Legal issues can seriously affect a company's employee branding, Richard James Havis looks at the top 10 small-print pitfalls and how to avoid them.
This article was published in the Hong Kong & China HR Yearbook 2017, Clarified Post and extensively quotes HWB Partner, Kevin Bowers
The main employment legislation in Hong Kong is the Employment Ordinance (EO). This guarantees certain minimum benefits, including paid annual leave, paid leave and paid maternity and paternity leave. The ordinance applies to all workers in Hong Kong, regardless of nationality. There are other mandatory laws, such as the Minimum Wage Ordinance (MWO) and the Occupational Safety and Health Ordinance. Here, we look at the 10 most important employment issues through recent or pending legal decisions that may affect the actions of HR professionals.
Employers do not have to pay employees gratuities if they consider the service unsatisfactory
Employers in Hong Kong do not have to pay employees a gratuity if there is no "satisfactory completion" of their contract, the Court of First Instance ruled in May 2017. Completion requires the employees not only "sit out the appointment" until the end of the term, but also discharge their duties and obligations in a manner deemed acceptable by the employer.
In Chok Kin Ming vs Equal Opportunities Commission (EOC), the EOC successfully appealed against a Labour Tribunal ruling that it had failed to pay an employee his end-of-contract commission. The employee had argued that "satisfactory completion" only applied to the dimension of time.
The court found that the EOC was entitled to withhold the gratuity because of the employee's conduct in a private forum at a church meeting, which amounted to a conflict of interest and therefore impeded the satisfactory completion of his employment. The employee's contractual employment terms included the EOC's Code of Conduct, which forbade him from participating in activities in which a conflict of interest could arise. The ruling says that employees' conduct towards their employment is not limited to their working hours.
"To minimise the instance of disputes about the interpretation of gratuity or bonus terms, these provisions in employment contracts should be clearly and precisely drafted to provide that these payments are subject to defined conditions, and where appropriate, the discretion of the employer," say Kevin Bowers, a partner and solicitor advocate at Howse Williams Bowers, where he acts for both employees and employers. "The employer should also have in place corporate policies which expressly state that the employees are subject to these conditions."
Employers can charge a fee for supplying employees with personal data
Employees can make a data access request (DAR) to their employers, which asks the employer to provide them with copies of any data the employer holds that relates directly or incorrectly to them. The data may include appraisals, personnel files, disciplinary records and anything that is practicable for the employer to supply, which relates to the employee's name. The employer can charge a fee for the data, and can withhold the data from the employee until the fee is paid.
However the employer cannot charge an "excessive" fee, and the fee must be "directly related to" and "necessary" to carry out the DAR. If an employer can produce the data without incurring any costs, there should be no fee. Not all costs incurred by an employer are deemed "necessary" - for instance administration costs are not considered direct and necessary. The fee must reflect the direct labour costs incurred by the employer in providing the data, and should be kept to a minimum.
"It is important for employers to bear in mind that the right to impose a DAR fee should not be exercised with the aim of deterring employees from making DARs," says Bowers. "Where employees believe that they have been charged excessively for compliance with their DARs, they may lodge a complaint with the Privacy Commissioner's Office. Ultimately, it is the employer's responsibility to justify the fee and how it relates to the compliance costs incurred. In calculating the DAR fee, proportionality is key."
Moonlighting employees may be breaching their employment contracts
A moonlighting employee, even one who takes employment with a business not directly in competition with the primary employer, is still at risk of breaking the law. Questions may arise about the employee's restrictive covenants (which are used by employers to protect their legitimate business interests if the employee leaves) and the implied term of trust and confidence (the obligations owed to the employer by the employee and vice-versa). In Hong Kong there is an increasing emphasis on the reciprocal duties of trust and confidence between employers and employees.
