Caption
Foreword P.3
Chapter 1 : Employed and Self-employed 1. Factors in distinguishing an “employee” and a “self-employed person” P.4
Chapter 2 : Continuous Contract 2. Whether voluntary and unpaid service rendered by an employee is
reckoned as work done under the definition of a continuous contract P.8
Chapter 3 : Statutory Benefits 3. Whether a contract term between the employer and employee regarding
work on rest days is valid P.12
4. Whether an employee works on rest days voluntarily and whether
compensation is payable P.16
Chapter 4Termination of Employment Contracts 5. Whether a redeployment arrangement leads to constructive dismissal P.19
6. Whether an employee’s misbehavior justifies summary dismissal P.23
7. Whether late payment of wages constitutes dismissal P.26
8. Whether an employee can unilaterally terminate the employment
contract by giving wages in lieu of notice P.30
9. Whether annual leave can be included in the length of notice required to
terminate a contract of employment P.33
10. A valid reason for dismissal under employment protection P.36
Enquiry P.39
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Foreword This booklet outlines the results of 10 civil appeal cases on the Employment Ordinance in simple terms. Through explaining rationales of the various rulings and introducing related good people management practices, we wish to promote understanding of relevant provisions of the Employment Ordinance among employers and employees, thereby enhancing harmonious labour relations and forestalling unnecessary labour disputes. To make this booklet easy to read, information of the cases have been edited or supplemented where appropriate. Readers may refer to the original judgment notes on the website of the judiciary at http://www.judiciary.gov.hk for more thorough understanding of the cases. Furthermore, it should be noted that the Employment Ordinance itself remains the sole authority for the provisions of the law explained. Please refer to the website of the Labour Department at http://www.labour.gov.hk/eng/legislat/content2.htm for the text of the Employment Ordinance. The Chinese version of this booklet is available at the website of this department at http://www.labour.gov.hk/public/content2_3.htm.
1. Factors in distinguishing an “employee” and a “self-employed person”
Facts Mr. Lee was a cross-boundary container truck driver. The defendant operated a company on transportation business. Mr. Lee alleged that he was employed by the defendant since 18 July 1997. He was paid 28% of the transportation fee received by the defendant as wages. The defendant also paid all miscellaneous expenses incurred by Mr. Lee. Mr. Lee contended that he had been constructively dismissed by the defendant since his wages for the month of January 2001 was not paid before 1 March 2001. Although Mr. Lee and the defendant had reached a settlement agreement at the Labour Department, the cheques given by the defendant were dishonoured subsequently. Mr. Lee thus proceeded with his claims against the defendant at the Labour Tribunal with respect to wages in lieu of notice, wages in arrears, annual leave pay, statutory holiday pay, severance payment and reimbursement of miscellaneous expenses. However, the defendant argued that Mr. Lee was an independent contractor and lodged counterclaims against Mr. Lee on loans, unjustified remunerations and other losses at the District Court. The Labour Tribunal subsequently transferred the case between Mr. Lee and the defendant to the District Court for a consolidated trial. Point of Contention Whether Mr. Lee was an employee of the defendant or a self-employed person. Arguments of Mr. Lee 1. Mr. Lee argued that he was responsible for driving the defendant’s
container truck without having to pay any rental. Moreover, he was not allowed to use the defendant’s container truck to transport any goods for any other persons or companies.
2. All equipment was provided by the defendant, who was also responsible for the maintenance and expenses of the container truck.
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3. All expenses incurred in the course of work were paid by the defendant. At the beginning of each month, the defendant would also pay Mr. Lee in advance miscellaneous expenses for petroleum, toll fee, custom and excise fees, etc.
4. The daily work was arranged by the defendant and Mr. Lee had no say in the matter. Mr. Lee had to take rest if no work was arranged. On the other hand, Mr. Lee had to seek approval from the defendant in advance if he wanted to take leave.
5. Mr. Lee was not allowed to contract out his work, and was not required to make any investment.
6. Mr. Lee was not required to and had not applied for a Business Registration Certificate. On the contrary, he had to pay salary tax.
7. Regarding employee compensation, Mr. Lee was covered by an insurance policy taken out by the defendant, and had been paid wages on his sickness days according to the law.
8. The defendant had contributed to an employee provident fund for Mr. Lee, and identified himself as an “employer” on relevant forms.
Arguments of the Defendant 1. The defendant opined that both parties reached agreement regarding
the contract for service according to custom of trade, including how profits were to be shared.
2. The defendant said that he was only a middleman who referred transportation orders from shipping companies to Mr. Lee. Mr. Lee completed his task according to the instructions of the shipping companies. The defendant had no control on how Mr. Lee should drive or how the container truck should be used.
3. Mr. Lee had to bear financial risks and pay the fixed penalty for traffic offences as the defendant was only responsible for the payment of two summonses.
Ruling of the District Court The Judge pointed out many factors had to be taken into consideration in distinguishing an employee from a self-employed person, including the degree of control, whether production equipment was provided by the person performing the service, whether the person has hired other helpers, degree of financial risks, degree of responsibility for investment and
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management, as well as whether the person had an opportunity of profiting from sound management, etc. His ruling was: 1. The defendant, who had the right and responsibility in assigning jobs
to Mr. Lee, was empowered with a form of control. 2. Mr. Lee’s driving licence in Mainland China was not one of the
production equipment. All production equipment was in fact provided by the defendant, including the walkie-talkie and other tools returned by Mr. Lee to the defendant after the notice of termination of employment was issued.
3. Although Mr. Lee had to pay the fixed penalty when over two summonses were received, he was not required to bear other financial risks, to invest or to suffer from any losses in case of a deficit.
4. In view of the above and other undisputable evidences including the fact that Mr. Lee did not have a Business Registration Certificate, the “Employer’s Return on Remuneration and Pension” provided by the defendant, the “Tax Return – Individuals” completed by Mr. Lee, compensation made to Mr. Lee under the employees’ compensation insurance taken out by the defendant, and the contribution made to the Mandatory Provident Fund for Mr. Lee by the defendant, the Judge ruled that the defendant had in fact employed Mr. Lee.
