Hong Kong Employment Law 2023 Review


Overview of employment law 2023

Happy New Year 2024 and an early Happy Chinese New Year of the Dragon.

Overview of major changes made by the Government on employment law

Major changes in 2023 included:

·           With effect from 1 May 2023, the minimum wage rate in Hong Kong has been increased to HK$40 per hour. The monthly threshold amount for keeping records of hours worked was increased accordingly to HK$16,300 per month.

·           On 13 June 2023, the Government announced its introduction of labour importation schemes for construction and transport sectors and enhancement of the existing Supplementary Labour Scheme to become the Enhanced Supplementary Labour Scheme.

·           In the wake of COVID-19, the vaccination provisions that were introduced in June 2022 into the Employment Ordinance (Cap. 57) (“EO”) were repealed on 16 June 2023. Non-compliance with the vaccination requests is no longer a valid reason under section 32K of the EO for the dismissal of employees or variation of their contracts.

There had also been some intriguing developments in case law last year. We have selected some cases that are relevant to employers, employees, in-house practitioners and human resources professionals.  

Court of Appeal confirms that standby time cannot be counted as statutory rest days or contractual day off

Employees are entitled to at least one rest day in every period of seven days under the EO. Employment contracts may also provide for other leave entitlement with various labels such as “day off”. The line between a “day off” and a workday is not often clear. If an employee is required to be on standby duty that requires him to be contactable by phone and, if required, report to work – does the standby time count a rest day under the EO or a day off under the employment contract?

In Breton Jean v香港麗翔公務航空有限公司 (HK Bellawings Jet Limited) [2022] HKCA 1736, the Court of Appeal (CA) explored the issue and affirmed that standby time should not be regarded as either a rest day under the EO or a “day off” under the employment contract if there was no clear indication to the contrary. The concepts of “rest day” and “day off” are related. The meaning of “rest day” in the EO is clearly relevant to the proper meaning that should be given to “day off” in the employment contract. In the absence of any clear indication to the contrary, the CA took the view that the contracting parties intended the two concepts to bear the same meaning to ensure consistency and coherence of their rights and obligations under the employment contract and the EO.

Takeaway: If an employee is required to be on standby duty, the standby time will not likely regarded as a statutory “rest day” under the EO or a “day off” in an employment contract if there is no clear indication to the contrary. Failure to grant at least one statutory rest day in every period of seven days is an offence under the EO, whereas failure to grant any “day off” contractually stipulated is a breach of contract.  Employers should be mindful of the above when making workplace arrangement.

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Court of Final Appeal finds Government’s refusal to allow transgender men using their acquired gender on identity cards without undergoing full sex reassignment surgery unconstitutional

On 6 February 2023, the Court of Final Appeal (“CFA”) handed down its landmark judgment in Q, Tse Henry Edward v Commissioner of Registration [2023] HKCFA 4, ruling in favour of two female-to-male transgender appellants and found that the Government had breached their constitutional right to privacy by refusing them from amending their gender marks and using their acquired gender (male) on their identity cards without undergoing full sex reassignment surgery.

Takeaway: Female to male transgender persons no longer have to undergo full sex reassignment surgery before amending their gender markers on their HKID cards. That said, this case had only addressed the scenario of female to male transgender and the CFA expressly left the male to female situation untouched. Therefore, whether male to female transgender persons can make a change of their gender markers without undergoing full sex reassignment surgery remains uncertain.

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Will the court grant a springboard injunction to assist an ex-employer where there is no restrictive covenant in the employment contract?

A “springboard” injunction is an injunction designed to remove or limit the unlawful advantage or unfair competitive head-start that a former employee has gained through unlawful activities such as misuse of an ex-employer’s confidential information. In DCL Communication Limited v Lam Yim Chi Julia and Reach Technology Solutions Limited [2023] HKCFI 98, the plaintiff ex-employer applied for a springboard injunction to restrain the 2nd defendant competitor company (which has hired the 1st defendant, the plaintiff’s former employee) from using or disclosing certain confidential information of the plaintiff including its clientele list.

