Hong Kong Employment Law 2022 Review
Overview
of employment law 2022
Happy New Year 2023 and Happy Chinese New Year of the Rabbit.
2022 was an exciting year for employment law. In
the wake of COVID-19, the Government amended the Employment Ordinance (Cap. 57) (“EO”) by introducing the Employment
(Amendment) Ordinance 2022 in June last year, yet most (if not all) of the
amendments have since become irrelevant because of the Government’s changes in
policy (with the quarantine mandate for COVID positive patients being scrapped
starting from 30 January 2023). At the time, there were major changes that aimed
to encourage employees to get vaccinated where dismissal of employees due to
refusal to receive vaccination without sufficient medical reasons after request
being made by employers is not considered as unreasonable dismissal.
There had also been some very interesting
development in case law, where the implications are wide. We have selected below some cases that are relevant to
employers, employees, in-house practitioners and human resources professionals.
Potential criminal
and personal liability of employee director
for employer company’s failure to pay wages/Labour Tribunal award
In
general, directors or senior officers of a corporate employer are not
personally liable for the wages of the employees. However, if the employer
company fails to pay its employees outstanding wages pursuant to an award of
the Labour Tribunal, the director or the senior officer may become criminally
liable if the company’s default is committed with the consent or connivance of,
or to be attributable to any neglect on the part of the director or senior officer. In such case, the
director or the senior officer may further be ordered to pay the outstanding
wages personally.
In 香港特別行政區 訴 永富 (香港) 有限公司及另一人 [2022] HKCFI 2634, the Court of First Instance (“CFI”) reiterates that a director or a
senior officer of an employer company may fall within the definition of
“employer” under the EO. If the corporate employer fails to pay employees
outstanding wages, the court has a discretion under section 65(1), EO to hold
the director or the senior officer personally liable for any outstanding wages.
Decision
Takeaway points: A director or a senior officer may be
ordered by the court to pay the outstanding wages owed by the corporate
employer if the director or the senior officer falls within the definition of
“employer” under the EO and commits an offence under the EO. An employee director or
senior officer commits an offence if the employer company fails to pay any sum
payable under a Labour Tribunal award with the consent or connivance of, or to
be attributable to any neglect on the part of, that director or senior officer.
Know
more about the case here.
Is “compensation clause”
in an employment contract enforceable?
In Ng Yan Kit Alfred & Anor v Ever
Honest Industries Limited & Anor [2022] HKCFI 1834, the CFI reaffirmed
the penalty rule applied in Law Ting
Pong Secondary School v Chen Wai Wah [2019] HKCFI 2236 and clarified that
if a “compensation clause” is a penalty clause, it is not enforceable. Know
more about Law Ting Pong Secondary
School v Chen Wai Wah here.
Facts
In
the Ng Yan Kit Alfred case, the
claimant employee was employed under an employment contract with a compensation
clause which, among others, stated that the defendant employer may dismiss the
employee within 3 years after the commencement of the contract by paying a
compensation of his 2 whole year’s salary. Their relationship turned sour and
the employer dismissed the employee with only 3 months of salary as payment in
lieu of notice.
The
employee commenced proceedings at the Labour Tribunal claiming 2 years’ salary
under the compensation clause. The Tribunal dismissed his claim and the
employee appealed.
Decision
On
appeal, the CFI adopted the two-step inquiry approach in the Law Ting Pong Secondary School case.
First, the court has to construe the relevant clause in the contract to
determine whether it is a contractually agreed method of lawful termination of
the contract which gives rise to a primary obligation to pay, or just damages
for breach of contract leading to a secondary obligation. Second, if only a
secondary obligation arises, the court should identify the legitimate interest
of the innocent party that is being protected by the clause, and then assess
whether the clause is out of proportion to such legitimate interest by
considering all the circumstances of the case.
Takeaway points: In the employment context, “compensation
clause” will only be enforceable if it is not a penalty clause. In determining
whether the compensation clause is a penalty clause, employment contracts
should be interpreted against their background facts and practical objectives
that they intend to achieve.
Know more about
the case here.
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?
Section 70 (Contracting out),
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. 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 wants to
terminate the contract of employment – which is common enough situation, and
that ad hoc agreement is not a contract of employment.
It is
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?
Prior
to the CFI’s decision in Dock Brian v Pacific Gourmet Holdings Limited [2022] HKCFI
444, case law authority suggests a receipt of terminal payments containing the
words “I acknowledge [receipt] the above listed payment as full and
final settlement of any claims against my employer” (Minarni v Ho Ho
Fan Ivy [2018] HKCFI 852) or a document containing the words “In
signing this receipt I agree that I have no further claims financial or
otherwise, in respect of any such previous contract against the Company” (Poon
Kwok Leung Lenny v Swett (China) Limited HCLA 19/2012, unreported,
19 December 2012) are prima facie valid
settlement agreements, which prevent the employees from claiming under the EO
and the Labour Tribunal has no jurisdiction.
