Hong Kong Employment Law Update

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1 Hong Kong Employment Law Update January 2012 In This Issue News Update Case Law Update News Update Amendment to the General Holidays Ordinance and the Employment Ordinance The General Holidays and Employment Legislation (Substitution of Holidays) (Amendment) Ordinance 2011 (the Ordinance ) will come into force on 24 February As reported in our November issue, the new Ordinance in essence provides that if any of the first three days of the Lunar New Year falls on a Sunday, the fourth day of the Lunar New Year (instead of the day preceding the Lunar New Year Day) will be substituted as a statutory holiday and general holiday. Similarly, if the day following the Chinese Mid-Autumn Festival falls on a Sunday, the second day following that Festival (instead of the day of that Festival) will be substituted as a statutory holiday and general holiday. The Ordinance was enacted to address the concern that the current arrangement for substitution of holidays results in employees getting Saturday off, which does not have any benefit to employees working on a five-day basis. Hong Kong 14th Floor, Hutchison House 10 Harcourt Road Central, Hong Kong 23rd Floor, One Pacific Place 88 Queensway, Hong Kong Tel: Fax: Beijing Suite 3401, China World Office 2 China World Trade Centre 1 Jianguomenwai Dajie Beijing , PRC Tel: Fax: Shanghai Unit 1601, Jin Mao Tower 88 Century Avenue, Pudong Shanghai , PRC Tel: Fax: The next Lunar New Year Day falling on a Sunday is expected to be in The general holidays for 2013 will be announced by the government in or around April this year thus providing employers with sufficient time to plan ahead. Case Law Update Equal Opportunities Commission Warns Employers to Create a Zero-Tolerance Culture Against Sexual Harassment in the Workplace In a recent District Court case, the Equal Opportunities Commission provided legal support to an employee of the Food and Environmental Hygiene Department who had been sexually harassed by a male work colleague. The unlawful behaviour included the male colleague making remarks with sexual overtones and adopting inappropriate body language on numerous occasions. The District Court made the following orders against the harasser: to pay compensation of HK$50,000 for injury to feelings;

2 to pay an additional HK$10,000 as a penalty for falsely making up a defence; to pay the plaintiff s litigation costs; and to apologize in writing. The employer was criticized for exacerbating the plaintiff s anxiety and stress by failing to provide support, rejecting her complaints against the harasser on the basis of a lack of substantial evidence and rejecting her application to transfer to another section. Five steps to improve compliance with anti discrimination legislation Most employers have equal opportunities policies but ensuring that they have a genuine deterrent effect and are followed throughout the workforce is another story altogether. Employers should consider taking the following steps: 1. Give your equal opportunities policy teeth Review the equal opportunities policy (or create one!). Does it have sufficiently broad examples to cover what constitutes discriminatory behaviour in particular the more subtle forms of harassment? Consider making adherence to the policy part of employees annual evaluation. 2. Involve senior management Consider appointing a senior member of the organization as the equal opportunities champion thus elevating discrimination on the internal agenda. 3. Ensure team leaders and managers are fully trained to act upon complaints or identify inappropriate behaviour in their teams Imposing mandatory equal opportunities training for all newly promoted team leaders and managers and refresher training every two years for all other team leaders and managers is likely to create an environment where problems are identified early and dealt with more effectively. 4. Create a specialist panel For large organizations, consider creating a specialist panel of two or three staff who have been trained to deal with the complexities of discrimination grievances and disciplinaries. This will ensure that basic steps are taken at the outset which will minimize stress to the complainant such as considering how to handle the parties while the complaint is being investigated and ensuring that any discriminatory behaviour ceases immediately. The knowledge that this panel will build up may prove to be valuable in identifying and addressing systemic problems within the company and also in managing the risk of legal claims by ensuring appropriate action is taken. 2 Hong Kong January 2012

