Amendments to the Employment Ordinance (“EO“) which strengthen the Labour Tribunal’s (“LT“) powers to make an order for reinstatement or re-engagement where an employee has been unreasonably and unlawfully dismissed have been passed and are to take effect from 19 October 2018. This represents a move away from the current position where both the employer and employee must agree to reinstatement or re-engagement. We anticipate that applications for reinstatement will increase; including as a strategy by employees seeking to leverage greater settlement payments from employers unwilling to take them back.
Strengthening the power of the LT
Previously, the LT was only able to make an order for reinstatement or re-engagement with the consent of both the employer and the employee. From October, where the employee has been found to have been unreasonably and unlawfully dismissed under section 32A(1)(c) of the EO (“Unlawful Dismissal”), the LT can order reinstatement or re-engagement without the employer’s agreement. Unlawful Dismissal will occur where an employee is dismissed without a valid reason and one or more of the following is present:
- the employee is pregnant or on statutory maternity leave;
- the employee is on statutory sick leave or is suffering from a work-related illness or injury where an assessment of compensation due under the Employees’ Compensation Ordinance is pending;
- the dismissal is due to the employee being a member or officer of a trade union or having engaged in lawful trade union activities; or
- the dismissal is due to the employee having given or agreed to give evidence in relation to:
- an alleged breach of the EO, the Factories and Industrial Undertakings Ordinance or any work safety obligations; or
- a workplace accident.
In all other cases, an order for reinstatement or re-engagement will still require the consent of both parties.
Additional financial compensation and criminal liability
In the event the employer fails to comply with an order for reinstatement or re-engagement, they must pay compensation to the employee of the lesser of HK$72,500 or three times the employee’s average monthly wages.
If it later becomes no longer ‘reasonably practicable’ for an employer to re-instate or re-engage the individual, it can apply for relief against the payment of compensation provided that it can show that the circumstances making compliance ‘no longer reasonably practicable’ are ‘attributable to the employee’, or due to a ‘change in circumstances beyond the employer’s control’. This application for relief must be made within seven days from when the reinstatement or reengagement was to occur.
Non-compliance with an order for reinstatement or re-engagement is not itself an offence, however, if the employer then fails to pay the compensation due wilfully and without reasonable excuse, they will be guilty of a criminal offence and may be subject to fine of up to HK$350,000 and three years’ imprisonment.
The amendments to the EO will not have retrospective effect and will only apply to dismissals (or notice of dismissals) where the employee was informed of the dismissal after 19 October 2018.
As noted above, the ability for the LT to order reinstatement without the consent of the parties is limited to Unlawful Dismissal cases. However, it may be that, where the relationship between the employer and employee has broken down, former employees may pursue applications for reinstatement as leverage in settlement discussions. Accordingly, to avoid increased risks of claims and the time and costs associated with responding to them, employers must take additional care when dismissing employees to ensure that they have a valid reason for doing so and the termination cannot be argue to be an Unlawful Dismissal.