In
the Dock
Brian case, the defendant employer gave the claimant employee a pay
cheque for his last month’s salary and accrued holiday pay, and asked
him to sign a document, which 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 Labour Tribunal pointed
out that the document was prima facie 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 decisions in Minarni and Poon Kwok
Leung Lenny. The
Employee appealed to the CFI against the Tribunal’s decision.
At the appeal, the CFI took
the view that Minarni and Poon
Kwok Leung Lenny was wrongly decided. The employee’s claims were for (a)
severance payment, which is based on Part VA (Severance Payments), sections 31B(1)(a)
and 31G of the EO, and (b) terminal payment and monetary compensation, which is based on Part VIA (Employment
Protection), sections 32A(1)(c), 32M, 32O and 32P of the EO. The CFI was
of the view 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. The CFI allowed the appeal and remitted the employee’s claim back to the
Tribunal for re-consideration and determination.
Takeaway points: 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” or “the failure of a person to comply with the provisions of the
EO”.
Know more about the case here.
The Hong Kong court adopted a pro-arbitration stance and stayed Labour Tribunal proceedings pending outcome of arbitration
The Labour Tribunal has
exclusive jurisdiction over claims arising from breach of employment contract
and non-compliance of the EO. What about claims arising from employment that
are subject to an arbitration agreement? In MAK v LA [2022]
HKCFI 285, the CFI adopted a pro-arbitration approach in interpreting an
arbitration clause regarding the staff bonus scheme and granted a stay of
Labour Tribunal proceedings in favour of arbitration.
Know more about the case here.
Can a male employee be subject to sex discrimination?
In Tan, Shaun Zhi Ming v Euromoney
Institutional Investor (Jersey) Ltd [2022] HKDC 622, the District Court
found that the defendant employer has discriminated against a claimant former
male employee,
who was subject to an unsubstantiated sexual harassment complaint.
Facts
The
employee was accused by a female colleague of sexual harassment in the
workplace, upon which the employer conducted some investigations and
interviewed several witnesses. Despite the lack of sufficient evidence proving the accusation, the
employer requested the employee to apologize to the female colleague. The
employee refused to do so, and he was subsequently dismissed immediately by
payment in lieu of notice. The employer claimed that the dismissal was irrelevant to the
sexual harassment complaint but to the employee’s conduct during and following
the investigation.
Decision
The
District Court considered that when assessing whether the employee was
discriminated, both sides’ evidence would be examined to determine if there are
substantiated reasons for the termination. If no such reason or explanation
could be found, it would be legitimate for the court to infer the presence of
discrimination against the employee as a result of a pro-female bias.
Takeaway points: Tan, Shaun Zhi Ming serves as a reminder for employers that
sexual harassment complaints must be handled with care. Whilst many employers
are well aware of the risks of claims by female employees for sexual harassment
under the Sex Discrimination Ordinance (Cap. 480), there are also legal risks relating
to claims from the employees who are accused of committing the sexual harassment. Employees should
be mindful about such risks as men (as well as women) can be subject to sex
discrimination.
Know more about the case here.
Is calling a foreigner “Gweilo” race discrimination?
If I call a foreign co-worker
a “gweilo” (鬼佬), is that racial
discrimination?
When the Equal Opportunities
Commission was asked whether the word “gweilo” could be regarded as
harassment under the law, their spokesman said that it would depend on several
factors including the actual circumstances of the case, the context of the
particular situation and the relationship between the parties involved.
In February 2022, the District
Court handed down a landmark judgment in Haden, Francis William v
Leighton Contractors (Asia) Ltd [2022] 1 HKLRD 995, [2022] HKDC
152, a high-profile racial discrimination case (dubbed as the “Gweilo”
case) that has attracted much media attention. In this case, the District Court
had to consider whether the use of the words “gweilo” and “foreigner” at
work was racial discrimination, and whether the employee’s race was the reason
for the termination of his employment.
The employee claimed that the
term “gweilo” was frequently used during discussions between his fellow
Chinese co-workers, which, as he alleged, showed racial hostility in the work
context. On the facts of the case,
the District Court found that the employee failed to prove that there was a
background of racial hostility in the project he was involved in. The Court was of the view that
the use of the term “gweilo”, even if it was used in a workplace, would
not necessarily carry a derogatory meaning. One must consider the context in
which the term “gweilo” was used.
Takeaway points:
Whilst the use of term “gweilo” at workplace may not be discriminatory,
it can be depending on the context. The court may infer race discrimination
from the facts and circumstances that disclose a possibility of discrimination.
Once the court is satisfied that there is a possibility of discrimination at
the workplace, it will look to the employer for an explanation. Therefore, it
is best practice to avoid the use of the term “gweilo”.
Employers should put in place
measures to manage the risks of racial discrimination claims, such as internal
policies on anti-discrimination, proper record keeping and equal opportunity
recruitment. Employers should obtain legal advice and assistance in setting up
and reviewing anti-discrimination policies.
Know more about the case here.
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Important: The law and
procedure on this subject are very specialised and complicated. This article
is just a very general outline for reference and cannot be relied upon as
legal advice in any individual case. If any advice or assistance is needed,
please contact our solicitors. |
Published by ONC Lawyers
© 2023 |