I. INTRODUCTION

i. Sources of law

The sources of employment law in Hong Kong are local legislation (ordinances, regulations and Codes of Practice¹) and the common law. The Hong Kong courts will often consider the jurisprudence of England and other common law jurisdictions. Prior to the transfer of sovereignty over Hong Kong to China, the decisions of the English courts were binding on Hong Kong courts. Since 1 July 1997, the decisions of the English courts only have persuasive authority in Hong Kong.

ii. The Employment Ordinance

The principal employment legislation in Hong Kong is the Employment Ordinance. This sets forth many mandatory employment rights, obligations and protections for employees and employers which apply to the formation of an employment contract, wages, benefits, leaves of absence, termination of employment, entitlements upon termination and employment records. Parties may not contract out of the Employment Ordinance provisions. Any agreement attempting to do so is void.

iii. Dispute resolution

The hierarchy of the courts of justice in Hong Kong is as follows:

1. Court of Final Appeal;
2. High Court:
   
   
   • Court of Appeal, which hears appeals on all matters from the Court of First Instance and the District Court; and
   • Court of First Instance;
     
     
3. District Court, which has limited civil jurisdiction over claims of up to HK$1million; and
4. Small Claims Tribunal which has a limited civil jurisdiction over claims of up to HK$50,000.

Employment claims for monetary damages² cannot be commenced in court; such claims must first be brought to the Labour Tribunal. This provides a quick, informal and inexpensive method of settling disputes between employees and employers. No legal representation is allowed in proceedings before a tribunal. To commence a claim in the Labour Tribunal, a claimant fills out a form with the Hong Kong Labour Department. Subsequently, the defendants must respond to the claims and submit various documents requested by the Labour Department.

The Labour Department will usually attempt conciliation and, if unsuccessful, a Labour Tribunal hearing is held before a presiding officer. Appeals to the courts from a decision of the Labour Tribunal are limited to errors of law or where the Labour Tribunal has exceeded its jurisdiction.

II. YEAR IN REVIEW

As has been the case in recent years, very limited amending legislation or new legislation was introduced in Hong Kong during the year in review. By way of exception, the recently enacted Minimum Wage Ordinance is expected to be brought into force in around the second quarter of 2011. Prior to this Ordinance being enacted there was no minimum wage in Hong Kong.

III. SIGNIFICANT CASES

The year under review saw a significant number of court cases handed down in Hong Kong. In Campbell Richard Blackney-Williams v. Cathay Pacific Airways Limited,³ the Court of Appeal reversed a lower court's finding that where an employment contract provided for disciplinary proceedings to be undertaken prior to termination for misconduct, it was not open to an employer to dismiss employees on the grounds of misconduct prior to such disciplinary proceedings being undertaken. The Court of Appeal confirmed that it was open to an employer to simply terminate the employment of employees by making a payment in lieu of notice (and without the need to undertake disciplinary proceedings) even where the underlying reason for termination was based on the employees' misconduct.

In Tadjudin Sunny v. Bank of America, National Association,⁴ the Court of Appeal rejected the argument advanced by the Bank of America that Part VIA of the Employment Ordinance represented the 'current high watermark of employee protection, beyond which courts should not venture'. The Court of Appeal held that Part VIA merely constituted no more than the 'lowest common denominator', which did not in any way preclude the implication of common law principles that provided more comprehensive protection than afforded by Part VIA.

The case of Zielona Transport Limited v. Au Sou Lin,⁵ involved truck drivers who were entitled to elect to be engaged either as employees or as independent contractors. Truck drivers who were engaged as independent contractors were awarded higher rates of pay than were paid to employee truck drivers. Truck drivers employed as independent contractors were not paid any employee statutory benefits. The truck drivers who were employed as independent contractors commenced proceedings against the trucking company for employee statutory benefits. Their claim was successful by reason that the independent contractors were held to have been in fact employed as employees. The trucking company was ordered to pay the truck drivers statutory benefits. The trucking company counterclaimed against the truck drivers for an amount equivalent to the extra payments that they had been paid over and above the payments that had been paid to employee truck drivers. The trucking company's counterclaim was dismissed. On appeal, the court held that it would be unjust to allow the independent truck drivers to retain the additional payments that had not been paid to truck drivers who had been recruited as employees. As a result, the truck drivers were ordered to repay the trucking company the extra payments that they had been paid.

