. Section 70 has no application to composition agreement or settlement
agreement, which is not a term of an employment contract. See Chiu Wing
Hang and Others v B. G. Lighting Co. Ltd. and Another HCLA67/1999.[i] Likewise, section
70 simply does not apply to invalidate an ad hoc agreement, arrived
at by the employer and employee not at the beginning but only at the time when
one of them wanted to terminate the contract of employment – which is common
enough situation, and that ad hoc agreement is not a contract of employment. See
Kao Lee & Yip (A Firm) v Lau Wing & Anor [2007] HKCU 1128.[ii]
It is also common for employers to provide
leaving employees with a receipt for payments upon termination (or completion
of employment contract) for the employee to sign off, where the employee will confirm he has checked the employer’s
calculation of final payments, the calculation is correct and he has received final
payments. Such receipt may also seek the leaving employee to confirm there is “no other outstanding amount owing to me by the employer” and, in some cases, “full and final settlement of any claims
against my employer”.
Does such a receipt for payments upon
termination signed off by an employee bar him from bringing a claim against the
employer at the Labour Tribunal? Is it void under section 70? Or section 70 has
no application because it is a subsequent ad hoc agreement or settlement
agreement that is not a contract of employment?
In a recent judgment
in Dock Brian v Pacific Gourmet
Holdings Limited [2022] HKCFI 444, the Court of First
Instance (“CFI”) examined some of
these issues.
Background
The employee claimant, Mr Brian Dock (“Employee”), was employed by employer
defendant, Pacific Gourmet Holdings Limited (“Employer”) as a member of food service staff from 16 December 2016 until his employment was terminated on
30 April 2021. After termination, he lodged a claim with the Labour
Tribunal claiming against the Employer a sum of approximately HK$142,700 under
the EO.
The Employee claims that he was dismissed
because in March 2021 he refused to sign an agreement to increase his work
hours from 9 to 10. On 1 April 2021, he was given a one-month notice of the
termination of employment. No reason for his termination was given. He claims
that he was dismissed with no valid reason[iii]
or by reason of redundancy which entitled him to severance payment, terminal
payment and/or monetary compensation under the EO.
The Employer gave the Employee a pay
cheque for his last month’s salary and accrued holiday pay, and asked him to sign a document dated
28 April 2021 (“Document”),
which he did sign. The Document stated that:
“I checked the
above calculation and hereby confirmed the final payment of my remuneration is
correct and also confirmed there is no other outstanding amount owing to me by
the company.”
The Employee claims that the Document was
a waiver that sought to extinguish his rights under the EO and is void under section 70.
The Tribunal pointed out that the Document
was prima face a valid settlement
agreement and adjourned the Employee’s claim sine die for want of jurisdiction. The Tribunal’s rationale was (1)
the Document, being a valid settlement agreement, has
the effect of preventing the Employee from claiming under the EO, such that (2)
the Document would have to be declared void and set aside by a higher court first
before the Employee could proceed with his claim in the Tribunal, and that (3)
the Tribunal has no jurisdiction to declare a settlement agreement void or to
set it aside.
In reaching its decision,
the Tribunal relied on the CFI’s Labour Tribunal appeal decisions in Minarni v Ho Ho Fan Ivy [2018]
HKCFI 852 [iv]
and Poon Kwok Leung Lenny v Swett
(China) Limited HCLA 19/2012, unreported, 19 December 2012.[v]
The Employee appealed
to the CFI against the Tribunal’s decision.
CFI’s findings
and decision
The Employee relied on two main errors of
law, namely (1) the Tribunal erred in ruling that it had no jurisdiction over the claim, and (2) the Tribunal
erred in ruling that the Document, unless set aside, could defeat the Employee’s
claim under the EO.
The Tribunal’s jurisdiction
The Employee’s claim for a monetary award comprised
of three heads: (1) severance payment of HK$65,589.04, (2) terminal
payment of HK$65,589.04 or to be assessed, and (3) monetary compensation
of HK$77,100 as an alternative to terminal payment.