The District Court confirmed the employee status of Mr. Lee and ordered the defendant to pay wages in lieu of notice, wages in arrears, annual leave pay, statutory holiday pay and miscellaneous expenses incurred. Since there was sufficient evidence which proved that Mr. Lee’s vacancy was replaced and he was not terminated due to redundancy, the Judge dismissed his claim on severance payment.
(Adapted from DCCJ 20890/2001 and DCCJ 22517/2001 (consolidated))
Practices of Good People Management To avoid unnecessary dispute, it is important for the relevant parties
to clarify their mode of cooperation and relationship before entering into a contract.
There is no one single conclusive test to distinguish an “employee” from a “contractor/self-employed person”. In determining the kind
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of relationship in each case, all relevant factors as well as circumstances of the case shall be taken into account, including: 1. Calculation of remuneration and scope of work 2. Control on work procedures 3. Ownership and provision of production equipment and material 4. Whether the person has hired other helpers 5. Bearing of financial risks 6. Responsibility for investment and management 7. Whether profits can be made from the management Since the facts and legal considerations in each case are different, the final decision will rest with the court in case of a dispute.
Employers should not unilaterally change the status of their employees to contractors/self-employed persons. This may amount to constructive dismissal and aggrieved employees may claim termination compensation against their employers.
If there exists in essence an employer-employee relationship, employers are still required to fulfil their responsibilities under the law, even though their workers are labeled as contractors or self-employed persons.
An employee should identify who his/her employer is before commencing employment. If necessary, an employee may make a written request to the employer for providing written information on conditions of employment.
An employee should be very cautious if asked to become a contractor or a self-employed person. The risks involved should be seriously assessed as his/her rights and benefits as an employee might be lost.
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Chapter 2 : Continuous Contract
2. Whether voluntary and unpaid service rendered by an employee is reckoned as work done under the definition of a continuous contract
Facts Mr. Tam was employed as a full-time fitness trainer by a health club since 4 November1996. An employment contract was subsequently signed by him on 15 October 1997 (“first contract”). His remuneration comprised commission for giving private lessons to members and an hourly wage for conducting demonstrations. On 28 August 2000, he signed another employment contract (“second contract”) which stated that he had been employed as a part-time private trainer since 1 July 2000. His remuneration was adjusted to comprise an hourly wage and commission for giving private lessons as well as selling courses. The working hours of Mr. Tam were not specified in both contracts. Eventually, Mr. Tam was dismissed. He claimed long service payment, annual leave pay and statutory holiday pay for the entire period of employment at the Labour Tribunal. Points of Contention The employer alleged that Mr. Tam was not employed under a continuous contract (i.e. having been employed continuously for four weeks or more, with at least 18 hours worked in each week) and put forth the remuneration records as proof. In addition, the employer alleged that Mr. Tam’s employment since November 1996 was terminated when he signed the second contract. On the contrary, Mr. Tam stated that he had been staying at the club to sell courses and supervising members other than the paid hours. Although he was changed to work part-time, he was still employed under a continuous contract just as he always was. As such, his length of service and statutory entitlements should be calculated as from November 1996. Ruling of the Labour Tribunal The Presiding Officer of the Labour Tribunal ruled in favour of Mr. Tam
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based on the following considerations: 1. Although Mr. Tam was paid by commission and an hourly wage for
the hours worked, he needed to stay in the clubs for long hours, during which he had provided assistance to members, albeit not receiving any pay from the employer. He was allowed to stay during non-teaching hours as long as he wore his uniform. The Presiding Officer ruled that in addition to those paid hours of teaching and demonstration, Mr. Tam had rendered service to the employer without pay and such hours should also be counted as working hours too. As such, the Presiding Officer considered that Mr. Tam had been working for more than 18 hours a week since 1996.
2. Despite Mr. Tam was changed to a part-time trainer since 1 July 2000, his work, regardless of the nature and working hours, had actually remained unchanged. It was only the employer who unilaterally changed his status and classified him as working part-time or full-time.
Grounds of Appeal The employer appealed against the ruling of the Labour Tribunal, saying that the Employment Ordinance did not define whether work should include unpaid service. In this case, the relevant terms of Mr. Tam’s employment contract did not require him to perform those unpaid activities. The Presiding Officer should not include those unpaid hours in considering whether that Mr. Tam was employed under a continuous contract. Moreover, the employer opined that the second contract had terminated the continuity of the first contract. The workload of Mr. Tam in the second contract had decreased. Mr. Tam enjoyed tremendous autonomy. He was free to decide whether to report to work or to perform selling duties. Ruling of the Court of First Instance of the High Court The High Court upheld the judgment of the Labour Tribunal. It dismissed the employer’s appeal and ruled that the second contract of Mr. Tam was indeed a continuous contract. Major points of the ruling are as follows: 1. Whether Mr. Tam was working did not depend on the way his
remuneration was calculated. One could not rule out that selling
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was actually work done even if both parties agreed that such duties would not be paid. Although the second contract did not require Mr. Tam to perform selling duties, the fact that the employer allowed him to solicit customers at the workplace was tantamount to allowing him to work.
2. Once Mr. Tam wore his uniform in the club, he stood ready to provide service. As such, when he wore his uniform and rendered the unpaid service at the workplace (including waiting), he was actually working.
3. Terminating an employment contract and discontinuing the employee’s length of service were not a trivial matter. Consensus of both parties was utmost important. In this case, the employer had not cleared Mr. Tam’s statutory benefits accrued under the first contract when he signed the second contract. Moreover, the job nature of Mr. Tam has remained unchanged despite he had changed to a so-called part-time employee. Therefore, the second contract had not, legally and de facto, terminated the continuity of employment of the first contract.
(Adapted from HCLA 47/2004)
Practices of Good People Management All employees, be they full-time or part-time employees, are entitled
to basic protection and benefits conferred by the Employment Ordinance. These include protection over payment of wages, restriction on deduction from wages, granting of statutory holidays, prohibition of assignment of heavy, hazardous or harmful work to pregnant employees, employment protection related to unreasonable and unlawful dismissal, employers’ obligation to provide information on conditions of service, etc.