3 5. Send a message to staff by dealing quickly and fairly with complaints and discriminators If a complaint is founded then swift and proportionate action should be taken against the discriminator/harasser demonstrating how seriously the organization takes such behaviour. Court Awards Costs Against Plaintiff to Send a Message Chan Wai Ho v Civil Service Bureau In line with the authority of Sit Ka Yin Priscilla v Equal Opportunities Commission, where costs were awarded against the plaintiff on a number of occasions during the proceedings and the appeals process, the District Court recently exercised its discretion to award costs against the plaintiff in the case of Chan Wai Ho v Civil Service Bureau. The plaintiff alleged that he had been discriminated against on the grounds of his disability, asthma. The allegations included (i) the employer preventing him from applying for sick leave using medical certificates from a private clinic and (ii) negative performance appraisals. The court took the view that the plaintiff had not provided any objective evidence to substantiate his claim and that it had been made frivolously. The award of costs was also motivated by a desire to discourage abusive discrimination claims. 1. This decision is further evidence that the court is prepared to exercise its discretion and award costs against plaintiffs who bring malicious and/or frivolous claims. It will be a valuable case to refer to during pre-litigation negotiations where employers are faced with an unmeritorious claim. 2. This case also highlights the importance of documenting the reasons for making significant decisions during the course of the employment relationship. In this case, the employer was able to evidence non-discriminatory reasons for actions taken such as giving negative performance reviews and the disallowing of the plaintiff s application for sick leave. The employer s ability to produce evidence of the real reasons for actions taken resulted in the successful defence of the claim and costs application against the plaintiff. Non Payment of Wages is Not an Option HKSAR v Lee Fung Jing (Court of First Instance) The personal liability of directors, officers and managers was highlighted when a company was found to have willfully and without reasonable excuse failed to pay wages to its employees. A Magistrate held that the offence was committed with the consent or connivance of one of the January 2012 Hong Kong 3

4 directors responsible for the company s human resources and financial matters. The director lodged an appeal against the conviction and the Court of First Instance considered the meaning of the terms wilfully and without reasonable excuse and connivance. 1. It is evident from this case that the hurdle is very high if an employer wishes to demonstrate that it had a reasonable excuse for delaying payment of wages. The decision refers to the fact that Hong Kong law takes the protection of wages very seriously, as evidenced by the fact that the Employment Ordinance treats the withholding of wages as a criminal offence rather than as a civil matter for outstanding debt. The court considered that employers in a grave financial situation who are struggling to pay wages are in a minority. However employers who delay payment of wages as a result of administrative errors or inefficient operating procedures should be aware that the courts are very unlikely to find such reasons to be a reasonable excuse. They may face criminal sanctions with the attendant brand damage that such proceedings may cause. 2. This case also highlights that it is not sufficient for a director to merely object to a practice in order to demonstrate that they did not consent or connive to the offence which the company has committed. It would require taking active steps which are evidenced in a variety of forms including Board minutes. Facts: Tong Lik Electronics Company Ltd ( Tong Lik ) was facing closure and decided to delay payments to all employees for a two-month period (October November 2009) in order to use those funds for daily operating costs to keep the company running. Five employees sought to recover their unpaid wages in the Labour Tribunal and a criminal prosecution followed in the Kwun Tong Magistrates Court Magistrates. Tong Lik went into liquidation in June The Magistrate held that Tong Lik had wilfully and without reasonable excuse failed to pay the wages which became due to the five employees. The offence committed by such body corporate was found to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, Ms Lee Fung Jing, a director of the company. Ms Lee Fung Jing (the Appellant ) lodged an appeal against the conviction and alleged that Tong Lik did have a reasonable excuse for failing to pay wages and that she was not guilty of consent or connivance as she had disagreed with the other directors on the decision to delay payment of employees wages. Outcome 4 Hong Kong January 2012 The Appellant contended that the grave financial crisis facing Tong Lik and the fact that the wages of all employees (including the directors) were withheld constituted a reasonable excuse for the company s failure to pay wages on time.