IV. BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i. Employment relationship

The Employment Ordinance mandates certain minimum terms of employment, which are discussed below. Other than these terms, the employment relationship in Hong Kong is contractual. Employment contracts need not be written,⁶ but before employment commences, employees must be clearly informed of:

1. wages and the wage period;
2. the end of year payment, if any; and
3. the length of notice required for the parties to terminate the employment contract.

There are no restrictions on employing employees on fixed-term employment contracts in Hong Kong. Employees employed on fixed-term contracts are entitled to exactly the same statutory benefits and protections as employees employed on open employment contracts.

Independent contractors

The Employment Ordinance provides certain rights and protection to employees, but not to other workers such as independent contractors. Thus, employers sometimes seek to avoid an 'employment' relationship by entering into independent contractor agreements or similar arrangements. To ensure that employee rights are protected, however, courts look critically at such non-employment relationships. Courts seek to determine the true relationship, regardless of the 'label' given to the agreement that the parties have made. In other words, even if a company hires an individual as an independent contractor, the courts may still find that a de facto employment relationship exists and require the company to meet all obligations to the contractor as if he or she were an employee.

In determining the true relationship between the parties, the courts will take into account numerous factors, including whether the company and worker are mutually obliged to act in some manner and the degree of control exercised by the company over the worker. Perhaps more importantly, the courts will consider the extent to which the worker can realistically be regarded as operating his or her own business.

Variation of contract

As a general rule, the terms and conditions of an employment contract may not be varied without the consent of both the employer and the employee. Where an employer has reserved the 'right to vary' the terms of the employment contract,⁷ the employer may unilaterally modify contract terms simply by notifying the employee of the changes. In practice, any right on the part of the employer to vary the terms of employment is usually limited, though, to changes of a minor and non-fundamental character.

ii. Probationary periods

Whether an employee is employed under probationary terms is purely a matter of contract. The only statutory provision that applies to probation provides that either party may terminate without giving notice during the first month of probation.

iii. Establishing a presence

It is not necessary for an employer to establish a business presence in Hong Kong in order to enter employment contracts with employees in Hong Kong.

V. RESTRICTIVE COVENANTS

Post-termination obligations (e.g., non-compete, non-solicitation of clients and non-poaching of employees) are common for both junior staff and executives in Hong Kong, though the courts are extremely reluctant to enforce such agreements for public policy reasons. For a restrictive agreement to be enforceable, an employer must be able to demonstrate sufficient proprietary interest in the subject matter of the restraint.⁸ If an employer satisfies this criterion, any restriction must still be reasonable in relation to the public interest, as well as in scope, duration and geographic ambit.

VI. WAGES

Working hours and overtime

There are no statutory provisions relating to maximum working hours, overtime limits or periods of rest in the workplace in Hong Kong.⁹ All employees are entitled to at least one rest day every seven days. An employee may volunteer to work on this rest day,¹⁰ but unless there is an unforeseen emergency, an employer has no right to compel an employee to work on a rest day.

There is also no statutory regulation requiring overtime to be undertaken on a paid basis. As a consequence, whether employees can be required to work overtime and whether or not such overtime is to be undertaken on a paid or unpaid basis will be determined solely by the terms of the employee's employment contract.

VII. FOREIGN WORKERS

Any individual who does not have the right of abode, rights to land, or the status of unconditional leave to remain in Hong Kong must obtain an employment visa before commencing any work in Hong Kong. Employing an individual to work in Hong Kong without a valid work visa incurs criminal liability, which may include imprisonment. Employers need to be careful of this requirement as it is not uncommon for employers to be imprisoned for hiring employees who are not lawfully employable.

