Overview of Employment Law 2025

Happy New Year 2026 and Happy Chinese New Year of the Horse.

Major change to definition of “continuous contract” under the Employment Ordinance that came into effect on 18 January 2026   

As we move into 2026, the most significant legislative development is the transition from the long-standing old “418 Rule” to the new “468 Rule”, which became effective on 18 January 2026.

For decades, the 418 Rule served as a foundation of Hong Kong employment law, stipulating that an employee working for the same employer for at least 18 hours per week for four consecutive weeks was deemed to be in a “continuous contract” under the Employment Ordinance (Cap. 57) (“EO”). This status is critical because, while all employees are entitled to basic protections like statutory holidays and wage protection, only those under a continuous contract qualify for a full range of protection and benefits under the EO (depending on the length of the continuous contract), including rest days, paid annual leave, sickness allowance, and severance or long service payments.

The new 468 Rule amends the EO to reflect changes in the modern labour market and provide greater flexibility for part-time and temporary workers. Under the 468 Rule, an employee is considered to have a continuous contract if they have been employed by the same employer for at least four weeks and have worked a total of 68 hours or more within that four-week period. This effectively lowers the weekly average threshold from 18 hours to 17 hours. Importantly, the 468 Rule allows for fluctuations in weekly schedules; an employee who works fewer than 17 hours in one specific week can still qualify if the aggregate hours of that week and the three preceding weeks meet the 68-hour requirement.

This change aims to prevent the common practice where employers intentionally reduced weekly hours to below 18 to create breaks in the continuity of employment and, as a result, avoid triggering statutory protection and benefits. Businesses must now review their staffing arrangements to ensure compliance.

Takeaway: The 468 Rule replaced the 418 Rule on 18 January 2026, offering greater flexibility by counting total hours over a four-week period. Employers must review their staffing arrangements to ensure they are prepared for the increased number of employees who will qualify for continuous contract protection and benefits.

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Can an act of dishonesty automatically justify the summary dismissal of an employee?

Summary dismissal is considered an extreme disciplinary measure, reserved for cases of very serious misconduct or fundamental breach of contract.

In Hu Yangyong v Alba Asia Limited HKCFI 2484, the Court of First Instance (“CFI”) examined whether a dishonest act regarding expense reimbursements was sufficient grounds for such an immediate termination. The employee, a Chief Operating Officer, was entitled to up to RMB 20,000 per month for family expenses. He was dismissed after the employer discovered that three hotel invoices submitted for reimbursement actually related to a friend’s son’s wedding banquet rather than his own family.

The employee argued that he did have genuine family expenses exceeding the limit but found it difficult to obtain official tax invoices in his own name for items like tuition or household costs. He claimed that he had raised the matter with one Mr. Zhang, a staff member whom he believed to be dealing with his expense claims. They came to an arrangement where he could obtain and submit invoices from “other sources” issued in his name instead of actual invoices issued for his family expenses to support his reimbursement claims.

The CFI found that while the employee’s approach involved “muddling”, he had no dishonest intent because he personally gained nothing and the employer lost nothing monetarily. The CFI ruled that the summary dismissal was not justified, noting the “unusual” circumstances where the employer’s staff had previously approved these claims, reinforcing the employee’s belief that the arrangement was acceptable.

The principles of summary dismissal require the employer to carry a heavy burden of proof. While cases involving serious dishonesty often justify dismissal, an act of dishonesty does not automatically trigger this right, as there are varying degrees of such conduct. The court will only uphold a summary dismissal if the act is so serious that it constitutes a fundamental breach of the employment contract. Furthermore, if an employer allows questionable conduct to continue for an extended period before taking action, it may be deemed as acquiescence. In this instance, the lack of monetary loss and the pre-existing arrangement meant the threshold for this extreme measure was not reached.

