Most Read Contributor in Hong Kong, September 2016
In the recent Hong Kong High Court decision of Lam Chun Choi
v. Standard Chartered Bank (Hong Kong) Limited (HCLA 15/2015),
the Court held that the employer was obliged to apply its
disciplinary procedures (the "Procedures") to an employee
even though the employee's performance had already been the
subject of a performance improvement plan (PIP). The case involved
a point of contractual interpretation on when the Procedures must
be applied to an employee.
The plaintiff was an underperforming employee of Standard
Chartered Bank (the "Employer"). He was put on a PIP. At
the end of the PIP period, the employee's performance remained
short of the Employer's expected standards. The Employer then
terminated the employee's employment by payment of wages in
lieu of notice.
The employee sued the Employer for wrongful dismissal. He
claimed that the Employer failed to (also) apply the Procedures
before deciding whether to terminate his employment. The employee
claimed that the Procedures formed part of his employment contract
and the evaluation of work performance fell within the scope of the
The Employer argued that the Procedures only applied to
"misconducts or conduct-related performance
issues" and not to straightforward cases of poor
performance. As the employee's poor performance could not be
categorised as misconduct or conduct-related, the Employer argued
it was entitled to terminate the employee's employment without
having to implement the Procedures beforehand.
The key question for the Court was whether the employee's
issues of poor performance fell within the scope of the Procedures.
This was a matter of interpreting the language of the
The Court held that the Procedures expressly excluded
"minor conduct and performance issues" from its scope.
However, the Procedures made multiple references to both
"conduct" and "performance" issues as falling
within its scope. The Court held that on a proper interpretation of
the Procedures, they applied to both conduct issues (including
wilful disobedience, dishonesty or conflict of interest) and
performance issues (including incompetence, neglect of duty or
general sloth or indolence), but excluding cases where the degree
of severity of the conduct or performance was
As a result, despite the Employer having already reviewed the
employee's performance under their PIP, the Court held that the
Employer should have additionally applied the Procedures to the
Lessons For Employers
It is not unusual for Hong Kong employers to have in place
internal processes for handling employee underperformance and
misconduct. These procedures can offer transparency and provide for
consistency in treatment of employees. However, care should be
taken to ensure that the procedures do not unnecessarily prolong a
process for managing an underperforming employee, such as in the
present case. An employer should carefully (a) define the scope of
when its performance process and disciplinary procedures will be
applied, and (b) set out how the performance process and
disciplinary procedures will interact with each other (e.g.,
provide that if a PIP has been implemented, then the disciplinary
procedures will not be applied in respect of the same performance
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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