The Hong Kong Immigration Department usually requires between four and six weeks to process an employment visa application. The current fee is HK$135, payable upon issuance of the visa. The application process requires the completion of several Immigration Department forms in addition to other documents including a copy of the employment contract, a thorough description of the applicant's proposed job in Hong Kong, the applicant's CV and academic certificates, and copies of the sponsoring company's most recent audited financial statements and list of employees in Hong Kong. Most importantly, a sponsoring employer must be able to provide the Immigration Department with cogent reasons and evidence why a suitably qualified local person cannot fill the position.

VIII. GLOBAL POLICIES

i. Anti-discrimination protection

Statutes prohibiting discrimination in Hong Kong are relatively new and undeveloped, especially as compared with those in the United States. There are discrimination ordinances relating to gender, pregnancy, marital status, disability, race and family status discrimination. There have been relatively few discrimination claims filed in Hong Kong courts since the enactment of these statutory measures. Discrimination based on age, religion, or sexual orientation is not prohibited in Hong Kong.

Although an employer is under no statutory duty to investigate an employee's discrimination complaint, employers are well advised to document carefully and respond to any complaints relating to discrimination in the workplace. Evidence that the employer took the complaint seriously, conducted an investigation in good faith and responded appropriately to the employee's complaint may help to resolve the matter prior to legal proceedings (such as through conciliation with the Equal Opportunities Commission ('the EOC')). Evidence of a bona fide investigation having been undertaken may also undercut any subsequent allegation of victimisation (discussed below).

Employers are liable for discriminatory acts¹¹committed by their employees. However, an employer may argue as a defence that it took reasonable steps to prevent the offending employee from acting improperly (e.g., implementing and enforcing an equal opportunity policy).

Sex discrimination ordinance

The Sex Discrimination Ordinance ('the SDO') makes it unlawful for employers to refuse to hire, to fire or to make other employment decisions affecting pay, benefits, conditions, or other aspects of employment based on a person's gender,¹² marital status, or pregnancy.

Direct and indirect discrimination

The SDO prohibits two types of discrimination. First, it prohibits direct discrimination. For example, where an employer does not hire a woman because of her gender, she may bring a sex discrimination claim under the SDO. In addition, the SDO prohibits certain forms of indirect discrimination, where employment practices are non-discriminatory on their face but have an unintended discriminatory impact upon protected groups.

Discrimination may be permitted where a genuine occupational qualification ('GOQ') exists; in other words, if a certain gender, certain marital status or pregnancy (or lack thereof) is a characteristic that is essential to a job, the employer may require such status.

Sexual harassment

The SDO prohibits engaging in unwelcome conduct of a sexual nature to an employee in circumstances in which a reasonable person, having regard for all the circumstances, would have anticipated that he or she would be offended, humiliated, or intimidated and subjecting an employee to conduct of a sexual nature that creates a sexually hostile or intimidating work environment. 'Conduct of a sexual nature' may be either oral or written statements made either to the employee or in his or her presence.¹³

The Code of Practice on Employment under the SDO('SDO Code') notes that the following behaviour may be regarded as sexual harassment:

1. unwelcome sexual advances (e.g., leering and lewd gestures, touching, grabbing or deliberately brushing up against another person);
2. unwelcome requests for sexual favours (e.g., suggestions that sexual cooperation or the toleration of sexual advances may further a person's career);
3. unwelcome verbal, non-verbal, or physical conduct of a sexual nature (e.g., sexually derogatory or stereotypical remarks; persistent questioning about a person's sex life); or
4. conduct of a sexual nature that creates a hostile or intimidating work environment (e.g., sexual or obscene jokes around the workplace; displaying sexist or other sexually offensive pictures or posters).

Disability discrimination ordinance

The Disability Discrimination Ordinance ('the DDO') prohibits direct and indirect discrimination against an employee or job applicant on the grounds of disability. Both direct and indirect discrimination are unlawful. Disability harassment and victimisation are also unlawful.