Takeaway: Employers must remember that dishonesty does not automatically justify summary dismissal. There are degrees of dishonesty, and the court will only uphold a summary dismissal if the act is so serious that it destroys the foundation of the employment relationship. The burden of proof lies heavily on the employer to show that such a strong and extreme measure is warranted on the facts and circumstances.

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Can an employer be held vicariously liable for an employee’s defamation against another employee?

Under the principle of vicarious liability, an employer is generally responsible for an employee’s wrongful acts committed in the course of employment.

In Breton Jean v HK Bellawings Jet Limited & 3 others HKDC 1695, the District Court applied the “close connection test” to a defamation claim for the first time in Hong Kong.

A pilot, Mr. Breton, sued his former employer after three colleagues sent emails to management alleging he engaged in unprofessional conduct, such as excessive drinking. He claimed the employer was liable for these defamatory statements because they were sent by employees during their work. The Court first determined that the emails were protected by qualified privilege, as the employees had a duty to report concerns and the recipients in management had an interest in receiving them.

Even if privilege did not apply, the Court stated (in obiter) that the employer would not have been vicariously liable. The Court reasoned that the employees concerned, who were a pilot and flight attendants, were not authorized to give vent to personal views as part of their job functions. The publication of the emails was not a business activity of the employer nor incidental to the performance of the employees’ authorized duties; therefore, there was no “close connection” to their employment.

Takeaway: Whilst employers may unlikely be held vicariously liable for the defamatory personal views of one employee regarding another if those views are not closely connected to their job functions, employers should maintain clear workplace guidelines and training programs to mitigate statutory risks related to discrimination and data privacy, where the liability standards are more stringent.

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Is it marital status discrimination to dismiss an employee because their spouse has left the company?

In Cheuk Kit Man v FWD Life Insurance Company (Bermuda) Limited & others HKCFI 1369, the CFI addressed whether terminating the service of a worker specifically because of his or her spouse constitutes marital status discrimination.

The plaintiff (Wife) and her husband (Husband) were both insurance agents at the same company (Company). When the Husband resigned to join a competitor, the Company immediately terminated the Wife’s service agreement, revoked her access, and demanded the repayment of HK$4 million in bonuses. The Wife argued that her marital status was the sole reason or a reason for terminating her service.

The CFI ruled in favour of the Company, clarifying that the Sex Discrimination Ordinance (Cap. 480) (“SDO”) protects the abstract state or condition of being married, not the identity of the specific person one is married to. The CFI found that the Company’s decision was based on genuine business concerns — such as information leakage and morale —linked specifically to the Husband’s identity as a high-ranking Regional Director who was moving to a rival. Using the hypothetical comparator test, the CFI concluded that the Company would have treated any person in a similar close relationship to the Husband (such as a cohabiting partner) in the same way, regardless of whether they were legally married.

This distinction is vital for workplace equality, as it confirms that the SDO protects the possession of the characteristic (being married), but not the disadvantages arising from the characteristics or conduct of an associate. If an employer can show that their actions were motivated by business risks posed by a specific individual’s identity or role, and that the same logic would apply to an unmarried partner, a claim of discrimination is unlikely to succeed. Employers should, however, document their rationale clearly to demonstrate that the decision was not rooted in an objection to the marriage itself.

Takeaway: Marital status discrimination under the SDO protects against disadvantage based on being married, but it does not protect against decisions based on a spouse’s identity, role, or conduct. Employers may make decisions regarding a married employee if there are genuine business risks posed by their association with a specific person, provided the same logic would be applied to unmarried partners in comparable circumstances.

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Can the termination of a fixed-term employment contract during an employee’s sick leave constitute dismissal?

In Chung Hoi Yin Aggie v The General of the Salvation Army HKCFI 3680, the CFI clarified that a contract ending by “effluxion of time” is not a dismissal.

The employee was on a series of fixed-term renewals and was on sick leave when the employer informed her that her contract would not be renewed further. She claimed that internal HR guidelines (SQS 5) requiring 28 days’ notice had been incorporated into her contract and that termination of her employment during sick leave was an unlawful dismissal. The Labour Tribunal ruled in her favour.

