Introduction

When an employee suffers an injury from an accident during the course of employment, it is not uncommon that an employer will reach out to the injured employee and offer to pay some compensation for settlement. Is a settlement agreement binding on both parties and resolve the employees’ compensation claim once and for all? Can an employee pursue further compensation against the employer after a settlement agreement is signed?  In Leung Siu Kam v 梁國強 & ANOR [2022] 1 HKC 81, the District Court (the “Court”) demonstrates how an employee’s compensation claim shall be determined when the parties have signed a settlement agreement.

Background

In Leung Siu Kam v 梁國強 & ANOR, the injured employee (the “Applicant”) was employed as a chef of the employer (the “1^st Respondent”) who operated a restaurant. When the Applicant was at the kitchen preparing food with a knife, he accidentally stepped on some food debris on the floor and fell. The knife that he held caused a 3-4 cm cut wound to his left palm. The Applicant sought compensation against the 1st Respondent under Sections 9 and 10 of the Employee’s Compensation Ordinance (Cap 282) (the “ECO”).

The 1^st Respondent had not entered any appearance in these proceedings, except for sending a letter to the Applicant’s solicitors informing them that a full and final settlement had been reached between the parties. It was alleged that the Applicant had agreed to settle his claim for employees’ compensation in the sum of HK$59,980, as proved by a written settlement agreement signed by the parties (the “Settlement Agreement”). As the 1^st Respondent did not enter any appearance, the Employees Compensation Assistance Fund Board was joined as the 2^nd Respondent to assist the Court.

Section 31 of the ECO

Section 31 of the ECO provides that “Any contract or agreement… whereby an employee relinquishes any right to compensation from an employer for personal injury by accident arising out of and in the course of his employment, shall, subject to subsection (2), be null and void in so far as it purports to remove or reduce the liability of any person to pay compensation under the provisions of this Ordinance”.

Section 31(2) of the ECO allows the employee to enter into an agreement with the employer to reduce or give up the right to compensation in respect of accident which is caused or contributed to by the old age or serious physical defect or infirmity, but such agreement is only effective if the Commissioner for Labour is satisfied that it is fair and reasonable (ECO s. 31(3)).

Effect of Section 31(1) of the ECO?

In Shiu Ying Kwong v Po On [1990] HKDCLR 15, it was held that s31(1) of the ECO does not disable the parties from coming to a settlement whereby the employee obtains compensation in an amount in excess of the minimum, but conceivably less than he or she might obtain after a full hearing.

Therefore, so long as the agreed amount is not less than the statutory minimum or that which would be due to the employee under the ECO on the basis of the facts agreed between the parties, the settlement agreement will not be null and void and regarded as purporting to remove or reduce the liability of any person to pay compensation under Section 31(1) of the ECO.

Issues

The 2^nd Respondent argued that by reason of the Settlement Agreement, no further compensation under the ECO is payable. The Applicant argues that the Settlement Agreement is null and void under Section 31(1) of the ECO. The Court considered that in order to decide whether the Settlement Agreement is null and void under Section 31(1) of the ECO, the Court will have to assess the potential minimum compensation payable to the Applicant.

The potential minimum compensation

According to the medical evidence, the Applicant had suffered a permanent loss of earning capacity ranging from 1.5% to 4%. The Court adopted 1.5% loss of earning capacity to access the minimum the Applicant could be awarded under Section 9 of the ECO.

Regarding the periodical payment under Section 10 of the ECO, the Applicant was found to have been working on 25 March 2017 according to the Settlement Agreement and the Court assessed the minimum potential payment on the basis that the Applicant only required sick leave from the date of accident to 24 March 2017.

After arriving at the potential minimum compensation under Section 9 and Section 10 of the ECO, the Court is satisfied that the potential minimum compensation the Applicant is entitled to receive under the ECO is above the settlement sum of HK$59,980 under the Settlement Agreement. Therefore, the Court ruled that the Settlement Agreement is null and void under Section 31(1) of the ECO.

Key takeaways

Leung Siu Kam v 梁國強 & ANOR demonstrates that an employer paying the compensation amount agreed by the employee will not absolve him of his liability to pay further employees’ compensation if the agreed amount is less than the minimum the Applicant is entitled to receive under the ECO. As such, if either party wants to settle an employees’ compensation claim, it is advisable to seek legal advice to determine the appropriate settlement sum so that the Settlement Agreement will not be null and void under Section 31(1) of the ECO.