Introduction

In many Hong Kong companies, employees who moonlight without disclosing it or obtaining consent are breaching their contracts, and may face disciplinary action, have their employment terminated or even be sued for damages. Moonlighting may also be a criminal offence under the Prevention of Bribery Ordinance.

Employment contracts or HR policy must state clearly what amounts to sufficient disclosure over the acceptance of advantages and any outside remuneration, including moonlighting, and who has the authority to approve it. Training and awareness of relevant policies and approval authority are vital, as is a mechanism for declaring outside work.

In this age of the e-commerce and the online “new economy”, start-ups and entrepreneurship, many younger employees with full-time jobs may also have a side business or freelance in their spare time. However, there may be civil or even criminal legal issues that staff and employers need to deal with.

The duties of an employee

In many Hong Kong companies, a usual requirement of the employment contract is that the employee cannot have any outside job, paid or unpaid, without written consent. If an employee moonlights without disclosing it or having obtained consent, this is a breach of their contract, and depending on the terms for sanctions, may be a disciplinary matter or grounds for the company to terminate their employment and sue the employee for damages. An employee who is also a director owes a fiduciary duty. Moonlighting may cause a breach of the fiduciary duty of not making a secret profit or placing themselves in a position where there is conflict of interest. There may be a conflict if the director places the importance of moonlighting work above that of their formal employment.

Breaking the law

Apart from civil liabilities, moonlighting may also be a criminal offence under the Prevention of Bribery Ordinance (“POBO”).

Section 9 (1) of the POBO states that it is a criminal offence for an agent who, without lawful authority or reasonable excuse, solicits or accepts any advantage as an inducement to or reward for doing, or forbearing to do, any act in relation to the agent’s principal’s affairs or business. Section 9 (2) says it is an offence for any person who, without lawful authority or reasonable excuse, offers any advantage to any agent as an inducement or a reward for the agent doing, or forbearing to do, any act in relation to the agent’s principal’s affairs or business.

An “agent” (not the “agent” under Agency law in the civil law context of “principal and agent”) as defined includes an employee. The definition of “advantage” is also broadly defined under the POBO and includes money, gifts, rewards, commission or rebates. The “principal” under the POBO includes, and usually means, the employer.

Accordingly, if an employee (an agent), receives a salary or payment (an advantage) from someone (the “offeror” of the advantage) for the employee doing or not doing something in relation to the principal’s (the employer’s) business or affairs, then unless there is lawful authority or reasonable excuse, it could be a breach of section 9 of the POBO. If the employee is moonlighting for a reward or salary in the same line of business as the employer company, this may be an offence under section 9 of the POBO.

For an employee’s actions or conduct to qualify as an act “in relation to his principal’s affairs or business”, the induced or rewarded conduct must be “aimed at the principal’s affairs or business” and that “subverts the integrity of the agency relationship to the detriment of the principal’s interests”. It need not involve immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense.

Applying this interpretation to an act of moonlighting, if any moonlighting or outside job does not harm the principal’s interests, there should be no violation of section 9 of the POBO. It would only be a crime if moonlighting would subvert the agency relationship between the employer and the employee to the detriment of the employer’s interests.

To avoid any misunderstanding or suspicion of a breach of section 9 of the POBO that may lead to a complaint to the Independent Commission Against Corruption, and that may in turn lead to an investigation, a better way is for the employee to disclose the moonlighting conduct and the reward received and seek permission.

Under section 9 (4) of the POBO, if an agent solicits or accepts an advantage with permission of the principal, being permission which complies with section 9 (5), neither they nor the person offering the advantage shall be guilty of an offence under section 9.

Section 9 (5) provides that permission shall:

• be given before the advantage is offered, solicited or accepted; or
• in any case where an advantage has been offered or accepted without prior permission, be applied for an given as soon as reasonably possible.
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Seeking permission – what is “informed consent”?

Permission of the employer for the employee to accept a payment or reward from moonlighting will amount to a “lawful authority” defence for the employee to answer any section 9 allegations. However, there is no provision or definition in the POBO on “informed consent” or minimum disclosure by an employee.

The courts have decided that the employee’s disclosure for obtaining an employer’s permission “must be adequate and full in the sense that the principal must be specifically advised, or it be otherwise made so crystal clear that he could not deny he ought to have known”. Disclosure must be adequate and timely. Depending on the employer’s policies, if an employee only discloses that they are moonlighting and will be paid, without disclosing how much, this may be insufficient for availing a defence of lawful authority under section 9 of the POBO.

Take-away points for HR professionals

• Whether a disclosure satisfies the “informed consent” requirement under the law depends on whether, in the circumstances and under the employer’s relevant policies, the disclosure was adequate and timely. It is important to state clearly in the employment contract or HR policy what amounts to sufficient disclosure, and who or which department has the authority to give approval.
• Proper training and employee awareness of relevant policies and approval authority are essential.
• It is good practice to have in place a mechanism for all employees, including directors, to declare any “outside” work and specify whether it is remunerated or not.
• Companies should provide guidelines or update their code of conduct governing procedures on obtaining permission for outside work as a volunteer or which is remunerated.

(This article, written by our Partner Mr Dominic Wai, is also published in the February 2018 issue of Human Resources, the Official Journal of the Hong Kong Institute of Human Resource Management.)