The CFI overturned the Labour Tribunal’s ruling, finding that the internal SQS 5 guidelines were merely HR management procedures and did not create mutual contractual obligations regarding notice periods. Furthermore, following the decision in Demery v Cathay Pacific Airways Ltd, the CFI held that the expiration of a fixed-term contract is a natural end to the agreement and does not require notice or compensation for dismissal. Crucially, the CFI noted that being on sick leave does not transform a fixed-term contract into an indefinite one, nor does it grant the employee additional protections against the contract naturally expiring.

This case emphasizes that employers are generally free to allow a fixed-term contract to expire even if the worker is unwell, provided they continue to respect statutory sick leave entitlements. For employees, the case serves as a warning that internal policy documents do not necessarily form part of their contractual rights unless explicitly stated. For employers, it highlights the importance of keeping fixed-term structures distinct from indefinite employment to avoid triggering notice or wrongful dismissal compensation claims.

Takeaway: Fixed-term contracts expire “naturally” without the need for notice, and this applies even if the employee is currently on sick leave. Employers and employees should ensure that if they intend for internal policies or specific notice rights to be binding, these terms must be clearly and explicitly incorporated into the employment contract.

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Can pandemic-related travel restrictions frustrate an employment contract?

The doctrine of frustration occurs when an unforeseen event renders the performance of a contract impossible or radically different from what was contemplated by the parties.

In Stahl Matthew Ian v Brilliant Jet Limited HKCFI 2013, the CFI considered whether COVID-19 travel restrictions frustrated a pilot’s employment. The pilot, primarily based in Shanghai, was unable to re-enter Mainland China due to border closures and visa application failures. The employer argued that since the pilot could not fly in China, the contract was frustrated and subsequently dismissed him summarily.

The CFI affirmed that the threshold for frustration remains very high. The CFI found that the employment contract expressly allowed the pilot to be deployed globally, not just in Shanghai. Therefore, alternative performance was possible because his inability to work in China did not prevent him from performing duties elsewhere. The CFI also noted that the employer had failed to provide necessary assistance for a further visa application, meaning the “impossibility” was partly due to the employer’s own failure to act. Consequently, the contract was not frustrated, and the employer was ordered to pay wages in lieu of notice.

This ruling clarifies that mere difficulty, expense, or delay caused by external events like a pandemic does not suffice to establish frustration if alternative means of performance exist. To succeed, an asserting party must prove that an unforeseen external event occurred without fault of either party and rendered performance fundamentally different from the original contemplation. Even if frustration had applied, the CFI noted that section 8A of the EO protects an employee’s right to wages in lieu of notice.

Takeaway: Frustration is a fact-sensitive assessment, and the courts will rarely find an employment contract frustrated if there are alternative ways for the employee to perform their duties. Employers must carefully consider the geographical scope and flexibility of employment terms before claiming a contract is discharged by external events.

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Partial summary judgment against an employee who misappropriated employer’s funds

When a trusted employee betrays their position through fraud, employers may seek immediate legal remedies such as partial summary judgment.

In JB Management Ltd & Ors v Lau Lik Wah David & Ors HKCFI 2702, the CFI dealt with a Financial Controller who misappropriated over HK$81 million over a ten-year period. The employee used two primary methods: forging invoices for purported payees controlled by him and requesting blank cheques for “confidential bonus payments” that were actually deposited into his personal accounts.

The CFI granted partial summary judgment based on the principles of unjust enrichment and constructive trust. The CFI rejected the "fragmentation defense", noting that it is procedurally economical to resolve clear claims early even if other parts of the case continue to trial. The employee’s “authorization defense” — claiming senior management asked him to “get money off the books” to defray surplus funds — was dismissed as “wholly incredible”. The CFI found that because the employee had abused payment procedures and forged signatures, equity imposed a constructive trust, making the money traceable and recoverable.