The Employment Ordinance has laid down the definition of employment under “a continuous contract”, but it does not differentiate “part-time” employees from full-time ones. An employee who has been employed continuously by the same employer for 4 weeks or more, with at least 18 hours worked in each week is regarded as employed under a continuous contract.
An employee who is employed under a continuous contract and meets qualifying conditions stipulated in the Employment Ordinance
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is further entitled to other benefits such as rest days, statutory holiday pay, paid annual leave, sickness allowance, paid maternity leave, severance payment, long service payment, etc.
An employer could not unilaterally change his full-time employee to a part-time employee, unless prior consent is obtained from the employee. The employee may claim remedies against his employer under the provision of the Employment Ordinance with respect to unreasonable variation of terms of the employment contract. Alternatively, the employee could make claims against his employer for damages/compensation on the ground of constructive dismissal under common law.
When a full-time vacancy arises, an employer should give priority to their existing pool of part-time staff.
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Chapter 3 : Statutory Benefits
3. Whether a contract term between the employer and employee regarding work on rest days is valid
Facts Mr. Yam and other 9 persons were employed by a restaurant and were retrenched on 31 March 2000 because the business suffered a loss. Their redundancy payment did not include any rest day compensation. Terms of their employment contracts stipulated that the employees could enjoy 4 statutory rest days per month, but they agreed to take rest on 2 days only and worked on the remaining 2 days. The employer considered that extra pay for having to work on the 2 rest days had been included in their monthly salary. On the contrary, the employees opined that the employer failed to comply with the rest day provisions under the Employment Ordinance and decided to claim rest day compensation at the Labour Tribunal. Point of Contention Whether it will be in contravention to the Employment Ordinance if the terms of an employment contract set out that the employee agreed to work on some of the rest days. Ruling of the Labour Tribunal By setting out in the employment contract and requesting employees to consent to take 2 rest days while working on the remaining 2 rest days every month, the employer contravened the Employment Ordinance which provides for an employee’s entitlement of having at least one rest day in every period of seven days. Besides, no employer had the right to oblige an employee by contract or compel any employee to work on a rest day. The relevant contract term therefore would be treated as void under the Ordinance. Since the employees were unable to enjoy all their rest days during employment and were retrenched, the employer was required to pay them rest day compensation. Grounds of Appeal The employer disagreed with the ruling of the Labour Tribunal and appealed to the Court of First Instance for the following reasons:
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1. The employees could choose to enjoy all 4 rest days and refuse working for the employer on such days.
2. The monthly salary of employees had included extra pay for their work on rest days. Employees might receive double benefit if the employer had to give further rest day compensation to them.
Ruling of the Court of First Instance of the High Court The Court of First Instance maintained the ruling of the Labour Tribunal and held that: 1. The employees had no choice whether or not to abstain from working
on 2 out of their 4 rest days each month. Besides, if an employee had taken leave for more than the contract specified, he would be regarded as absent and wages would be deducted.
2. The employer did not have the right to use any means or methods to reduce the employees’ benefits. It was not acceptable even if such practices were common in the industry.
3. Even though the employees might receive double benefit, it was the result of the employer’s intent to evade his liability on employees’ protection.
Grounds of Appeal The employer appealed to the Court of Appeal and put forward the following reasons: 1. Both parties entering into employment contract had the liberty to
negotiate on any contract terms. 2. The employees had received extra pay for the rest day work.
Further rest day pay would amount to double benefits. Ruling of the Court of Appeal The Court of Appeal did not accept the contention of the employer about freedom on negotiation of whatever contract terms and held that the terms agreed between the parties must be allowed under the law. The Court inferred that as the contract term about rest day of the current case was in conflict with the Employment Ordinance, such term was void. The reasoning of the Court was: 1. The contract term had reduced the employee’s rights and protection
on rest days. The employer failed to adhere to the Employment Ordinance and to arrange employees with one rest day in every
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period of seven days. 2. If the employees failed to obtain the consent of the employer and
took rest on days other than the 2 rest days specified in the employment contract, they would be regarded as breaching the contract.
3. The contract term made the employees feel that if they opted to take rest on “a rest day that they were expected to work”, they would violate the employment contract and would result in dismissal or disciplinary actions.
With regard to the double benefits of employees on rest day compensation, the Court of Appeal concluded that if extra pay on the rest day work was proven to have been paid to the employees, they should not have further compensation.
(Adapted from HCLA9/2001 & CACV1950/2001)
Practices of Good People Management If there are operational needs for an employee to work on rest days,
the employer should obtain the employee’s consent each time before arranging him/her to work on rest day originally scheduled. An employer should maintain the records of his/her employees’
consent for working on the nominated rest days. An employer should clearly set out the compensation for his/her
employees if they are required to work on rest days. If the compensation is made in the form of a substituted rest day, it must be arranged within the same month before the original rest day or within 30 days after it. If the compensation is made in pecuniary terms, the daily rate should be specified and payment should be made within the same wage period to which the original rest day belongs. An employer should devise a reasonable rest day roster for
employees who are required to undertake shift duties. This is to avoid employees working prolonged hours and to maintain their efficiency and productivity. Rest days, statutory holidays and paid annual leaves are different
types of leave and could not be used to substitute each other. Employer should note the restriction on payment in lieu of granting
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leaves under the Employment Ordinance. To meet the needs of both parties, employer should negotiate with
his/her employees in advance the arrangement of different kinds of holidays. An employer should keep a proper record of the leave arrangements
and details of the compensation payable to his/her employees. Such information should be conveyed to the employees periodically, for example setting out the information in employees’ monthly pay slips, so as to enhance communication between the management and staff on leave arrangements.