Moonlighting employees could also be committing an offence under section 9 of the Prevention of Bribery Ordinance. The case of secretary for Justice vs Chan Chi Wan Stephen highlights the issue. Steven Chan was the former general manager of TVB, and also hosted the channel's show Be My Guest. Chan hosted a show called Additional Be My Guest at a shopping mall in 2009 and afterwards received HK$112,000 for the work from a third-party company. Chan's contract stated he could not take any employment outside TVB unless written permission was given, and that was not obtained. Chan was charged and found guilty under section 9 of the Prevention of Bribery Ordinance, but was acquitted on appeal to the Hong Kong Court of Final Appeal.
"Whilst [Secretary for Justice vs Chan Chi Wan Stephen] is apparently good news for Hong Kong employees, it would be irresponsible and unacceptably risky for moonlighting employees to take up second jobs, or any additional employment, without first obtaining their current employer's informed written consent," says Bowers. "This will ensure compliance with their ongoing employment obligations and allow them to steer clear of any criminal prosecution."
The MPF offset mechanism may be abolished
Former Chief Executive CY Leung announced in his final policy address in January 2017 plans to "progressively abolish" the offset mechanism under the Mandatory Provident Fund (MPF) system. Employers are currently allowed to offset severance payments and long-service payments against the employer's contributions to employees' MPF (retirement) scheme benefits.
A company that dismisses an employee who has more than five years of service must currently pay a long-service fee equal to the number of years of service multiplied by two-thirds of the employee's monthly income up to HK$15,000 for each year and a maximum of HK$390,000.
The government noted that the abolition will have no retrospective effect - "employers' MPF contributions before the implementation date of the proposal will be grandfathered" Leung said - and employers may be subsidised for a portion of the cost in the first 10 years following the abolition. Furthermore, severance and long-service payments may be reduced from two-thirds to half of the employee's monthly wages.
"Although this recent (employee-friendly) proposal contemplates a reduction in the amount of severance and long-service payments in order to reduce the burden on Hong Kong employers, and employers would have 10 years from the implementation of the proposal within which to plan for the change - during which the government would bear part of the costs involved in these payments - it is likely to be vigorously opposed by the business sector," Bowers says. "It will be opposed on the basis that, if implemented, it will hit small and medium-sized businesses hard at a time when they can ill afford this additional financial exposure at the same time as paying the ever-increasing costs of doing business in Hong Kong."
The Employment Amendment Bill compels employees to reinstate employees without the employer's consent
The Employment Amendment Bill, which was announced in Legco in May 2017, compels employers to reinstate employees who have been unlawfully dismissed without the employer's prior consent. An employer must agree to reinstate the employee before the court can make the order under current law. The proposed penalty for employers who fail to comply with the order of reinstatement is set at three times the employee's monthly wage up to a maximum of HK$72,000.
However, it's rare for the court to make an order for reinstatement, as by that time the relationship between employer and employee has usually deteriorated to such a point that returning to work is untenable.
"Notwithstanding this apparently employee-friendly legislative improvement, the reality of the position is that this legislative change is unlikely to improve the lot of employees in any meaningful way in circumstances where, by the time an employer and an employee participate in contested Labour Tribunal proceedings, neither party is particularly keen to renew their relationship," says Bowers. "The end result is that the Labour Tribunal Presiding Officer is highly unlikely to force an employee to go back to work for an employer who he/she no longer trust or wants to work for."
Howse Williams Bowers is an independent law firm which combines the in-depth experience of its lawyers with a forward thinking approach.
Our key practice areas are corporate/commercial and corporate finance; commercial and maritime dispute resolution; clinical negligence and healthcare; insurance, personal injury and professional indemnity insurance; employment; family and matrimonial; property and building management; and financial services/corporate regulatory and compliance.
As an independent law firm we are able to minimise legal and commercial conflicts of interest and act for clients in every industry sector. The partners have spent the majority of their careers in Hong Kong and have a detailed understanding of international business and business in Asia.
Disclaimer: The information contained in this article is intended to be a general guide only and is not intended to provide legal advice. Please contact firstname.lastname@example.org if you have any questions about the article.