Head (1) is on the basis that the
Employee was dismissed by reason of redundancy which would entitle him to a severance payment. This head is based on
Part VA (Severance Payments), sections 31B(1)(a) and 31G of the EO.
Heads (2) and (3) are on the basis
that he was dismissed other than for a valid reason which would entitle him to a terminal
payment and, if not, to monetary compensation. These two heads are based on
Part VIA (Employment Protection), sections 32A(1)(c), 32M, 32O and
32P of the EO.
The CFI pointed out that claims based on
Parts VA and VIA of the EO are expressly listed in the Schedule to the Labour Tribunal Ordinance (Cap. 25) (“LTO”) and so on the face of it fall
within the Tribunal’s jurisdiction under sections 7(1) and 7(2) of the LTO.
Paragraphs 4 and 7 of the Schedule provide that:
“4. Any question as to – (a) the right of
an employee to severance payment under Part VA of the Employment Ordinance
(Cap. 57); or (b) the
amount of such payment, other than a claim specified in the Schedule to the
Minor Employment Claims Adjudication Board Ordinance (Cap. 453).
…
7. A
claim for remedies under Part VIA of the Employment Ordinance
(Cap. 57).” (emphasis added)
However, it is settled that claims can be
excluded on certain bases, including that the relief sought includes
non-monetary awards such as injunctive relief.
The merits of the appeal
The CFI was of the view that the starting
point is that the Tribunal has jurisdiction over “any question as to … the right of an employee to severance payment
under Part VA of the [EO]” and over “a claim for remedies under
Part VIA of the [EO]”.
In this case, the Employee sought monetary
relief under Parts VA and VIA of the EO. He did not seek (and he does not
need to seek) a declaration that the Document was void or that it be set aside.
Whilst the Employee referenced the Document and said that it should not have
the effect of defeating his claim under the EO, this was a reply in
anticipation of one part of the defence that the Employer had already mentioned
in correspondence.
In view of such a possible defence, the Tribunal
will have to decide if the defence could be made out. This is part and parcel
of the wider inquiry of whether the Employee’s claim under the EO could ultimately succeed. The CFI pointed out that the
Tribunal acts inquisitorially, and whether the claim has somehow been “settled”
or is otherwise barred is simply one of the “any question[s]” as to the
Employee’s right to a severance payment under Part VA, and an issue
arising on his claim for remedies under Part VIA of the EO. Such a
question might arise on the claim is not same as saying that the Employee had
to seek the relief of setting aside the Document or declare it void.
There is also the prior question as to
what was the proper effect of the Document. Though the Tribunal described it as
a “settlement agreement”, there was no analysis as to why it might be described as settling or compromising a claim, or
why it amounts to a waiver of a claim, and if so what claim – even before
considering whether that was legally possible under the EO (and in particular
in light of section 70).
The CFI agreed that there was an error of
law. The CFI took the view that the Tribunal does have jurisdiction to hear the
claim, and in the exercise of that jurisdiction, there are necessary questions
which relate to the proper effect of the Document that must be determined. The
CFI allowed the appeal and remitted the Employee’s claim back to the Tribunal
for re-consideration and determination.
As to the two authorities (Minarni and Poon Kwok Leung) relied upon by the Tribunal to support its
decision, the CFI took the view that they were wrongly decided in accordance
with the above analysis.
Takeaway
In Dock
Brian, the CFI made it clear that Minarni
and Poon Kwok Leung were
wrongly decided. If Dock Brian
will be followed by the courts, then a document signed by the employee, which on the face of it, contains an agreement
between the employer and employee for the settlement of all the employee’s
claims against the employer arising from the termination of the employee’s
contract of employment will no longer in itself bar the employee from bringing
a claim in the Labour Tribunal – the Tribunal does have jurisdiction to hear
the claim and determine the proper effect of that document. It will not be
necessary for the employee to have the document declared void and set aside by
a higher court before he can proceed with his claim in the Tribunal.