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4. Whether an employee works on rest days voluntarily and whether
compensation is payable
Facts Mr. L has been employed by a shipping company as a system analyst since May 1998. His employment was terminated in December 2002. He then lodged a claim against the company in the Labour Tribunal and was awarded wages in lieu of notice and other compensation. In October 2005, Mr. L made another claim in the Labour Tribunal seeking compensation for overtime work on holidays and rest days during his employment with the company. Mr. L claimed that in the course of his entire employment with the company, he was compelled to work on all public holidays and rest days. As a result, he had performed over 1 600 hours of overtime work, but had not been remunerated by the company. On the other hand, the employer contested that Mr. L had been given a rest day on each Sunday and there was no record of Mr. L signing in to work on Sundays. If Mr. L had worked on rest days, it was performed on a voluntary basis. Points of Contention Whether Mr. L voluntarily worked or was compelled to work on rest days and whether he should be entitled to compensation. Ruling of the Labour Tribunal The Presiding Officer dismissed the claim on the following grounds: 1. There was no agreement indicating that Mr. L was entitled to receive
payment for overtime work. 2. There was no evidence indicating that Mr. L was forced or compelled
to work on public holidays and rest days. 3. On the contrary, Mr. L voluntarily worked on Sundays and public
holidays in line with the company’s culture and practice and out of obedience to his boss (who was a friend of his mother).
Grounds of Appeal Mr. L was discontented with the decision of the Presiding Officer and put up the following arguments in support of his appeal: 1. The employer issued memos to request staff to work on rest days.
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2. He would be dismissed if he were to refuse his boss. 3. Some 30 – 40 people worked between 10 a.m. and 1 p.m. on Sundays
and holidays. It was not possible that the work was voluntary. 4. As the Presiding Officer had found Mr. L’s witnesses credible, he
should not have dismissed Mr. L’s case. Ruling of the Court of First Instance of the High Court The Court found that the evidence given by the claimant and the witnesses as well as other documents did not support Mr. L’s claim that he worked on Sundays and public holidays under compulsion. Accordingly, the Court upheld the decision of the Labour Tribunal. The Judge pointed out that: 1. As pointed out by the two witnesses called by Mr. L, it was the
company’s culture that people came in to work on Sundays and public holidays but no one had ever been dismissed for reason of refusal to work on holidays. Mr. L’s contention about possible dismissal for not working on Sundays and public holidays was hypothetical.
2. A witness called by Mr. L also indicated that there were a number of occasions when the boss asked him not to come to work on Sundays and his superior had never forced him to come to work on rest days or public holidays. Although Mr. L had come to the office on Sundays, staff who came to work on Sundays could choose to leave the office any time they chose to.
3. The Judge considered the witnesses called by Mr. L as independent witnesses and their evidence should carry great weight because both of them had left the company.
On the above grounds, Mr. L failed to show that his appeal involved any arguable points of law. The application for leave to appeal was dismissed.
(Adapted from HCLA 29/2006) Practices of Good People Management An employee employed under a continuous contract is entitled to not
less than one rest day in every period of seven days. The Employment Ordinance provides that an employer must not
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compel an employee to work on a rest day except in the event of a breakdown of machinery or plant or in any other unforeseen emergency. For any rest day on which the employee is required to work, the employer should substitute some other rest day within 30 days after the original rest day. The employer should notify the employee of the arrangement within 48 hours after the employee is required to work.
An employee may work voluntarily on a rest day. The employer must obtain the employee’s prior consent each time before arranging such work.
For record purpose, the employer should document the employees’ consent to work on rest days.
An employer and an employee should clearly agree on the compensation to be made for the employee’s work on a rest day. For a substituted rest day, it must be taken within the same month before the original rest day or within 30 days after it. For pecuniary compensation, its rate should be specified and payment be made within the same wage period of the original rest day.
An employer should make reasonable rest day arrangements for staff and prevent them from working prolonged hours so as to safeguard their health and enhance their work quality and efficiency.
Rest days, statutory holidays and paid annual leave are different types of leave. They should not be used to substitute one another.
An employer and an employee should agree in advance on the leave arrangements to cater for the needs of both parties.
An employer should keep proper records of leave arrangements and details of leave compensation of each employee.
An employer should cultivate an organization culture that underlines the employees’ needs and encourages and assists employees to maintain a proper balance between work and family life.
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5. Whether a redeployment arrangement leads to constructive dismissal
Facts A cleaning contract between a cleaning service contractor (the employer) and a public transport utility would not be renewed upon its expiry on 30 November 2001. The employer intended to redeploy the affected workers (over 500 strong) to other workplaces. In view of the opposition of workers against such move, the employer attempted a second redeployment but the employees were still dissatisfied. The workers accused the employer of forcing them to resign by means of unreasonable redeployment. They demanded severance payment before deciding on whether the redeployment arrangement would be accepted. The employer appealed to the workers to report duty to the newly designated workplace on 1 December 2001, or else they would not be entitled to severance payment. On the contrary, the workers considered that they had been constructively dismissed by the employer. A Madam WONG and other 157 workers filed claims for severance payment and miscellaneous compensation against the employer, and over 90% of the claimants joined another contractor on 1 December 2001 and continued to work in the same place since then. Point of Contention Whether the claim of employees against their employer for severance payment arising out of “constructive dismissal” was substantiated. Ruling of the Labour Tribunal The Presiding Officer dismissed the claim of Madam Wong and others. He considered that: 1. The employer was a multinational enterprise, engaging over 5 000
cleaning workers in no less than 2 000 service contracts in Hong Kong. As the claimants were all general cleaning workers, given its business scale, the employer should be able to look for sufficient posts to absorb all of the employees.
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2. Even though the employer failed to canvass sufficient posts at one go, so long as it agreed to pay normal wages to the claimants for the time being, whether there were enough vacancies or not was not material. Besides, the employer had provided evidence that measures had been adopted with a view to absorbing all workers in a few months’ time.
3. It was unreasonable for the claimants to refuse any redeployment on the pretext that there would be insufficient vacancies or they would be incessantly deployed.
