HONG KONG: UNLAWFUL DISMISSAL REINSTATEMENT RIGHTS FROM OCTOBER

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.

Retrospective effect

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.

Key takeaways

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.

Gareth Thomas
Gareth Thomas
Partner, Head of commercial litigation, Hong Kong
+852 2101 4025
Tess Lumsdaine
Tess Lumsdaine
Registered Foreign Lawyer (New South Wales)
+852 2101 4122

Impact of CJEU decision in Schrems v DPC on the implementation of cross-border data transfer provisions in Hong Kong

Organisations in the European Union with operations in the United States have, for over a decade now, taken comfort that the transfer of personal data to the United States would be lawful if the recipient had subscribed to the US Safe Harbour Scheme (the "Scheme").  According to the European Commission Decision 2000/520, the operation of the Scheme meant that personal data transferred to the United States would be afforded an adequate level of protection (that is, an EU-standard level of protection).

That is no longer the case.  In the recent case of Schrems v DPC, the Court of Justice of the European Union (the "CJEU") ruled that the US Safe Harbour Scheme does not provide an equivalent standard of protection for personal data, because data recipients are required to disregard the Safe Harbour Principles where they conflict with national security, public interest or law enforcement requirements of the United States.  A summary of the CJEU's decision and, in particular, its immediate consequences for organisations in the EU is available here

This case is of interest in Hong Kong, because of recent indications that the Hong Kong Government may take steps to bring section 33 of the Personal Data (Privacy) Ordinance into effect.  Section 33, once it becomes operative, will prohibit the transfer of personal data out of Hong Kong, unless an exception applies.

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You can’t keep a good man down

In the recent case of Eastern Athletic Association Football Team Ltd v Alessandro Ferreira Leonardo (HCA 2383/2015), the High Court refused to grant an interlocutory injunction to a football club, Eastern Athletic Association ("EAA"), to restrain one of its players from playing for a rival club ("Kitchee"). 

This decision recognises both the special nature of the relationship between an employer and employee and the public policy basis for the courts' refusal generally to order specific performance of employment contracts.

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ADR Practical Guide No. 7:  Mediating Employment and Workplace disputes

Our London ADR team has launched the seventh guide in their series of ADR Practical Guides, designed to provide clients with essential practical guidance on various processes falling under the banner of alternative dispute resolution (ADR), with a particular focus on mediation.

Guide No. 7: ‘Mediating employment and workplace disputes’ outlines how mediation can be used to resolve disputes in the employment context and offers a number of practical tips for getting the best result. It also examines specific mediation and conciliation schemes offered in the UK by the Employment Tribunal and by Acas (the Advisory, Conciliation and Arbitration Service).

Previous guides in the series can be found on our ADR webpage, including:

To be informed when new guides in the series are published, subscribe to our blog ‘ADR Notes’  (http://hsfnotes.com/adr) – or visit the blog at any time for the latest updates on ADR topics internationally.

If you would like to discuss with us the way your organisation uses ADR, please contact one of the team or your usual Herbert Smith Freehills contact.

 

Second minimum wage increase in Hong Kong

On 16 January 2015, the Chief Executive in Council gazetted a legal notice to increase the statutory minimum wage in Hong Kong for the second time. Hong Kong’s minimum wage is therefore set to increase from its current rate of HK$30 per hour, to HK$32.50 per hour (equivalent to US$4.20 per hour).

Subject to the Legislative Council’s approval, the new rate is expected to come into force on 1 May 2015. To reflect the amendment, the monthly monetary cap on recording the total number of hours worked will also increase from HK$12,300 to HK$13,300 per month.

Employers found guilty of failing to pay at least the minimum wage to their employees are liable to pay a fine of HK$350,000 and to imprisonment for three years. Employers should therefore ensure they update their payroll systems where necessary to reflect the increased rate of pay.

In addition, the Minimum Wage Ordinance requires the Minimum Wage Commission to report certain statistics to the Chief Executive in Council at least once every 2 years. In its 2014 report, the Minimum Wage Commission reported that:

  • there are currently approximately 150,000 employees in Hong Kong who earn less than HK$32.50 per hour;
  • employers will be required to pay an additional HK$1.36 billion per year due to the new minimum wage rate; and
  • the new minimum wage rate would lead to a 0.2% increase in the current rate of unemployment rate.

 

 

 

Hong Kong: Paternity leave laws in force from 27 February 2015

The Hong Kong Legislative Council has finally introduced laws to entitle private sector male employees to paternity leave.  From 27 February 2015, male employees will be entitled to take up to three days of paternity leave in recognition of the birth of their child. An employee may take paternity leave at any time between four weeks prior to the expected date of delivery of the child and 10 weeks following the actual date of birth.

In order to be eligible for statutory paternity leave, an employee must be the father of the child, and be employed under a continuous employment contract immediately prior to taking the paternity leave.

To claim the entitlement, the employee must notify his employer of his intention to take paternity leave at least three months before the expected delivery date or notify his employer at least five days prior to each intended date of leave.

An employee is entitled to be paid for a period of paternity leave if he has been employed under a continuous employment contract for not less than 40 weeks immediately prior to taking the leave and he provides his employer with proof of the child’s birth and his status as the father of the child. The daily rate of paternity leave pay is 80% of the employee’s average daily wages calculated over the previous 12 months or, if the employee has been employed for less than 12 months, that shorter period.

It is an offence for an employer to fail to grant paternity leave to an employee or to fail to pay an employee for paternity leave where required. Employers found guilty of these offences will be liable to a fine of HK$50,000.

In light of the introduction of statutory paternity leave for private sector employees, all employers should review and/or update their relevant policies and employment contracts to reflect the new provisions. Employers may also want to consider running training sessions for their employees on the new paternity leave laws.

Hong Kong: Amendments to the Labour Tribunal Ordinance – Security for awards and orders

The Administration of Justice (Miscellaneous Provisions) Ordinance 2014 (the “Ordinance”) was gazetted and came into effect on 24 December 2014.  Part 6 – Division 1 makes a number of changes to the Labour Tribunal Ordinance (the “LTO”), the most significant of which are in relation to:

  • section 30 – conferring on the Tribunal the power to make an order for one party to give security for the payment of an award; and
  • section 31(4) – expanding the existing right of the Tribunal to make an order for payment of security on the review of an award or order.

A copy of the Ordinance can be found here. Continue reading