In the absence of a restrictive covenant in the former employee’s employment contract, the Court of First Instance (“CFI”) refused to grant a springboard injunction.  The CFI considered that even if the employee did have access to the confidential information in issue, the court still had to decide whether there had been any unlawful behaviour on the part of the employee and the competitor.  There was no restrictive covenant in the employment contract and the employee was entitled to approach the ex-employer’s clients and to offer services. The CFI dismissed the ex-employer’s application.

Takeaway: Employers should bear in mind that where there is no (or no enforceable) restrictive covenant in the employment contract, the court will not grant a springboard injunction as a substitute to assist them. If employers want to protect their legitimate business interests such as trade secrets and trade connections from the outgoing employees, they should ensure they have put in place enforceable restrictive covenants in their employment contracts.

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Cross-border employment issue: Can an employee refuse or ignore an employer’s requests for information regarding expenses incurred in Mainland that had already been approved and reimbursed years ago?

In Alcohol Countermeasure Systems (HK) Limited & Anor v Li Chi Kong, Peter [2023] HKCFI 227, the CFI heard (i) a claim by two former employers for repayment of reimbursements already made to a former employee for his expenses incurred when he worked in Mainland; and (ii) a counterclaim by the former employee for wrongful dismissal. The employers originally terminated the employment by giving notice. During the notice period, the employers ordered the employee to provide information relating to the employee’s expenses that they had reimbursed him. The employee refused to do so and the employers dismissed him summarily.   

The CFI found the former employers had failed to prove the employee had either submitted fraudulent/false receipts or pocketed part of the money to be paid to their suppliers and the former employers’ claim was dismissed accordingly. On the other hand, the former employee had wilfully disobeyed the employers’ lawful and reasonable orders and so the summary dismissal was justified.

Takeaway: Terms of the employment contract should properly deal with expenses and reimbursements, especially in the case of cross-border employment, where expenses and allowances that are subject to reimbursements will be inevitably incurred. Such expenses should be recorded properly with clear procedures in place to avoid or minimise any subsequent disagreement or dispute. Employees should abide by lawful and reasonable orders from the employers, including responding to employer’s requests for information relating to expenses receipts, as failure to do so may justify summary dismissal under the EO.

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Can an employee broker be held liable to compensate the employer brokerage for the loss caused by his clients?

In Black Marble Securities Limited v Lee Yan Chi [2023] HKCFI 1084, the CFI ruled that a brokerage can hold its brokers liable to compensate it for the loss caused by clients introduced by the brokers. This case concerned a compensation clause in the broker agreement between the parties in which the defendant broker would be personally liable for the loss caused to the plaintiff brokerage firm. While this clause and such compensation arrangement are not problematic per se, the broker claimed that she entered into an oral agreement with the brokerage firm to the effect that any compensation payable to the brokerage under the said compensation clause would be paid through deduction of her wages.

On the facts of this case, the Court held that the alleged oral agreement was neither made on the same occasion as nor made as a supplement to the broker agreement. No consideration was given for entering into the oral agreement and, therefore, it was not a binding agreement with any effect and did not affect the operation of the broker agreement.

Takeaway: While it may not be problematic for an employer to hold employees liable for the loss caused by clients, the compensation cannot be paid out of the brokers’ salary or commission income as this arrangement would be in breach of s. 32(1) of the EO, which provides that no deductions shall be made by an employer from the wages of his employee or any other sum due to the employee otherwise than in accordance with the EO.

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What is pregnancy discrimination and how to avoid it?

In周露娜 v 中旅貨運物流中心有限公司 [2023] HKDC 1115, the District Court held that the respondent employer was liable for discrimination under the Sex Discrimination Ordinance (Cap. 480) against the claimant employee as a pregnant woman by, among other things, refusing to renew her employment contract.