Grounds of Appeal The claimants appealed against the ruling based on the following arguments: 1. In redeploying the workers, whether the employer was acting within
the power provided under the mobility clauses of the employment contracts. Even if the employer had the contractual power to redeploy the workers, whether the exercise of such power has breached any statutory duty under the Employment Ordinance or constituted constructive dismissal.
2. The gist of the mobility clause was as follows: “If there is a need, the employee has to accept reasonable redeployment by the employer, including transferring to another workplace or position”.
Ruling of the Court of First Instance of the High Court The judge ruled that the employer, through redeploying the workers instead of dismissing them, has not violated any statutory or common law duty. The reasons are as follows: 1. The judge considered that the “need” specified in the contract should
refer to that of the employer. Upon termination of the cleaning contract, the employer had the need to redeploy the manpower to other workplaces, even though there was no immediate requirement for additional workers at those new locations. As to whether the redeployment was reasonable, according to the redeployment notices, the judge noted that the employer had undertaken to pay extra transportation costs. There was also no indication that the workers would be busier than before. Considering further other factors such
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as the transportation facilities in Hong Kong and the nature of cleaning services, the judge concluded that the redeployment was not unreasonable.
2. According to the Employment Ordinance, unless and until the employer terminates the contract with an employee, the latter will not be entitled to severance payment. In this case, since the employer had chosen to continue employing the workers and pay them the same amount of wages, there was no lay-off. The judge did not concur with the view that surplus workers would trigger a right to severance payment.
3. In determining whether the redeployment would lead to constructive dismissal, the judge looked at the matter from three different perspectives: a. Whether there was any repudiation of contract: As there was no
significant changes on the work nature (including workplaces and employment terms) of the claimants, the redeployment arrangement did not constitute repudiation of contract.
b. Whether the employer had acted rationally: Such implied duty did not require the employer to dismiss surplus workers. Under lawful circumstances, the employer could exercise its power of redeployment rationally. The judge opined that the employer had not violated such duty in either the first or second redeployment exercises.
c. Whether the employer had damaged the implied duty of mutual trust and confidence between an employer and an employee: The judge considered that any term implied in a contract should be consistent with the express terms as well as the legislation. As the judge had already ruled that the mobility clauses were applicable, the redeployment exercise based on such clauses should not have damaged mutual trust and confidence. Moreover, he could not rely on this implied duty to deduce that an employer had the obligation to give severance payment in case of excessive workforce, for this would contradict section 31E (provision about lay-off) of the Employment Ordinance.
(Adapted from HCLA 56/2003)
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Practices of Good People Management To avoid unnecessary labour disputes, an employer should redeploy
the employees only when there is a genuine operational need. Such redeployment should be rational and in compliance with the law and terms of the employment contract.
The redeployment exercise should be conducted in a transparent and open manner as far as possible. The employer should also enhance staff communication in order to ease their worries.
Upon taking out a redeployment exercise, an employer should take care of the needs of the employees and offer appropriate measures to help them adapt to new posts or workplaces.
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6. Whether an employee’s misbehavior justifies summary dismissal Facts Mr. Chan was employed by a transportation company as a lorry/godown assistant. Since mid March 2003, he had touched the hair of his colleague, Miss Leung, who was suffering from congenital speech and hearing difficulties, for at least six times. Miss Leung did not like to be touched and had made that known to Mr. Chan on every occasion. In one instance, when asked by Miss Leung why he did not touch the hair of other female colleagues, Mr. Chan went to touch the hair of another female colleague, Miss Cheng, who was not at all upset and just gave a laugh. On 24 April 2003, Mr. Chan touched Miss Leung’s face with the back of his hand once. Miss Leung was very upset and her aunt made a complaint to the company on the following day on her behalf. Management of the company interviewed Mr. Chan who admitted touching Miss Leung but considered it was no big deal. The company later summarily dismissed Mr. Chan. Mr. Chan then lodged a claim against the company for termination compensation. Point of Contention Whether the act of touching the hair and face of a colleague who has repeatedly expressed her dislike justifies the summary dismissal. Ruling of the Labour Tribunal The Deputy Presiding Officer found that Mr. Chan’s touching of Miss Leung was a form of ordinary social contact between friends and colleagues as evidenced by the fact that Miss Cheng was not offended. Thus, summary dismissal was not justified. Grounds of Appeal The company appealed against the order on the grounds that the Deputy Presiding Officer wrongly determined that: 1. The touching of the hair/head and face of a female colleague did not
amount to an act which called for summary dismissal. 2. Since the touching was accepted by another female colleague
without objection, therefore the touching was merely a friendly
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gesture.
Ruling of the Court of First Instance of the High Court The Appeal was allowed on the following grounds: 1. Touching was an assault and battery if a person had indicated clearly
that she did not consent to be touched. One person’s consent to being touched did not mean that another person also consented to be touched.
2. Mr. Chan knew that Miss Leung did not consent to being touched. Yet he repeatedly touched her. It was a misbehavior of Mr. Chan to touch Miss Leung without her consent even though Miss Cheng found the touching by Mr. Chan acceptable.
3. An employer had a duty to provide a safe and decent working environment for his employees. Not only did Mr. Chan touch Miss Leung repeatedly, he was unremorseful and said it was no big deal when interviewed by the management. Apart from abusing a fellow worker, Mr. Chan was a nuisance at the workplace. The employer was not only entitled but under a duty to remove him for the protection of his other employees.
(Adapted from HCLA 99/2003)
Practices of Good People Management Employers should lay down fair and reasonable rules of conduct and
grievances and disciplinary procedures for the staff. They should also ensure that such rules and procedures are not contrary to provisions of the Employment Ordinance and are made known to all staff.
In case of staff grievances and disciplinary cases, employers should handle the cases or complaints according to established rules and procedures in a timely manner so as to avoid the situation from worsening.
When handling such cases or complaints, employers must investigate the matters in a fair and unbiased manner and give every party involved sufficient opportunity to explain their cases.
Depending on its severity, employers should handle the case according to the procedures for dealing with misconduct. On one hand, employers should give an opportunity to the concerned staff to
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improve or take out appropriate disciplinary action. On the other hand, they should protect the safety and benefits of other employees.
