Could moonlighting employees be breaching more than just their employment contracts?
In Hong Kong, there is an increasing emphasis on the importance of reciprocal duties of trust and confidence between employers and employees. A 'moonlighting' employee (even one who takes up ancillary employment with a non-direct competitor) often sits in a legally precarious position since questions are bound to arise in relation to his/her fiduciary duties, restrictive covenants and/or the implied term of trust and confidence. In fact, a moonlighting employee is also at risk of committing an offence under section 9 of the Prevention of Bribery Ordinance (Cap. 201) ("POBO") which is concerned with transactions between third-parties and agents in relation to the affairs or business of their principals.
This Employment Alert discusses the judgment of the Hong Kong Court of Final Appeal ("HKCFA") in Secretary for Justice v Chan Chi Wan Stephen  HKEC 505 and examines the circumstances which would render an employee guilty of bribery in the private sector.
This case considers whether Chan, the General Manager of a television station ("TVB"), who also voluntarily hosted a television segment for TVB's pay channel, committed the offence of bribery pursuant to the POBO by contracting with a third-party to host an external television segment. In accordance with the POBO, Chan is an agent of TVB by virtue of being an employee of TVB.
The incident arose when TVB contracted with Olympian City, a Hong Kong shopping centre, to produce a New Year's Eve event. Olympian City subsequently entered into a separate agreement with Chan's agent (Tseng) for Chan to host a live rendition of his television segment at the New Year's Eve event broadcast. Chan received HK$112,000 from Tseng as remuneration for this engagement, but did not seek or obtain prior permission from TVB. Nevertheless, the evidence showed that Chan's engagement to host the external television segment was generally known to TVB.
As a result, Chan was charged in the alternative for: (1) "accept[ing] an advantage… as an inducement or reward for or otherwise on account of [him] doing or having done an act in relation to his principal's affairs or business" contrary to s.9(1) of the POBO; or (2) conspiring with Tseng to commit the s.9(1) offence. Tseng was also charged with the offence of bribery pursuant to s.9 of the POBO. Whilst both Chan and Tseng were acquitted at First Instance, the lower court's decisions were overturned by the Court of Appeal. Upon further appeal, the HKCFA unanimously quashed the convictions.
The primary issues before the HKCFA were as follows:
(i) What is the mental element required to render an agent guilty under section 9 of the POBO?
(ii) Should "in relation to the principal's affairs or business" be interpreted as requiring an element of prejudice to the principal?
(iii) How should the HK Courts approach the defence of "reasonable excuse" under section 9 of the POBO?
(i) Mental element
To secure a conviction under section 9 POBO, the prosecution must prove that the agent "knew or believed" that the advantage was provided as an inducement or reward or otherwise. In other words, if the agent receiving an advantage was unaware that the advantage was offered for a corrupt purpose, he will not be liable. Since the prosecution failed to establish that Chan knew or believed that the remuneration he received for hosting the external television segment was for a corrupt purpose, Chan couldn't be held culpable for the section 9 offence.
(ii) "In relation to the principal's affairs or business"
The HKCFA determined that section 9 POBO required an individual's mischief which is "aimed at the principal's business" to be conduct which "subvert[ed] the integrity of the agency relationship to the detriment of the principal's interests". Conduct which is beneficial to and aligned with the interests of the principal would fall outside the scope of section 9. In accepting remuneration to host the external television segment, Chan had not intended to influence or affect TVB's affairs or business in a manner that undermined the integrity of his agency relationship with TVB. Consequently, Chan couldn't be held culpable for the section 9 offence.
(iii) "Reasonable excuse"
"Reasonable excuse" may be a defence to an act that would otherwise contravene section 9 POBO. Since the HKCFA did not consider that Chan had breached section 9 (for the reasons stated above), the majority of the judges saw no basis for assessing the defence in this case. However, Tang PJ maintained a different view and thus elaborated on the "reasonable excuse" defence. Specifically, Tang PJ held that Chan had a reasonable excuse for hosting the external television segment as he "honestly believed that his principal would not object" to his participation.
Implications for moonlighting employees
Although this judgment may bring a sigh of relief to moonlighting employees, it certainly does not provide a carte blanche for multiple employment (especially where the employers are in the same industry). The decision on whether or not a breach of section 9 POBO has taken place is fact-sensitive and dependent on factors such as the agent's intentions and the nexus between the principal's business and the third-party's terms of engagement. Moonlighting employees should seek their employer's informed written consent before taking on additional employment, so as to ensure compliance with their employment obligations, and steer clear of any potential criminal prosecution.
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