Introduction

In a recent appeal in Cheung Chi Wah Patrick v Hong Kong Cement Co Ltd [2017] HKCU 2291, the Court of First instance (the “CFI”) clarified whether an employer may summarily dismiss an employee (i.e. terminating the employment contract without notice or payment in lieu) on the ground of the employee’s misconduct in the absence of serious neglect of duty, breach of confidence or incompetence on the part of the employee.

Facts

In this case, an employee (the “Employee”), who has 15 years’ professional experience in corporate finance, financial management and accounting and auditing, was instructed by his supervisor to seek legal advice relating to a rights issue application in the parent company of his employer (the “Parent Company”) from legal advisers of the employer (the “Employer”).  The Employee did so but miscomprehended the poorly given legal advice and thus conducted himself wrongly, which almost resulted in serious consequences as (1) the Parent Company’s majority shareholder could have been in breach of an irrevocable undertaking to the underwriters of the Parent Company’s rights issue and (2) the Parent Company could have been in breach of the Listing Rules.  With the efforts of the management of the Parent Company’s majority shareholder, the problems were later rectified.

The Employee was later summarily dismissed by the Employer on the ground of serious misconduct.  The Employee commenced proceedings in the Labour Tribunal and was awarded (1) wages in lieu of notice and (2) end of year payment.  The Employer appealed to the CFI.

Statue

Section 9(1) of the Employment Ordinance (Cap. 57) provides that an employer may terminate a contract of employment without notice or payment in lieu:

(a)          if an employee, in relation to his employment--

(i)            wilfully disobeys a lawful and reasonable order;

(ii)          misconducts himself, such conduct being inconsistent with the due and faithful discharge of his duties;

(iii)        is guilty of fraud or dishonesty; or

(iv)        is habitually neglectful in his duties; or

(b)          on any other ground on which he would be entitled to terminate the contract without notice at common law.

Decision

The CFI dismissed the appeal and held that when deciding whether it is justifiable to dismiss an employee under section 9(1)(a)(ii), the employee’s explanation on why he has committed the misconduct is relevant for the consideration of whether the employee’s misconduct is inconsistent with the due and faithful discharge of his duties.

It is only when the employee has manifested an intention not to be bound by the essential terms and conditions of his employment contract or has repudiated the employment contract that he can be dismissed summarily by the employer.  Otherwise, the employer could only terminate the employee’s employment contract by giving the necessary notice to quit or wages in lieu of notice and other compensations as the law may require.

In this case, the Employee acted faithfully in the discharge of his duties as he acted upon his supervisor’s instructions and sought legal advice from the Employer’s legal advisers.  The CFI did not consider the miscomprehension of a poorly given legal advice is a serious neglect of duty and only considered the Employee as an “unfortunate” employee who was not disobeying any order.  Thus, section 9 did not apply as the Employee’s conduct did not manifest an intention not to be bound by the employment contract.

Implications

The issue of summary dismissal often comes to the mind of the employers when the employees’ performance is not up to their expectation.  In order to avoid undesirable employment disputes, it is important that the employers observe the relevant employment laws and seek proper legal advice from a competent legal adviser before summarily dismissing employees.