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7. Whether late payment of wages constitutes dismissal
Facts Mr. Chan, together with 5 other claimants, were employed by the employer as cross-boundary or local container truck/lorry drivers. Their length of service ranged from 5 to 19 years. At the end of 2001, the employer proposed a 10% wage deduction but the proposal was turned down by the employees. The employer served written termination notice to the employees on 28 February 2002 with the effective date on 31 March 2002. However, the employees left employment after serving a “Notice of Constructive Dismissal” to the employer on 11 March 2002 as container fees, being part of their wages, were unpaid for over 1 month. The employer contended that the employees had gone on strike. The employees lodged their claims at the Labour Tribunal for wages in lieu of notice, annual leave pay, statutory holiday pay, end of year payment and severance payment or long service payment. The Presiding Officer awarded the employees with annual leave pay, statutory holiday pay and part of the end of year payment. The Presiding Officer dismissed the claims on wages in lieu of notice, end of year payment for 2002 and severance payment (or long service payment). Point of Contention Whether the employees were entitled to apply section 10A of the Employment Ordinance and deemed their employment terminated due to non-payment of wages for over 1 month. The pay day of container fee was relevant in this respect. Ruling of the Labour Tribunal The Presiding Officer ruled that: 1. Wages of each employee comprised basic salary and container fees.
As a practice, basic salary of the preceding month was paid on the first few days each month while the container fee of preceding month was paid on the 15th day. The employer paid the basic salary of January 2002 in early February 2002 but the container fee of January 2002 was not paid on 11 March 2002, the day when the employees served “Notice of Constructive Dismissal” to the employer. The Presiding Officer considered that since the
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container fee of January 2002 should be paid on 15 February 2002, such sum was not overdue for 30 days as at 11 March 2002.
2. The Presiding Officer accepted the explanation of the employer and ruled that no concrete date of payment for container fee was agreed by both parties, and that it was paid normally in the second half of each month. The Presiding Officer further considered that when the employees returned their driving licences and relevant documents for cross-boundary transportation to the employer, they had in effect terminated the employment relationship with the employer. Since the employees terminated their employment unilaterally, they were not entitled to severance payment or long service payment, as well as end of year payment for 2002.
Grounds of Appeal The employees disagreed with the judgment of the Labour Tribunal and appealed for the following reasons: 1. The Presiding Officer erred in ruling that it was the employees
instead of the employer who had terminated the employment contract.
2. Even if the employment contract was terminated by the 6 employees unilaterally, the employees were still entitled to severance payment or long service payment, as well as end of year payment.
Ruling of the Court of First Instance of the High Court The court allowed the employees’ appeal because: 1. In accordance with section 2 of the Employment Ordinance, “wage
period” means “the period in respect of which wages are payable under a contract of employment or under section 22”. Section 22 of the Employment Ordinance stipulates that “the wage period in respect of which wages are payable under a contract of employment shall, until the contrary is proved, be deemed to be one month”. Section 23 stipulates that “wages shall become due on the expiry of the last day of the wage period and shall be paid as soon as is practicable but in any case not later than seven days thereafter”.
2. In this case, since the Presiding Officer has accepted the arguments of the employer that no payment date of container fee was agreed by both parties, according to the interpretation of “wage period” under section 2 of the Employment Ordinance, the presumption in section
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22 and requirement in section 23, the container fee of January 2002 should be paid on 1 February 2002, or not later than 8 February 2002. Hence, if the employer had not paid the container fee within one month from 8 February 2002 (i.e. on 7 March 2002), the employees were entitled to deem their employment terminated in accordance with section 10A of the Employment Ordinance and claim wages in lieu of notice.
3. The employer alleged that he used to pay container fee of the preceding month on the 15th day or the second half of each month. However, this arrangement only showed that payment of wages was delayed without making any change to how the wage period should be reckoned. Even if the Presiding Officer accepted that the employer was used to making such an arrangement, the Presiding Officer did not find that a special agreement on the wage period had actually been reached between the employer and the employees, which rendered section 22 of the Employment Ordinance which specified that a wage period would be deemed to be one month inapplicable.
4. The “Notice of Constructive Dismissal” served by the employees to the employer on 11 March 2002 was valid under the law. The employees were entitled under the Employment Ordinance to claim wages in lieu of notice, severance payment or long service payment, as well as end of year payment for 2002 against the employer.
5. In addition to the payments awarded by the Labour Tribunal, the employer should pay wages in lieu of notice, end of year payment for 2002 and severance payment to the employees.
(Adpated from HCLA59/2003)
Practices of Good People Management Since verbal agreement is open to misunderstanding or argument,
rights and obligations of the employer and employees should be set out in a written employment contract to avoid unnecessary labour disputes.
Methods of calculating wages, including basic salary, allowances and overtime payment, manner of payment and payment date should be clearly defined in a written employment contract.
Employers should clearly explain the employment terms and
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conditions to employees. A copy of the written contract should be given to the employees for retention and reference immediately after it is signed. Employees should also take the initiative to understand details of their employment contract and staff handbook, and keep relevant employment records for reference.
If an employer is going to vary the terms and conditions of any employment contract, he should discuss with the employee concerned and give sufficient prior notice, say 7 to 14 days, to the employee for consideration. An employer shall secure the consent of the employee before implementing any variation.
Wages are due on the expiry of the last day of the wage period or the date of termination of contract. An employer should pay wages to an employee as soon as practicable but in any case not later than seven days after the end of the wage period or the date of termination of contract. If the employment contract is terminated before the expiry of a normal wage period, an employer should clear the outstanding wages within seven days after the termination. An employer is required to pay interest on the outstanding amount of wages if he fails to pay wages to the employee when it becomes due.
Any employer who wilfully and without reasonable excuse fails to pay wages to an employee when it becomes due is liable to prosecution and, upon conviction, to a fine of $350,000 and to imprisonment for three years.