The implications can be wide, since the
Tribunal does not only have jurisdiction on “any question as to the employee’s
right to a severance payment under Part VA”, and “an issue arising on his
claim for remedies under Part VIA of the EO” (which are the basis of the
Employee’s claim in Dock Brian),
it also has jurisdiction on a claim for a sum of money, whether liquidated or
unliquidated, which arises from “the breach of a term, whether express or
implied, of a contract of employment”[vi]
or “the failure of a person to comply with the provisions of the EO”.[vii]
It remains the case that section 70 of the
EO has no application to compromise agreement, settlement agreement or ad hoc
agreement arrived at by the employer and employee at the time when the parties
want to terminate the employment contract. However, for a document that simply confirms the calculations rather than settle or waive some
other claim, which is not mentioned and perhaps not even yet raised, and if it
has not provided any fresh consideration and purports to extinguish the
employee’s rights under the EO, it would be void under section 70.
If employers want to ensure a departing
employee will not be making any claims against them, the employers should
consider entering into an agreement with the employee concerned, where the
employee agrees to waive and release all claims that he may have against the employer. The agreement should be properly drafted, clearly
state the terms of the settlement and properly executed by the employer,
employee and (in some cases) other parties concerned. It is strongly
recommended that legal advice should be obtained in preparing the agreement,
and when in doubt, it is always prudent to speak to an employment lawyer.
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Important: The law and procedure on
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complicated. This article is just a very general outline for reference and
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Published by ONC Lawyers © 2022 |
[i] In Chiu
Wing Hang and Others v B. G. Lighting Co. Ltd. and Another (per Deputy
Judge To at p.10 of the English translation of the judgment):
“Effect of Section 70:
Mr
Lau submitted that even if the July agreement is supported by consideration, it
is void because of section 70 of the Employment Ordinance. His argument is that
the respondents were monthly rated workers and were entitled to be paid their
wages within 7 days of the last day of the wage period in accordance with
section 23. The July agreement is void as it purports to take away the right to
payment of wages within 7 days of the wage period. Section 70 provides:
“Any term of a contract of employment which
purports to extinguish or reduce any right, benefit or protection conferred
upon the employee by this Ordinance shall be void.”
The July agreement is not a term of a contract of
employment. It therefore has no application to the July agreement. Wages were
due 7 days after the last day of the wage period. They were due and outstanding
at various times before the July agreement. It was only when they were due and
liabilities accrued that the parties agreed to discharge that liability by the
arrangements in the July agreement. The section therefore has no application to
the July agreement, whether in relation to the employee’s rights under section
23 or under section 10A which I shall next turn to.”
[ii] In Kao Lee & Yip (A Firm) v Lau Wing &
Anor, the Court of Appeal (per Hon A Cheung J at §59):
“Lastly, section 70 only strikes down “[a]ny term of a contract of employment” which seeks to do what is
prohibited. An ad hoc
agreement, arrived at by the employer and employee not at the beginning but
only at the time when one of them wanted to terminate the contract of
employment by an agreement for payment in lieu of notice – which is a common
enough situation, is not a contract of employment.
It is a different and subsequent contract to terminate the prior contract of
employment. Section 70 simply does not apply to invalidate such an agreement.”
[iii] An employee employed
under a continuous contract for a period of not less than 24 months
may make a claim for remedies against an employer for unreasonable dismissal if
he is dismissed other than for a valid reason as specified in the EO.
[iv] In Minarni v Ho Ho Fan Ivy, upon payment and receipt of her
terminal payments, the claimant employee (a domestic helper) and the defendant
employer signed a document that appeared to be a printed standard form of the
employment agency for use on the termination of a foreign domestic helper’s
contract but which contained the following handwritten words: “I acknowledge recipient (sic) the above
listed payment as full and final settlement of any claims against my employer.”
[v] In Poon Kwok Leung Lenny v Swett (China) Limited, the claimant
employee signed a document that reads, among other things, “In signing this receipt I (潘先生) agree that I have no further claims
financial or otherwise, in respect of any such previous contract against the
Company.”
[vi] Paragraph 1(a) of the Schedule to LTO.
[vii] Paragraph 1(c) of the Schedule to LTO.