Definition of disability

Disability is widely defined as including:

1. total or partial loss of the person's bodily or mental functions;
2. total or partial loss of a part of the person's body;
3. the presence in the body of organisms causing or capable of causing disease or illness;
4. the malfunction, malformation, or disfigurement of a part of the person's body;
5. a disorder or malfunction that results in the person learning differently from a person without the disorder or malfunction; or
6. a disorder, illness or disease that affects a person's thought processes, perception of reality, emotions or judgment or that results in disturbed behaviour.

In addition, the term 'disability' is broad in the sense that it includes a disability that presently exists;¹⁴ previously existed but no longer exists; may exist in the future; or is imputed to a person.

The DDO also protects (non-disabled) persons who are discriminated against due to the disability of an 'associate'. The term 'associate' includes the person's spouse, relative, care-provider, other persons living with him or her on a 'genuine domestic basis' and other persons who are in a business, sporting or recreational relationship with him or her.

Exceptions

Employers face a reasonable accommodation obligation in assisting disabled persons to perform work. Disability discrimination may be permitted where a GOQ exists; the employer may argue that the employee or applicant: cannot carry out the inherent requirements of the job due to his or her disability; or reasonable accommodation would impose an unjustifiable hardship¹⁵ on the employer.

In addition, the DDO provides an exception to discrimination protection where the 'disability' is an infectious disease,¹⁶ and the discriminatory act is reasonably necessary to protect public health.

Family status discrimination ordinance

The Family Status Discrimination Ordinance ('the FSDO') prohibits discrimination against any person due to his or her status of being responsible for the care of an immediate family member.¹⁷ Both direct and indirect discrimination are prohibited under the FSDO.

Race discrimination ordinance

The Race Discrimination Ordinance ('the RDO') was recently enacted and prohibits discrimination against any person due to his or her race, colour, descent or national or ethnic origins.

Victimisation

The SDO, DDO, RDO and FSDO prohibit workplace victimisation; that is, taking an adverse employment action against an employee because he or she has brought (or may bring) a legal claim, provided evidence or information in relation to a legal claim, or alleged that a person acted in violation of one of the discrimination ordinances.

A victimisation claim typically would arise when an employee makes a work-related complaint of unlawful conduct to a supervisor or participates in some lawful activity (such as giving evidence in connection with proceedings brought under the SDO by a third party), and then the employer subsequently subjects the employee to some type of negative employment action, such as termination or demotion.

ii. Occupational health and safety

The Occupational Safety and Health Ordinance ('the OSHO') is one of the main regulations pertaining to occupational health and safety.¹⁸ The OSHO mandates employers to ensure the safety and health of employees at work, so far as is reasonably practicable. Employer obligations may include provision and maintenance of a safe work environment and work practices; arrangement of safe handling, storage, and transport of substances; and provision of information, instruction, training, and supervision to ensure health and safety.

Employers must notify an occupational safety officer¹⁹ within seven days of any accident which causes an employee to be permanently or temporarily incapacitated from working. Such notification must be within 24 hours for any accident causing death or serious bodily injury.

The Commissioner for Labour may serve an improvement or suspension notice on an employer for contravention of the OSHO or the Factories and Industrial Undertakings Ordinance.

Individuals may be found guilty of offences under the OSHO, in addition to employer companies. If an employer is convicted of an offence under the OSHO, and if the offence was committed with the consent or connivance or as the result of any negligence of a director, manager, company secretary, or other similar officer, he or she may also be found guilty of such offence.

IX. EMPLOYEE REPRESENTATION

Membership in trade unions is quite uncommon in Hong Kong, and collective bargaining and union-organised disruptions of a business or workplace are very rare.

i Requirements for trade unions

The Trade Unions Ordinance ('the TUO') requires every trade union to apply for registration to the Hong Kong Registrar of Trade Unions. Such application may be denied if the provisions of the TUO are not complied with, or in the event any purpose of the trade union is declared unlawful, or for any other exceptional reasons.

The TUO mandates certain requirements in relation to officers and members (e.g., they must be ordinarily resident in Hong Kong), the unions' rules and other matters. The Ordinance also regulates the rights and liabilities associated with union activities. A registered trade union enjoys limited immunity from certain civil lawsuits.

ii. Employee rights

Every employee has the right to: associate with other persons for the purpose of forming or applying for registration of a trade union pursuant to the TUO; be or become a member or officer of a trade union registered under the TUO; and take part in trade union activities at any appropriate time,²⁰ if he or she is a member or officer of such union.