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8. Whether an employee can unilaterally terminate the employment contract by giving wages in lieu of notice
Facts Two solicitors planned to terminate their employment contracts with the employer. According to the contract, their notice period of termination of contract was three months. On 19 August 2005, they gave their employer three months’ notice of termination in writing, yet they claimed that they would only work for one more month, and at the same time they submitted a cheque corresponding to two months’ wages in lieu of the remaining notice period. The employer did not accept their termination notices and refused to receive their cheques. One month later, i.e. on the date of termination, the two solicitors resubmitted those cheques to the employer who still declined them. The employer subsequently filed a case at the High Court requesting adjudication on the matter. Points of Contention The parties disagreed on the interpretation of the Employment Ordinance. According to sub-sections (1) and (2) of section 7 of the Employment Ordinance:
(1) “… either party to a contract of employment may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the period of notice required …”.
(2) “Either party to a contract of employment, having given proper
notice …, may at any time thereafter terminate the contract by agreeing to pay to the other party such proportion of the sum referred to in sub-section (1) as is proportionate to the period between the termination of the contract and the time when the notice given would have expired.”
Arguments of the Employer The employer considered that the two solicitors had not terminated the employment contracts in accordance with section 7(1), as the way of termination by giving two months’ wages in lieu of notice had not been
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agreed with the employer. Moreover, even if it would be unnecessary to obtain consent from the employer, their termination notices were still in contravention with section 7(2) because both solicitors had enclosed the cheques representing wages in lieu of notice when they tendered the resignation notices on 19 August, but not thereafter. Ruling of the Court of First Instance of the High Court The judge ruled that the termination notices given by the two solicitors were valid notices and were in compliance with the provisions of the Employment Ordinance for the following reasons: 1. The meaning of “by agreeing to pay” provided both parties of the
contract an opportunity to cease working before the end of notice period by paying wages in lieu of notice. In fact, if the two solicitors merely gave their employer one month’s notice without paying two months’ wages in lieu of notice, the employer could seek damages from them for wrongful termination of contract under section 8A of the Employment Ordinance, in a sum equivalent to the amount of wages in lieu of notice offered.
2. In general, an employer would not seek the consent of an employee before a dismissal was made in accordance with section 7. This should apply to the employees vice versa.
3. Besides, “by agreeing to pay to the other party” simply meant the willingness or promise to pay, but not “by agreeing with the other party to pay”.
4. In this case, the employer opined that the two solicitors have submitted the cheques of two months’ wages while tendering their resignation letters on 19 August. Hence, the cheques were not submitted after giving the notice of termination. The judge did not accept such an argument. He furthered that, as the employer had not accepted their cheques, the two employees resubmitted the cheques the second time after one month, i.e. on their last working day, obviously after resignation letters were tendered.
(Adapted from HCA 1854/2005)
Practices of Good People Management By virtue of the Employment Ordinance, either the employer or the
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employee has the right to terminate the employment relationship by giving the other party an appropriate notice under section 6 or giving a sum of wages in lieu of notice to the other party under section 7.
To avoid unnecessary disputes, an employer should state clearly the notice period of termination in the employment contract.
An employer should be considerate towards an employee who is leaving, and provide him/her with necessary assistance (such as preparing reference letters) as far as possible. Although the employment relationship comes to an end, both parties should treat each other with respect.
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9. Whether annual leave can be included in the length of notice required to terminate a contract of employment
Facts Mr. Chan has been employed by a transportation company since 31 March 1998 as a coach driver. The employment contract provided that either party might terminate the employment by giving 15 days’ notice or wages in lieu of notice. In the afternoon of 16 August 2005, the employer’s representative, Mr. So, verbally informed Mr. Chan that his employment would be terminated and he did not have to return to work after 31 August 2005. In addition, Mr. So told Mr. Chan that Mr Chan had to take eight days of his accrued annual leave within the notice period. Mr. So instructed Mr. Chan to start taking the annual leave on 17 August 2005. However, Mr. Chan did not return to work after 16 August 2005. The employer claimed that Mr. Chan agreed to the above termination arrangements. Hence, after the 8 days’ annual leave was over, Mr. Chan should have returned to work. Although the employer issued a written warning on 28 August 2005, Mr. Chan did not resume work. The employer therefore contended that Mr. Chan had wrongfully absented himself from work and was in breach of the employment contract. On 19 October 2005, Mr. Chan commenced proceedings in the Labour Tribunal claiming against the employer wages in lieu of notice, severance pay, long service pay and annual leave payment. At the same time, the employer lodged a counterclaim against Mr. Chan for 15 days of salary in lieu of notice and overpaid salary. Points of Contention Whether Mr. Chan had terminated the employment contract by wrongfully absenting himself from work or whether he was dismissed by the employer and when the termination took place. Ruling of the Labour Tribunal The Presiding Officer rejected the employer’s claim that Mr. Chan had agreed to the arrangement of using eight days of his accrued annual leave as part of the notice period for the termination, or that Mr. Chan voluntarily accepted to start taking annual leave on 17 August 2005. He also disbelieved the employer’s claim that a written warning had been
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issued. The Presiding Officer applied section 6(2A) of the Employment Ordinance which provided that annual leave to which an employee was entitled should not be included in the length of notice required to terminate a contract of employment. Section 41AA of the Ordinance also required an employer to give no less than 14 days’ written notice for the employee to take annual leave. On the above grounds, the Presiding Officer held that Mr. Chan’s employment was terminated on 16 August 2005 without proper notice and Mr. Chan was under no obligation to return to work thereafter. Therefore he should not be regarded as having wrongfully absented himself from work. Mr. Chan was awarded wages in lieu of notice and other compensation. Grounds of Appeal The employer was dissatisfied with the decisions and filed an appeal on the grounds that the Presiding Officer failed to consider the validity of the termination of the employment and that as Mr. Chan had misconducted himself by failing to report to work, he should not be entitled to any termination payments. Ruling of the Court of First Instance of the High Court The judge upheld the decisions of the Labour Tribunal and dismissed the appeal on the grounds that: 1. The Presiding Officer found that Mr. Chan had not agreed to include
eight days of his accrued annual leave as part of the 15 days’ notice period required to terminate the employment. This was a judgment of fact.