5 The Court of First Instance did not agree that this was a reasonable excuse and confirmed that this was not a case where Tong Lik did not have sufficient funds to pay wages to its employees; rather it was a decision by the decision-makers that the priority was to maintain the operation of the company and this did not constitute a reasonable excuse. Judge Wong noted that the Employment Ordinance does not define connivance and took the view that it should be construed in accordance with its ordinary meaning. Judge Wong considered the definition in the New Longman Chinese Dictionary and the Shorter Oxford English Dictionary which provides that connivance means assistance in wrong doing by conscious failure to prevent or condemn, or tacit permission. Connive has the meaning of to shut one s eyes to (a thing one dislikes but is resigned to). In the circumstances, Judge Wong concluded that the delay by the company of the payment of wages was carried out with the connivance of the Appellant. It was noted that the Appellant s objection to the decision was merely verbal and that she did not take more active steps to stop the unlawful behaviour or to distance herself from the decision. When Does an Accident Arise Out Of And In The Course Of Employment? Employers often require a mobile workforce and many employees from Hong Kong are expected to travel to the Mainland and other locations as part of their duties. Employers will be aware that if an employee has an accident while travelling for work then they may be entitled to compensation under the Employees Compensation Ordinance (section 5(4)(g)), if certain conditions are satisfied. In order to successfully claim compensation for an accident which took place in the course of employment, an employee will need to demonstrate: 1. The accident happened while the employee was travelling with the express or implied permission of his employer; and 2. The employee was travelling by any means of transport for the purposes of and in connection with his employment between Hong Kong and any place outside Hong Kong or between any place outside Hong Kong and any other such place. Two recent cases reported below demonstrate the challenge of applying these provisions to real life scenarios which are less clean-cut. It appears that the courts are adopting a common sense and purposive approach in such cases. Does a Detour Interrupt the Course of Employment? Chan Ho Yuen v Multi Circuit Board (China) Ltd [2011] 5 HKC 565 Chan Wa Keung acting for himself and other Members of the Family of Chan Chi Kai, deceased v Multi Circuit Board (China) Limited (CACV 217 of 2010) The Court of Appeal considered whether a car accident could be deemed to be in the course of employment when the employees involved had January 2012 Hong Kong 5

6 been travelling in a colleague s car, without express permission and had interrupted their return journey by visiting a karaoke parlour. 1. It is always challenging for the parties and the court to determine the existence of an implied term. Therefore as a general point, it would be preferable for employers to state clearly whether or not company transportation that is provided is mandatory (for example at a work social event). It is noteworthy that Hon Justice Fok commented that an employer could prohibit the making of detours for personal business or to limit the type of detours that are permissible. This highlights the need for clear communication to employees should the employer wish to take this approach. 2. It is helpful to review the terms of use of employees personal vehicles and to ensure practice is consistent with such terms. The Court of Appeal rightly scrutinised the past history and practice of the employer in order to conclude what an employee would reasonably believe they are permitted to do based on the same. Facts: Mr. Chan and Mr. Chan Chi Kai attended the annual dinner of their employer, Multi Circuit Board (the Company ) in Shenzhen. The Company had made arrangements for the HK-based staff to travel either from the HK office or the Customs Port in Shenzhen to the dinner venue and a similar arrangement was made for the return journey. The Appellants told the CEO of the Company that they were returning separately and there was no objection to this. The Appellants went to a karaoke parlour with another employee of the Company ( Mr. Lee ). They left the karaoke parlour shortly after midnight and Mr. Lee intended to drive them to the Customs Port. On their way to the Customs Port, Mr. Lee s car crashed. As a result, Mr. Chan Chi Kai was killed and Mr. Chan suffered serious injuries. The Court of Appeal had to determine: 1. Whether the Appellants had the express or implied permission of their employer to return to Hong Kong from a company dinner in Shenzhen in a colleague s car; and 2. Whether a detour to a karaoke parlour had the effect of taking the return journey out of the course of their employment for the purposes of claiming compensation under the Employees Compensation Ordinance (section 5(4)(g)). Outcome: The Court of Appeal held: 1. It was reasonable for the Appellants to conclude that they had implied permission to travel from the venue in their colleague s car to the border. Although the employer had provided a company vehicle which most of the HK-based staff used that evening, there 6 Hong Kong January 2012