Any employer that prevents or deters an employee from, discriminates against, terminates the employment of or penalises an employee due to exercising any such right, is guilty of a criminal offence and liable to a fine. In addition, employers may not make an offer of employment conditional on agreement not to exercise any such right. Further, an employee is protected by Part VIA of the Employment Ordinance in relation to trade union activities. In other words, when employment is terminated, if the employer fails to establish a 'valid reason' for such termination, and the employee has exercised any right in relation to trade union activities (as detailed above) within the preceding 12 months, the employee is entitled to remedies pursuant to Part VIA of the Employment Ordinance. Employee complaints are heard by the Labour Tribunal.

Any demonstration, picketing or attendance at or near a place of business which is not for the purpose of 'peacefully obtaining or communicating information or peacefully persuading any person' in relation to a trade dispute is unlawful, and may result in a fine and imprisonment for six months.

X. DATA PROTECTION

i. Personal Data (Privacy) Ordinance

The Personal Data (Privacy) Ordinance ('the PDPO') requires any individual or organisation handling 'personal data' to ensure proper collection, handling, processing, use, accuracy, security and transfer of such information.

In addition, anyone handling such data must inform the individual concerned about why such data are being collected. Also, where personal data are collected, the individual must be informed of his or her rights in relation to accessing and correcting the data held.

'Personal data' is defined as any data relating to a living individual that can be directly or indirectly identified from such data and the data are held in a form that it is reasonably practicable to access or process.

Supplemental codes of practice

The PDPO has been supplemented by Codes of Practice ('the PDPO Codes') on the collection of Hong Kong identity card numbers and other personal identifiers; consumer credit data; and human resource management (dealing with solicitation and collection of personal data during recruitment and employment, and retention and transfer of such data after employment).

Guidelines on 'Monitoring and Personal Data Privacy at Work' have been issued. The provisions of the guidelines are limited to employers' monitoring of employees' usage of: telephone calls, e-mail, internet and video.

Currently there are no laws in Hong Kong specifically addressing these issues nor are there laws or codes related to drug testing or psychological profiling of employees.

Employee access to personal data

The PDPO mandates that individuals whose personal data are held may request to be informed whether their data are held, and to be supplied with a copy of such data. The data holder must comply within 40 days, or formally refuse to comply (due to, for example, compliance forcing disclosure of another person's identity).

Policy

Employers must have a policy in relation to data privacy relating to, at a minimum:

1. employees' right to access and correct their personal data held by the employer;
2. the employer's possible transfer of personal data, within and outside Hong Kong, to related companies and third parties such as insurance companies; and
3. employees' duty to protect the confidential nature of the personal data of others.

Employment records

Employers must maintain a record in relation to each employee containing his or her:

1. name and Hong Kong identity card number;
2. commencement date of employment;
3. job title;
4. wages paid in respect to each wage period;
5. wage period;
6. periods of annual leave, sick leave, maternity leave, and holidays to which he or she is entitled, and that he or she has taken, along with details of payments made in respect thereof;
7. the amount of any end of year payment and the period to which it relates;
8. the length of notice required to terminate the employment contract; and
9. the date of any employment termination.

This record must be maintained either at the employer's place of business or at the employee's work location, in relation to his or her preceding six months of employment, and for 12 months after termination thereof.

Employers must file forms with the Hong Kong Inland Revenue Department for every employee working in Hong Kong in relation to: commencement of employment; cessation of employment; and remuneration paid to each employee (annually). Other forms and notifications may be necessary in certain circumstances (e.g., for remuneration paid to persons other than employees, or upon termination of employment of an employee who is expected to depart Hong Kong).

