Wrongful Dismissal in Hong Kong
Termination of employment in Hong Kong is a sensitive issue, which has a direct impact on the welfare and emotions of those affected. Employees who face termination often feel ‘wronged’ by their employers, and their immediate response is to seek recourse for what they consider to be a ‘wrongful’ termination. But feelings of injustice or of unfair circumstances may not, from a legal perspective, be sufficient to establish that a termination was legally wrong or not permitted.
In the recent case of Lam Siu Wai v Equal Opportunities Commission [2021] HKCFI 3092 the Court clarified that it is not concerned with the “rightness” or “wrongness” of a dismissal in the literal sense of the words. A dismissal will only be deemed wrongful if an employer dismisses an employee under circumstances which are inconsistent with the law itself or the specific terms of the employment contract.
This article outlines an employer’s statutory and legal grounds for dismissal in Hong Kong, as well as various statutory protections that are available to employees at risk of termination.
General Right to Terminate
Under Hong Kong employment law, governed primarily by the Employment Ordinance (“EO”) (Cap. 57), both the employer and the employee, have the right to terminate an employment contract by giving the other party due notice or payment in lieu of notice. Accordingly, it is normally relatively easy for employers to terminate an employment contract in this way and making the relevant termination payments, including severance or long service payment if the employee qualifies based on years of service.
If an employer terminates a contract of employment without serving the requisite notice or payment in lieu of notice, or where a summary dismissal is not justified, the termination will be deemed to be a wrongful repudiation of the contract, entitling the employee make a claim of wrongful dismissal and to receive termination entitlements and potentially damages. However, damages are usually limited to what the employee would have received by way of net remuneration had the requisite notice been given.
In Lam Siu Wai the Court also confirmed that a contractual right to terminate can be exercised unreasonably or capriciously so long as the right is exercised in accordance with the specific terms of the contract unless such terms are inconsistent with the provisions of the EO.
Valid Reason for Termination
The EO provides that an employer may dismiss an employee for any of the following reasons:
- the conduct of the employee;
- the capability or qualifications of the employee for performing his/her work;
- redundancy or other genuine operational requirements of the business;
- statutory requirements; or
- other substantial reasons.
This apparent requirement for the employer to have a specific reason for the termination often leads to employees thinking they will have a substantial claim. In practice, however, the remedies are limited and therefore such claims tend to be rare. An employee who has been employed under a continuous contract for a period of not less than 24 months who is wrongfully dismissed without a valid reason, can make a claim in the Labour Tribunal for unreasonable dismissal. But the normal remedy is simply to receive the normal termination payments which the employer has already paid at the time of termination.
Statutory Protections and Unlawful Dismissal
The EO does provide some further protections to employees. Dismissal of an employee under any of the following circumstances is prohibited and unlawful:
- Is pregnant and has served notice of pregnancy.
- Is on paid sick leave.
- Is away on jury duty.
- Is a member of and participates in the trade union activities.
- Has a claim pending under the Employees’ Compensation Ordinance.
- Is giving evidence or information in any proceedings or inquiries relating to the EO and/or the Factories and Industrial Undertakings Ordinance.
- Has suffered injury at work and has neither entered into an agreement with the employer concerning compensation nor been issued a certificate of assessment.
An employer who wrongfully dismisses an employee under any of the restricted categories above will be guilty of an offence and subject to a fine. The employee would also be entitled to make a claim for unlawful dismissal and, if successful, obtain an award of compensation from the Labour Tribunal of up to HK$150,000 and seek an order for compulsory reinstatement or re-engagement.
Wrongful Dismissal Misconceptions and Complications
It is common for individuals to consider that a termination is invalid or unfair because it occurs after a specific event in the workplace, such as a disagreement or difference of opinion with a colleague or manager. Technically, however, such circumstances will not present a legal obstacle to the termination unless one of the wrongful situations described above applies, or the relevant situation constitutes unlawful discrimination or harassment against the individual.
The Right Approach
Although termination tends to be relatively easy for employers in Hong Kong compared to other jurisdictions such as mainland China, employers should ensure that they adhere to the relevant statutory requirements and any specific contractual provisions.
As a practical matter, it is also advisable for employers to handle terminations with sensitivity, taking into account the individual circumstances of the employee. A failure to do so may result in terminated staff seeking to bring termination claims, which can result in significant management and administrative time as well as legal costs, even if ultimately formal legal proceedings are not brought. In addition, given the proliferation of social media, there can be reputational impact for employers if details of their actions are posted, even if such actions technically do not breach the law. This may even affect attraction of talent to the business. Accordingly, acting fairly and communicating clearly are extremely important factors alongside the letter of the law.
Additional details of statutory requirements and entitlements in connection with termination of employment may be found in our guide When and How to Terminate an Employee in Hong Kong.
For further information relating to wrongful dismissals and other employment related matters, please do not hesitate to contact our team of employment lawyers.