One of the key issues was causation.  If the employee could establish that her pregnancy was one of the reasons for her dismissal and less favourable treatment, the dismissal and less favourable treatment would be taken as done by reason of her pregnancy, even though it was not the dominant or substantial reason or that there were other reasons which were legitimate and justified for the dismissal. On the facts of the case, while there was no direct evidence against the employer, the Court by inference concluded that the employee’s employment contract was not renewed because of her pregnancy.

Takeaway: Pregnancy discrimination cases are highly fact-sensitive. The court will carefully scrutinize the reasons for the dismissal put forward by the employers. Employers should therefore be particularly vigilant when the circumstances call for dismissal of a pregnant employee as it touches on both discrimination and employment law issues.

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CFA declared lack of alternative framework for legal recognition of same-sex partnerships unconstitutional and gave the Government two years to fix it

On 5 September 2023, the CFA handed down a landmark judgment in Sham Tsz Kit v Secretary for Justice [2023] HKCFA 28. By a majority of 3 to 2, the CFA declared that the Government was in violation of its positive obligation under the Bill of Rights to establish an alternative framework for legal recognition of same-sex partnerships and to provide for appropriate rights and obligations attendant on such recognition with a view to ensuring effective compliance with the aforesaid obligation. The CFA directed that operation of the said declaration be suspended for a period of two years from the date of the final order to be made after receipt of the parties’ written submissions, to allow the Government to comply with its obligation.

Takeaway: The CFA’s ruling called for an alternative legal framework for same-sex couples which allows them to meet basic social requirements and to have a sense of legitimacy which they deserve. It is anticipated that with a more systemized and structural framework, relevant authorities may no longer need to deal with each case or application involving same-sex partnerships on a case-by-case basis, and eventually resorting to expensive and time-consuming litigations or judicial reviews. That said, it is by no means certain what exactly will be protected under the new alternative legal framework.

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The CFI ruled that a subsequent transfer order by the Labour Tribunal would not cure a jurisdictional defect where the claim was wrongly commenced at a higher court in the first place

The Labour Tribunal has exclusive jurisdiction to hear claims for money that arise from breach of employment contracts.  Acumen Hong Kong Limited v Kwan Pak Kei Lawton [2023] HKCFI 2038 illustrates the negative consequences of commencing a claim for breach of employment contract at the wrong court. The CFI struck out the counterclaim of the defendant employee, which should have been commenced as a separate claim in the Labour Tribunal first.

The employer plaintiff commenced proceedings against the employee in the CFI for breach of the employment contract, fiduciary duties and duty of care (“1st HC proceedings”). The employee filed a defence and counterclaim, where the counterclaim was in relation to breach of employment contract. After the employee filed the counterclaim, he commenced a separate Labour Tribunal claim against the employer that was identical to his counterclaim in the 1st HC proceedings. The Tribunal ordered the employee’s labour claim be transferred and became a fresh action in the CFI (“2nd HC proceedings”).   

The CFI on its own initiative raise the jurisdiction issue. The CFI held the employee’s counterclaim in the 1st HC proceedings fell squarely within the Labour Tribunal’s exclusive jurisdiction and was liable to be struck out for want of jurisdiction. The jurisdictional defect could not be cured by a subsequent transfer order made by the Labour Tribunal; the transfer order (which was in relation to the 2nd HC proceedings) was not capable of affecting the pre-existing 1st HC proceedings. The reality was the 1st HC proceedings and the 2nd HC proceedings were two different set of proceedings; the counterclaim was not transferred from the Labour Tribunal at all.  The CFI struck out the counterclaim for want of jurisdiction and ruled that it constituted an abuse of process.

Takeaway: The case shows the negative consequences brought upon a party for not commencing a claim for breach of employment contract at the Labour Tribunal. One should therefore carefully consider the nature of an employment or employment related claim and be mindful of the jurisdiction of the Labour Tribunal before commencing legal action.

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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 © 2024

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