XI. DISCONTINUING EMPLOYMENT

i. Dismissal

The principle of 'at-will' employment is not recognised in Hong Kong. Conversely, employment may be terminated:

1. by mutual agreement;
2. by either party giving notice;
3. by either party making a payment in lieu of giving notice;
4. by the employer summarily dismissing an employee for serious breach of a fundamental term of employment (i.e., termination for cause);
5. by the employee terminating without notice for the employer's serious breach of a fundamental term of employment (i.e., constructive dismissal);
6. upon the expiration of a fixed-term employment contract;
7. by operation of law (e.g., where an employee suffers a serious disability that results in the employee being declared unfit to continue employment or where the employer is declared bankrupt or placed in receivership); or
8. any other manner recognised by law.²¹

Notice of termination

An employment contract may be terminated by either party giving the other party notice (either orally or in writing). The length of the notice period typically is stated in the employment contract.²² If the employee and employer have not agreed on the length of the notice period, the Employment Ordinance implies one month's notice.

An employment contract may also be terminated by one party agreeing to pay the other party a certain sum in lieu. In the absence of notice or a payment in lieu of notice it is not possible to terminate an employment contract immediately unless there are grounds for summary dismissal.²³

Summary dismissal

An employer may terminate an employment contract immediately pursuant to Section 9 of the Employment Ordinance, without notice or payment in lieu, if an employee:

1. wilfully disobeys a lawful and reasonable order;
2. misconducts himself or herself, such conduct being inconsistent with the due and faithful discharge of his or her duties;
3. is guilty of fraud or dishonesty; or
4. is habitually neglectful in his or her duties; or
5. on any other ground on which the employer would be entitled to terminate the contract without notice at common law.

Case law provides an insight into what grounds are sufficiently serious to permit an employer to summarily dismiss an employee. In practice around half of the summary dismissals adjudicated by the courts are declared unlawful.

Immediate termination by employee

An employee may terminate an employment contract without notice or payment in lieu if the employee:

1. reasonably fears physical danger by violence or disease such as was not contemplated by the employment contract (either expressly or implicitly);
2. has been employed for at least five years, and is certified (in the form required) by a doctor as permanently unfit for the particular type of work for which he or she is employed;
3. is subjected to ill-treatment by the employer;
4. is not paid wages within one month from the due date; or
5. on any other ground on which he or she would be entitled to terminate the contract without notice at common law.

Case law provides an insight into what grounds are sufficiently serious to permit an employee to be regarded as being constructively dismissed. In practice around half of the constructive dismissals adjudicated by the courts are declared unlawful.

Restrictions on termination

In certain circumstances, an employee's employment may not be terminated, unless there are grounds for summary dismissal. An employer may not terminate the employment of an employee who is: pregnant²⁴ or on statutory maternity leave; on statutory paid sick leave;²⁵ or incapacitated and entitled to compensation pursuant to the Employees' Compensation Ordinance.²⁶

Grounds for termination

Where an employee has been employed continuously for at least 24 months (but not more than five years), the employee is protected by Part VIA of the Employment Ordinance, which requires the employer to have a 'valid reason' to terminate an employee's employment. Statutory awards of compensation will be payable in the event of an employer terminating employment without a valid reason.

A valid reason for termination may include:

1. any reason relating to the employee's conduct (e.g., an employee having a proven performance issue);
2. any reason relating to the employee's capability or qualifications for performing the type of work for which the employee was employed;
3. any reason relating to the employee's redundancy or other genuine operational requirements of the employer's business;
4. any reason that would entail the employee or employer violating the law if the employment were to continue; or
5. any other reason of substance which the Court or Labour Tribunal holds is sufficient reason to terminate.