2. The employer had contravened section 6(2A) of the Employment Ordinance by including annual leave as part of the 15 days’ notice period. Although the employer purported to give 15 days’ notice in accordance with the employment agreement, the notice was invalid because it was short of the required 15 days. The termination was therefore a wrongful termination.
3. The contract of Mr. Chan was wrongfully terminated on 16 August 2005. Hence the fact that he did not report to work after 16 August
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2005 did not constitute a breach on his part. Neither could it be regarded as misconduct that justified summary dismissal.
(Adapted from HCLA 28/2006)
Practices of Good People Management To terminate an employment contract, both employers and
employees should comply with the provisions of the Employment Ordinance in giving sufficient notice or payment in lieu of notice.
Employers and employees must not include annual leave provided under the Employment Ordinance in the length of notice required to terminate a contract of employment. Otherwise, they will be breaching the Employment Ordinance.
An employer must not force or through other means request an employee to accept annual leave as part of the notice period required to terminate a contract of employment. Any terms of an employment contract which extinguishes or reduces any right and benefit conferred upon an employee by the Employment Ordinance is void.
An employer should make proper arrangements for employees to take annual leave and should follow the provisions of the Employment Ordinance by giving the employees notice in writing not less than 14 days in advance.
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10. A valid reason for dismissal under employment protection Facts Mr. V worked for a newspaper company as a journalist for 4 years and 11 months. Before dismissal, Mr. V wrote an article and his employer found that substantial portions of it were directly copied from another piece of writing. The employer wrote to Mr. V stating that it was a clear case of copyright infringement. Mr. V replied and denied the accusation, saying that the piece was a comprehensive reworking of the source material. Mr. V later received one-month notice of termination from the employer. Mr. V considered that the employer had breached the mutual obligation of trust and his dismissal was wrongful and unreasonable. He then commenced proceedings against the employer in the Labour Tribunal for remedies of unreasonable dismissal and other damages. Labour Tribunal transferred the case to the Court of First Instance of the High Court. Point of Contention Whether Mr. V’s act of plagiarism constituted a valid reason for dismissal under the employment protection of the Employment Ordinance. Ruling of the Court of First Instance of the High Court The Court agreed that Mr. V’s act of plagiarism amounted to serious professional misconduct for a journalist. Therefore, the employer could adopt the “conduct of the employee” as a valid reason for dismissal under the employment protection of the Employment Ordinance. However, the Court took the view that the employer had not reasonably considered the circumstances of this specific case, such as the facts that the conduct was a first offence, the company had not put in place any formal disciplinary process, the plagiarism had not caused any actual loss to the company, and the employee was very close to completing the qualifying period for a long service payment. The Court inferred that dismissal decision was flawed and without support of proper reasons. The employee was awarded with terminal payments under unreasonable dismissal.
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Grounds of Appeal The employer disagreed with the decision of the Court of First Instance of the High Court. It considered that the Court had rebutable presumption towards the valid reasons for dismissal and the dismissal was solely attributed to “conduct of the employee”. Ruling of the Court of Appeal The Court of Appeal allowed the appeal and set aside the judgment of the Court of First Instance. It held that: 1. The valid reasons under the employment protection were all reasons
of substance. These reasons, including “conduct of the employee”, must be true. Employer could not discharge his decision because of some trivial conduct or any act which the employer found that he did not like.
2. If the employer could prove that the dismissal was made with a valid reason under the Employment Ordinance, it was not for the court to decide whether the termination process was reasonable, fair and effective or otherwise.
3. If the employer had proven that the dismissal was made with a valid reason at the time of dismissal, whether the employer would be exposed to a possible lawsuit by the copyright owner was not relevant to the dismissal decision.
4. The employee had committed serious professional misconduct, therefore the dismissal was due to substantive reasons.
Grounds of Appeal Mr. V disagreed with the decision of the Court of Appeal. He pointed out that the employer had not adopted the correct approach to show that the dismissal decision was not an intention to extinguish or reduce any right, benefit or protection of an employee under the Employment Ordinance. Ruling of the Court of Final Appeal The Court of Final Appeal dismissed the appeal of Mr. V. The Court found the employee guilty of disobeying a general instruction of the company, copyright infringement, plagiarism and serious professional misconduct for a journalist. When Mr. V responded to his employer’s invitation to explain his conduct, he still refused to admit plagiarism.
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Such misconduct induced the dismissal decision. The judge therefore came to a conclusion that a true and relevant reason for dismissal under the employment protection has been shown.
(Adapted from HCA6233/1999, CACV253/2002
& FACV2/2005) Practices of Good People Management The employer should formulate code of practices and disciplinary
procedures and make sure that they are easy to understand, reasonable and fair. Such practices and procedures should be put down in writing. The employer should ensure that the information was made known to every employee. Besides, the employer should check if his/her employee understands the employer’s requirements and the relevant codes before commencement of employment. If an employee is not punctual, absent from duty without leave or
unable to maintain performance standard, the employer should handle the misconduct according to disciplinary procedures and give the employee an opportunity to improve. A single incident of misconduct, unless it seriously violates the foundation of the contract, may not be admitted as a reason for summary dismissal. If an employee has neglected his/her duties, the employer should
adopt appropriate disciplinary measures. If an employee disobeys an order, the employer should consider
whether such order is reasonable and legitimate or not. If the order is related to work arrangement, the employer should figure out whether it contravenes the employment contract or not. If an employee is found guilty of fraud or dishonesty, the employer
should conduct an in-depth investigation for collecting facts and evidence. Employer should hold an equitable and fair attitude and give the employee an opportunity to answer the case. The investigation should be documented and the result should be announced to the employee in a comprehensible format once available.
Under all circumstances, employer should ensure that the disciplinary procedures and penalties do not violate the Employment Ordinance or any other legislative provisions.
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Enquiry
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