This case serves as a stark reminder for companies to maintain robust internal controls. The masterminded fraud was only exposed when the Hong Kong Jockey Club reported that corporate cheques were being deposited into the employee’s personal betting account. While equitable remedies like unjust enrichment and constructive trust are available to recover funds, the litigation process can be complex and time-consuming. Employers are advised to seek legal counsel early when fraud is detected to secure injunctions and pursue recovery through summary proceedings.

Takeaway: Employers can seek summary judgment and equitable remedies against dishonest employees who misappropriated funds, particularly when the employee has no credible defense. This case underscores the need for vigilant oversight of payment systems and the effectiveness of tracing misappropriated assets through constructive trusts.

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Company failed in its action against director and his son who set up a rivalry business. Why?

The legal duties of employees and directors differ significantly when it comes to competition.

In Sea Dragon Food Limited v Tung Chung Wah and others HKCFI 4187, a food production company (Company) sued a director (Father) and a manager, who is the director’s son (Son), for secretly establishing a rival business. While a director owes fiduciary duties and must act solely in the interests of the company, an ordinary employment relationship does not automatically create such a “single-minded duty of loyalty”.

The CFI found that the Company failed to prove the Father had actually participated in the rival business or benefited from it. Regarding the Son, the Company failed to plead the material facts necessary to show that his managerial role was senior enough to create a fiduciary relationship. Furthermore, the Son’s actions prior to his resignation —such as planning and incorporating the competitor — were classified as “preparatory steps”, which are permitted under the implied duty of fidelity. Employees are only prohibited from engaging in “actual competitive activity”, like trading or tendering, while still on the payroll.

The Company’s claims regarding misuse of confidential information and trade secrets also failed. The CFI noted that information like customer and supplier contact details found in the public domain (e.g., internet or food guides) does not qualify as a trade secret. To succeed in such claims, a company must prove the information is truly confidential, difficult to isolate, and capable of causing significant harm if disclosed. Without enforceable restrictive covenants in the employment contract, the court will not prevent former employees from competing or soliciting clients.

Takeaway: Employers should not rely solely on implied duties of fidelity; instead, they should explicitly set out fiduciary duties and add restrictive covenants in contracts. This case illustrates that preparatory steps for a new business are generally legal, and customer lists are only protected if they meet the strict criteria for trade secrets.

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Are gig workers employees? What rights do they have?

The rise of the gig economy has re-ignited the debate over the legal status of workers on platforms like Keeta, Deliveroo (which had since ceased its operations in Hong Kong in April 2025), and Zeek.

In Hong Kong, workers are traditionally classified either as “independent contractors” or “employees”. This distinction is vital because only employees qualify for statutory protection and benefits under the EO, minimum wage, or work injury compensation.

The courts apply the “overall impression” test from the Court of Final Appeal set out in Poon Chau Nam v Yim Siu Cheung to determine the status of a worker. In the Zeek case, the Labour Tribunal ruled that six couriers were employees despite their “independent contractor” service contracts because the platform exercised significant control over them. Conversely, in the Deliveroo case, the District Court ruled a rider was an independent contractor, noting that each case must turn on its own specific facts. Factors considered include the degree of control over working time, who provides the equipment, and the level of financial risk borne by the worker.

Globally, other jurisdictions have moved away from this rigid dichotomy. The UK has introduced an intermediate category of “workers” who are entitled to minimum wage and leave pay but not protection against unfair dismissal. Singapore passed the Platform Workers Act, mandating insurance for medical expenses and income loss for gig workers. In Hong Kong, until new legislation is passed, platforms and gig workers must continue to rely on the courts to determine their relationship on a case-by-case basis.

Takeaway: Whether a gig worker is an employee is not determined by the label on their contract but by the actual features of the relationship, including control and financial risk. As long as Hong Kong lacks an intermediate legal class for gig workers, both platforms and workers face legal uncertainty and potential litigation costs to define their status.

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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 © 2026