Overview of major changes made by the Government
on employment, discrimination and privacy law

Major changes that have become effective in 2021 include:

• Starting from 1 April 2021, employers may now apply for reimbursement for the extended maternity leave period under the maternity leave pay scheme, subject to a cap of HK$80,000 for every employee.
• With effect from 19 June 2021, it will be unlawful for a person to harass a woman on the ground that she is breastfeeding by engaging in (1) unwelcome conduct in which a reasonable person would have anticipated that the breastfeeding woman would be offended, humiliated or intimidated or (2) conduct that creates a hostile or intimidating environment for the breastfeeding woman.
  
• Starting from 2 July 2021, the coverage of the Employees’ Compensation Ordinance (Cap. 282) has been extended to the situation where an employee sustains an injury or dies as a result of an accident when commuting to or from work, during the period of “extreme conditions” arising from a super typhoon or other natural disasters of a substantial scale.
  
• With effect from 8 October 2021, it will be a criminal offence for a person to disclose personal data in absence of the data subject’s consent, whether intentionally or recklessly.
  

Does an employer have to tell you why you are fired?

In Lam Siu Wai v Equal Opportunities Commission [2021] HKCU 4949, the Court of First Instance (“CFI”) made it clear that it is unnecessary for an employer to give any reason for termination and the long-established implied duty of mutual trust and confidence does not cover termination of an employment.

Facts

The employee has been working for the employer for over 22 years. The employee’s employment contract provided that the employer may terminate her employment by giving three months’ notice or by paying three months’ salary in lieu of notice.

The employer gave notice to the employee and terminated her employment with immediate effect on the ground that the employee’s attitude and behaviour shortly before issuing the termination notice did not match with the requirements of her position. The employer paid the employee three months’ wages in lieu of notice and all benefits due to her.

The employee commenced proceedings in the Labour Tribunal. The Tribunal decided that the implied duty of mutual trust and confidence applies to termination of an employment, and held that by failing to prove that the reason of termination was good and valid, the employer breached this implied duty. The employer appealed.

Decision

On appeal, the CFI considered that the fundamental purpose of the implied duty of mutual trust and confidence was to maintain the relationship between employer and employee and it was inappropriate to apply this implied duty to termination of an employment. The contractual right to terminate an employment can be exercised unreasonably or capriciously insofar it is in accordance with the employment contract.

Takeaway points: An employer is entitled to terminate an employment by giving notice or payment in lieu of notice in accordance with the employment contract and sections 6 (Termination of contract by notice) and 7 (Termination of contract by payment in lieu of notice) of the Employment Ordinance (Cap. 57) (“EO”) without the need of giving any reasons of termination.

Know more about the case here.

Can employer be vicarious liability for employee’s fraud?

Time and again, the “close connection” test has been applied and affirmed by Hong Kong courts to an employer’s vicarious liability for employee’s unauthorized act. In Luk Wing Yan v CMB Wing Lung Bank Limited (previously known as Wing Lung Bank Limited) [2021] HKCFI 279, the CFI discussed whether the “close connection” test serves as a blanket principle that is applicable in all circumstances.

Facts

The plaintiff customer was a victim of a fraudulent investment scheme perpetrated by an employee of the bank. For a period of over three years, the customer engaged in what she thought were “internal investments” (i.e. investments only made available to bank’s staff and employees) that promised extremely high returns.

Part of the customer’s investment money had never been returned and was completely lost. The fraud was brought to light subsequently and the employee was convicted of three counts of fraud. The customer brought proceedings against the bank for her losses.

Decision

The CFI recognized that whilst the “close connection” test is firmly established pertinent to employer’s vicarious liability, the correct test for employer’s liability over employee’s fraud is the “apparent authority” test, under which apparent authority is found where: (1) a principal, by words or conduct, has represented to the third party that the agent has actual authority to enter into the kind of transaction in question; (2) the third party enters into a transaction in reliance on that representation; and (3) the reliance must be reasonable.

The CFI commented that the “close connection” test can be reconciled with the “apparent authority” test in the sense that it is the apparent authority of the employee who makes the fraudulent representations that will identify the necessary close connection as might render it just to hold the employer vicariously liable.

Applying the “apparent authority” test, the customer’s claim on the basis of vicarious liability must fail particularly in view of the fact that the customer evidently knew she was seeking to take advantage of a private arrangement not really available to her if she had dealt with the bank.

Takeaway points: The “close connection” test must be considered in light of the facts and circumstances of each case. For cases that concern an agency relationship in furtherance to an employment relationship, the “apparent or ostensible” authority test comes into play.

Know more about the case here.

Does partial suspension from work
amount to constructive dismissal?

Section 11 (Suspension from employment in certain cases) of the EO confers employers the power to suspend employees from employment without notice or payment in lieu for a period not exceeding 14 days in certain circumstances. Where a suspension from employment falls under section 11, an employee may, under section 11(2), at any time during the period of suspension terminate the employment contract without notice or payment in lieu. In Lengler Werner v Hong Kong Express Airways Ltd [2021] HKCFI 1333, the CFI clarified the scope of the employer’s power under section 11.