If the employer has no valid reason for terminating the employment, the Employment Ordinance will presume that the termination was (improperly) undertaken for one or more of the following reasons:

1. to eliminate or reduce the employee's rights, benefits or protections provided pursuant to the Employment Ordinance;
2. due to the employee's pregnancy, in violation of Section 15(1) of the Employment Ordinance;
3. due to the employee's participation in trade union activities, in violation of Section 21B(2)(b) of the Employment Ordinance;
4. due to the employee's sickness and entitlement to paid sick leave, in violation of Section 33(4B) of the Employment Ordinance;
5. due to the employee's giving information or evidence for a proceeding in relation to the enforcement of the Employment Ordinance or a work-related accident, in violation of Section 72B(1) of the Employment Ordinance;
6. due to the employee's giving information or evidence for a proceeding in relation to the enforcement of the Factories and Industrial Undertakings Ordinance,²⁷ in violation of Section 6 of such Ordinance; or
7. due to the employee's giving information or evidence for a proceeding or investigation in relation to the enforcement of the Employees' Compensation Ordinance or due to the employee's entitlement to compensation without the Labour Commissioner's consent to such termination,²⁸ in violation of Section 48 of the Ordinance.

If the employer has no valid reason for termination the court or Labour Tribunal may make an order for reinstatement of the employee;²⁹ award the employee with a statutory compensation (e.g., accrued statutory annual leave); or make an 'award of compensation' pursuant to Section 32P of the Employment Ordinance, of up to HK$150,000.

Entitlements upon termination

Payments payable to an employee include all amounts due to an employee either by statute or contract including:

1. wages through the termination date;
2. accrued but unused statutory annual leave;
3. (if applicable) an end of year bonus; and
4. (if applicable) payment in lieu of notice.

ii. Redundancies

Severance payment

A severance payment will be payable where an employee's employment is terminated due to redundancy or lay-off after continuous employment for at least 24 months.³⁰

The term 'redundancy' includes the following: the employer has ceased or intends to cease carrying on business for which the employee was employed; the employer has ceased or intends to cease carrying on business for which the employee was employed at the location where the employee is employed; or the employer must cut back employees due to operational requirements.

A severance payment is not required where:

1. the employee is dismissed summarily;
2. not later than the termination date, the employer employs the employee under a new employment contract; or
3. not less than seven days before the termination date, the employer offers to re-engage the employee under a new employment contract³¹and the employee unreasonably refuses such offer.

The amount of severance pay is determined pursuant to a statutory calculation and based on the employee's length of service, but is no more than HK$15,000 for each year of service, up to a statutory cap. In addition, the employer's contribution (i.e., not the employee's contribution) to the employee's retirement scheme (e.g., the employee's statutory MPF scheme, discussed above) may be deducted from any severance pay due.

Long-service payment

Where a severance payment is not payable, a long-service payment may be payable when an employer terminates³² an employee's employment after at least five years of continuous service.³³ The calculation of long service pay is identical to that of severance pay.

XII. TRANSFER OF BUSINESS

There are two circumstances in which a transfer of business affects the employment relationship of employees in Hong Kong. Where a trade, business or undertaking is transferred from one entity to another, the period of employment of an employee in the trade, business or undertaking at the time of the transfer counts as a period of employment with the transferee entity. As a result, such a transfer does not in any way break the continuity of the employment of any employee employed by the transferor entity immediately prior to the transfer. Where a change occurs (whether by virtue of a sale or other disposition or by operation of law) in the ownership of a business for the purposes of which an employee is employed, no statutory severance payment will be payable in the event of an employee unreasonably refusing an offer of employment by the new owner of the business.

XIII. OUTLOOK

Hong Kong has been historically and continues to be pro-business-orientated. As a result, employment laws tend to be non-interventionist in nature and seek merely to provide basic statutory protection. There is no indication that this long-standing policy is about to change in the very near future.

Footnotes

1. Codes of Practice do not have the force of law, but rather are voluntary guidelines to assist employers to comply with ordinances and regulations. Failure to abide by a Code of Practice may be taken into account in any Hong Kong court or Labour Tribunal proceeding, or by a Commissioner in any investigation, when deciding whether an employer has complied with the related ordinance.

2. Claims for reinstatement, unliquidated damages, stock options or other 'complex' damages will not be heard by the Labour Tribunal, but will proceed directly to court.