7 was no directive prohibiting use of another vehicle or requiring use of the company vehicle only. 2. It was accepted that the detour was not incidental to the employment of the Appellants and did interrupt the course of employment. However, this was deemed to be a temporary interruption until the return journey resumed which was in the course of employment. It was determined that an interruption for only 2.5 hours was not sufficiently lengthy to be considered more than a temporary one. It was significant that the resumed journey was on precisely the same route that their colleague would have taken from the annual dinner had they not taken the detour. Therefore, the Court of Appeal allowed the appeals and held that the car accident did occur in the course of employment. Tick Tock: When Does The Course of Employment Commence? Fong Christina v Clever View Group Ltd (District Court) The Applicant was a shipping manager employed by Clever View Group Ltd. In October 2008, she was injured while crossing the road on her way to the bus stop where she would take public transportation for the purpose of attending a lunchtime appointment on the Mainland followed by a factory visit. The employer contended that as the Applicant had not yet commenced taking fare paying public transport, it could not be considered that the course of employment had commenced. The District Court held that as the Applicant was travelling to the Mainland (and not her normal place of work in Hong Kong), it deemed that her travel from home was on account of her work. Therefore she was in the course of employment from the time she left her home. The District Court was persuaded by several factors including the fact that she was reimbursed for her travel, the employer did not stipulate how she must travel and the unusual place of work. Judge Lo confirmed that all these factors indicated that her whole trip from home in Hong Kong was undertaken for all practical purposes on account of her employment and in her employer s time. In the same vein as the decision reported above, this case demonstrates that the court will take a broad view when determining whether the course of employment has commenced or not. The trend appears to be that very technical arguments are unlikely to be received well when they would result in a decision that does not accord with common sense. January 2012 Hong Kong 7

8 To find out more about how our Employment Law Group can add value to your business, please contact: Jennifer Van Dale Direct: Susan Kendall Direct: Tier 1 Law Firm for Employment (China & Hong Kong) Asia Pacific Legal 500, Band 1 Law Firm for Employment (China & Hong Kong) Chambers and Partners, 2011 Leading Law Firm for Labour and Employee Benefits in Hong Kong PLC Which Lawyer? 2012 Ranked No. 1 Employment Law Firm PLC Which Lawyer? Global Labour and Employee Benefits Super League Employer of Choice (Hong Kong & China) ALB Employer of Choice, 2011 & 2010 Leading Law Firm for Employment Law (Hong Kong: International Firms) ALB Employment and Labour Law Survey 2011 What is in the Exclusive Jurisdiction of the Labour Tribunal? Deutsche Bank AG (HK Branch) v Daniel Mamadou-Blanco The Defendant employee sought to strike out claims brought against him in the Court of First Instance for breach of confidence by Deutsche Bank AG, on the basis that the Statement of Claim disclosed no reasonable cause of action and the claim fell within the exclusive jurisdiction of the Labour Tribunal. Background: It was alleged that after resigning in July 2011, the Defendant sent an from work to his personal address, which contained the details of the remuneration package of sixteen of the Plaintiff s senior employees. Nine of these employees (including the Defendant) resigned in the same period joining the Plaintiff s competitor. The Plaintiff lodged claims for damages and a declaration that the Defendant was still bound by the non-competition and non-solicitation of employees clauses in his employment contract. Outcome: The court of First Instance held that the facts in the Statement of Claim supported a claim for breach of confidence which could be founded both in contract and in tort. The Court held that even though it had not been expressly pleaded, the facts supported such a cause of action and on this basis it did have jurisdiction. The court agreed with the Defendant that the Statement of Claim was inadequately pleaded and ordered the Plaintiff to amend its Statement of Claim to include relevant material facts in support of its claim and to include the claim for breach of confidence. The Labour Tribunal has exclusive jurisdiction over certain employmentrelated claims. The court commented on the difficulties caused by the existing law in relation to the Labour Tribunal s jurisdiction. The view was expressed that complex claims should be excluded from the Labour Tribunal (such as breach of restrictive covenants, fiduciary duties and breach of confidence) as it was the intention of the legislature that the Labour Tribunal served as an informal forum for straightforward claims such as unpaid wages etc. We will need to watch this space to see whether these comments precipitate any review of the laws governing the Labour Tribunal s jurisdiction. This Update has been prepared for clients and professional associates of Baker & McKenzie. Whilst every effort has been made to ensure accuracy, no responsibility can be accepted for errors and omissions, however caused. The information contained in this publication should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. No responsibility for any loss occasioned to any person acting on refraining from action as a result of material in this Update is accepted by clients, authors or Baker & McKenzie. If advice concerning individual problems or other expert assistance is required, the service of a competent professional adviser should be sought. Data Privacy Please contact Jane Lee by telephone or should you wish your details to be added, amended or deleted from our mailing list Baker & McKenzie. All rights reserved. Baker & McKenzie, a Hong Kong Partnership, is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. 8 Hong Kong January 2012

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