Facts

The employer was an airline operator. The employee was employed as a pilot by the employer. Following a verbal dispute with his colleagues, the employee was suspended from flying duties (but not other non-flying duties) for around six weeks pending the conclusion of an internal investigation.  During the suspension, the employee continued to be paid his basic salary and allowances, but not overtime or productivity bonuses which the employee would normally be entitled to had he not been partially suspended from his employment.

The investigation remained pending after six weeks. Upon enquiry about progress of the investigation, the employee learned that two warning letters would be sent to him. The employee resigned before the warning letters were issued and claimed he was constructively dismissed.

The employee commenced proceedings at the Labour Tribunal and the Tribunal found in favour of the employee. The employer appealed.

Decision

On appeal, the CFI distinguished between suspension from employment and mere suspension from partial performance of duties. Section 11 was not concerned with any partial suspension, but rather envisaged a complete suspension of the rights and obligations of the employment contract so that the employee was not required to do any work and the employer was not required to pay the employee.

The employee was simply suspended from his flying duties, but not his employment and section 11 of the EO did not apply. The employee could not rely on section 11(2) to claim constructive dismissal.

Takeaway points: Where an employee’s duties have only been partially suspended, such partial suspension does not fall within section 11 of the EO. 

Know more about the case here.

There are consequences for job applicants
who accept offer and then change their mind

In Law Ting Pong Secondary School v Chen Wai Wah [2019] HKCFI 2236, the CFI held that the term requiring the job applicant to give three months’ notice or make payment in lieu of notice to terminate the contract was not included in the employment offer made at the outset. After hearing the appeal made by the employer, the Court of Appeal (“CA”) clearly demonstrated that not honouring a signed employment contract may come with a price even before commencement of the employment.

Facts

On 17 July 2017, the employer made an offer to hire the employee as its teacher for the school term commencing on 1 September 2017, and issued three documents i.e., an Offer of Appointment, Conditions of Service and a Letter of Acceptance. On the same day, the employee accepted the offer and signed those three documents. The Letter of Acceptance stated that the employee accepted the appointment in accordance with the Conditions of Service and understood that the conditions of the new contract would come into immediate effect upon acceptance of the offer.  One of the terms contained in the Conditions of Service required the employee to give three months’ notice to terminate his employment with the employer or make a payment in lieu (“Termination Provision”). On 22 August 2017, the employee backed out of the employment contract.

Decision

In deciding whether the Termination Provision became legally binding upon the signing of the three documents, the CA took the view that the terms of the three documents were accepted as a “package deal”. The Termination Provision was legally binding, and that the Letter of Acceptance formed part of the employment contract between the parties.

Regarding whether the Termination Provision was unenforceable as a penalty clause, the CA ruled in favour of the employer as the doctrine of penalty is only engaged when there had been a breach of contract, and thus the employee’s argument that the Termination Provision is unenforceable as a penalty clause cannot stand. The employer’s claim is not for liquidated damages for breach of contract, but for recovery of a contractual debt arising from a contractually agreed method of lawful termination under the Termination Provision.

Takeaway points: In employment context, taking the wordings of any contract out of context and solely looking at its literal meaning could result in misinterpretation. Further, the courts will be slow in finding a clause as penal and striking it down on such basis.

Know more about the case here.

Enforceability of a non-competition clause: Is evidence
about matters that happened after the contract relevant?

A clause in an employment contract that restrains the activities of an employee after termination of employment is prima facie void and unreasonable subject to certain exceptions. In BFAM Partners (Hong Kong) Ltd v Gareth John Mills & Segantii Capital Management Limited [2021] HKCFI 2904, a six month non-compete restriction was upheld by the CFI against an employee.

Facts

The employment contract in issue contains a non-compete clause that prohibits employee from being employed or performing services in competition with the employer for a period of 6 months after termination of his employment. The employee resigned from his position as the technology consultant on 22 February 2021 and his employment ceased on 21 May 2021. There was no dispute that the “six-month restriction period” in respect of the non-compete clause is between 1 May and 31 October 2021.

Unbeknownst to the employer, the employee began working as the Chief Technology Officer for a competitor of the employer on 24 May 2021. In June 2021, the employer paid the employee’s base salary for the first month of the non-compete period. The employee returned the payment, stating that his employment had ceased on 21 May 2021 and considered that the non-compete clause was unenforceable.

Decision

The CFI found in favour of the employer and granted the injunction sought by the employer.

Based on the facts that the employee had knowledge of both the confidential information and the trade secrets associated with the products and services he had provided to the employer and the six months life-cycles of trading strategies, the CFI found that the employer had sufficiently demonstrated that the non-compete clause would protect its legitimate interests and went no further than reasonably necessary to protect the employer's legitimate interests.

The CFI also emphasised that evidence concerning matters that happened after the making of the employment contract would also be relevant for the purpose of determining the reasonableness of a non-compete clause as long as it can show parties’ intention at the time when the contract was made.

Takeaway points: Whilst the time for ascertaining the reasonableness of a restrictive covenant is the time of the making of the contract, there is nothing to stop an employer from adducing that evidence regarding matters that took place after the making of the contract for the purpose of determining the reasonableness of the restrictive covenant in issue.

Know more about the case here.