3. Campbell Richard Blackney-Williams v. Cathay Pacific Airways Limited, Civil Appeal 268 of 2009.

4. Tadjudin Sunny v. Bank of America, National Association, Civil Appeal No. 173 of 2009.

5. Zielona Transport Limited v. Au Sou Lin, [2010] 3 HKLRD 555.

6. Statutory limits are imposed if an employment contract is not in writing. For example, an employment contract for a fixed term of two years may only be entered by both parties agreeing to such terms in a signed written document. Where any of these formalities are missing the employment contract will be regarded as a monthly contract that may be terminated by either party giving the other party one month's notice of termination.

7. Typically, the employer would reserve such right.

8. For example, an employer will usually have no difficulty in demonstrating sufficient interest in a trade secret; by contrast the Hong Kong courts will not uphold any restrictive covenant that merely prohibits an employee from engaging in competition with a former employer.

9. There are regulations that limit certain types of work and periods of work in the cases of children and young people.

10. It is advisable to obtain the employee's agreement in writing.

11. The Sex Discrimination Ordinance ('the SDO'), Disability Discrimination Ordinance ('DDO'), Race Discrimination Ordinance ('the RDO') and Family Status Discrimination Ordinance ('the FSDO') also prohibit discrimination by educational institutions and those providing goods, facilities, services or housing (with certain exceptions). In addition, the DDO prohibits all persons from performing any public activity that incites hatred towards, serious contempt for or severe ridicule of any disabled person. Such incitement includes threatening physical harm of the person or property of any disabled person.

12. The SDO applies equally to discrimination against men.

13. The SDO does not specifically require an employee to suffer some type of detriment for a finding of harassment.

14. In addition, persons who use a 'therapeutic device or auxiliary aid or device,' or are accompanied by an interpreter, reader, assistant or care-provider who provides services because of a disability are protected by the DDO.

15. In determining what constitutes an unjustifiable hardship, a court considers all relevant circumstances including: the reasonableness of any accommodation to be made available to a person with a disability; the nature of the benefit or detriment likely to accrue or be suffered by any persons concerned; the effect of the disability on a person concerned; and the financial circumstances of and the estimated amount of expenditure (including recurrent expenditure) required to be made by the person claiming unjustifiable hardship.

16. Infectious diseases may be specified either by the Director of Health (by notice in the Gazette) or in the First Schedule to the Quarantine and Prevention of Disease Ordinance. Currently, for example, measles, mumps and SARS are included, but AIDS and HIV-positive status specifically are not.

17. An 'immediate family member' is defined as someone related to the person by blood, marriage, adoption or affinity.

18. Some other ordinances (e.g., the Factories and Industrial Undertakings Ordinance) also regulate occupational safety.

19. These individuals are appointed by the Hong Kong Commissioner for Labour.

20. 'Appropriate time' means any time outside of working hours, or a time within working hours as agreed to by the employer.

21.The law in fact recognises many other ways in which an employment contract may be lawfully (and unlawfully) terminated in addition to those listed above.

22. In the case of a continuous contract the agreed notice period must not be less than seven days.

23. There are two exceptions to this rule. First, during the first month (only) of the probationary period, either an employee or an employer may terminate the employment contract without notice, without making a payment in lieu of such notice, and without grounds for summary dismissal. Second, the Employment Ordinance recognises that an employee and employer may voluntarily agree to terminate an employment contract immediately without notice or payment in lieu.

24. If an employer terminates an employee who then immediately notifies the employer of her pregnancy, the employer must withdraw the termination (or notice thereof).

25. Statutory sick leave may accrue up to 120 days, as discussed above.

26. In certain limited circumstances, an employee may be terminated despite such incapacity.

27. Generally, this Ordinance relates to health and safety at work.

28. This is a general summary of Section 48 of the Employees' Compensation Ordinance, which should be reviewed in full.

29. Such an order is possible only with the employer's and the employee's consent.

30. An employee must make a specific demand to the employer for severance pay; it becomes due within two months of such demand.

31. It makes no difference that the terms of employment that are offered are different from those under which the employee worked so long as the terms amount to 'suitable' terms.

32. No long-service payment is payable where an employee is summarily dismissed for cause.

33. A long-service payment may also be payable whenever an employee's employment is terminated by reason of an employee having being constructively dismissed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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