Compliance professionals need to keep a close eye on the case law relating to labour disputes in Hong Kong. Zoe Chan So Yuen FCS FCIS, solicitor, looks at how the courts in the HKSAR have played an important role in upholding basic employee rights.

Hong Kong is often considered an employer-friendly jurisdiction, particularly when it comes to trade union rights. Although 879 registered trade unions are active in Hong Kong, collective bargaining rights are mostly disregarded and ignored by employers. Moreover, general employment law does little to protect trade union rights and the participation in union activities by employees. In Hong Kong few workers are covered by collective agreements and those that exist are not legally binding. Recent surveys also indicate that bullying in the workplace is relatively common in Hong Kong, though most workers dare not complain.

Given that employers usually have better resources for litigation and can often depend on witnesses eager to support the corporate interest, they would seem to be in a much stronger position than employees when it comes to labour litigation and negotiation. Nevertheless, some important court decisions have shown that the courts in Hong Kong are prepared to uphold employee rights. In particular, contractual disciplinary and grievances procedures (DGP) represent an important safeguard for employees. Indeed, it can be hard for employers to terminate an employment contract if the DGP policies are used tactically by employees.

Understanding employee rights

Enshrining worker protections in labour regulations and law increases job stability and improves productivity through better employer-worker cooperation. In this context, it is vital that both employers and employees understand their rights. Complex labour disputes will have a direct impact on human resources (HR) practice and the costs of defending charges of summary or wrongful dismissal can be substantial. In addition to being liable to pay common law damages and statutory termination payments, employers may also be liable for damages for breach of implied trust and confidence, and sometimes costs will be ordered on an indemnity basis.

Upholding trade union rights

The Court of Final Appeal (CFA) judgment in the Campbell Richard Blakeney-Williams & Ors v Cathay Pacific Airways Ltd & Ors (Cathay) (FACV 13 & 14/2011) case concerned the unfair dismissal of pilots who participated in industrial action. The judgment marks a landmark in employment law development in Hong Kong and is the most significant trade union judgment in Hong Kong that reconfirms the legal protection of employees participation in trade unions and strikes.

Working to rule is regarded as a legitimate activity of a trade union. Section 21B of the Employment Ordinance protects employees right to participate in union activities outside working hours or with the employers consent. Hence a thorough understanding of the rights and responsibilities of employers and employees in collective bargaining is crucial for HR professionals, particularly those in larger organisations in the public and private sectors.

Employers should allow trade union representatives or staff members reasonable time off for union duties or activities. A refusal to do so is not only likely to have a detrimental effect on employee relations, it may also result in a Labour Tribunal intervention with a declaration to that effect and an award for substantial compensation.

The CFA judgment also concerned the pilots complaints about defamatory statements made online by their employer regarding their alleged misconduct. Cathay was held liable for substantial damages for these defamatory statements.

Moreover, the employers conduct in making various internal and external announcements on the matter constituted sufficient evidence that the employees were dismissed for disciplinary reasons. Giving reasons for dismissal by employers that are untrue can lead to adverse publicity and substantial damages of defamation being awarded to former employees.

The judgment also upheld the principle that neither party can contract out of Hong Kong employment law where employees are based in Hong Kong.

Upholding DGP rights

Where disciplinary proceedings form part of employees contractual terms, such procedures need to be given due regard when an employees employment is being terminated for reasons relating to discipline or performance. Damages may be awarded against employers if they fail to conduct contractually entitled disciplinary hearings.

DGP was the focus of the Lam Chun Choi v Standard Chartered Bank (Hong Kong) Ltd ([2016] HKCFI 320) case. How DGP is used to determine the issue of wrongful dismissal of an employee will depend on whether the issue involves the employees:

conduct – involving misdeeds such as wilful disobedience, dishonesty or conflict of interest, and/or

performance – involving behaviour such as incompetence, neglect of duty or general sloth or indolence.

The court decision highlights the dangers of incorporating an employee handbook and DGP rights into an employment contract. The effect of incorporation will prolong the termination process as employers must follow the policies and procedures that are incorporated into the employment contract. As a result, it appears hard to terminate the employment if the employer does not strictly follow the DGP.

The lessons to be learned

General lessons to be learned from the cases discussed above are many. Any wrongful suspension of work during a case investigation of alleged staff misconduct is challengeable. It may amount to a breach of the implied terms to suspend an employee without reasonable and proper cause, and the plaintiff may be able to recover damages for personal injury action or psychiatric harm which he or she has suffered as a result of the suspension.

The courts have shown an increasing willingness to look at substance over form in employment disputes and to assess the specific circumstances of each individual case. The legal duties and responsibilities of employers are substantial and there are many circumstances where managers can get it wrong. Keeping your company secretarial teams up to date with current and forthcoming Hong Kong employment legislation and case law is essential.

Regular staff training to understand the practical application of law to potential labour disputes and employment relations is critical. It is time to respond to new developments in employment legislation and case law, and ensure practical knowledge is shared throughout the corporation. Compliance professionals should keep employment policies, procedures and contracts of employment up to date with a regular review.

Employers should treat employees fairly in DGPs. Both employees and employers should maintain mutual trust and confidence. Unfair dismissal or termination processes can destroy that mutual relationship of trust and confidence. When an employer has fundamentally breached its duty of trust and confidence, an employee may be justified in treating his or her contract as having been unlawfully breached. This may result in a valid constructive
dismissal claim.

Investigation of the relevant DGPs before any summary termination or work suspension is essential. Employers should investigate the circumstances leading to the termination and provide employees with fair representation to explain their position in the DGP. They must ensure that consistent treatment is afforded to all employees when contemplating summary dismissal. Bear in mind that, where wrongful summary dismissal results in unfair stigmatisation of a particular employee, this can affect his or her ability to seek alternative employment, and may result in an increased award of compensation.

Modernising Hong Kongs labour law

Compliance with employment law is important because it stabilises the overall value system of society, thus harmonising relationships among workers, employing entities, and trade unions etc. Although Hong Kong is an international financial hub with a strong local and expatriate workforce, workers are generally let down by the parlous state of the Hong Kong Employment Ordinance which is outdated and has not kept pace with modern workplace requirements. Filibustering together with general reluctance on the part of the Legislative Council members to modernise the Employment Ordinance in line with international labour laws has weakened employees ability to negotiate for better employment conditions and collective bargaining arrangements. But the judicial acceptance of broader rights attaching to the employment relationship is a welcome signal that the courts will work to prevent the undermining of employee rights.

Zoe Chan So Yuen FCS FCIS