Labour Tribunal's exclusive jurisdiction averted by separate commission agreement

A recent Hong Kong case has highlighted the important point that the Labour Tribunal's exclusive jurisdiction does not extend to dealing with matters which arise outside of an employee's contract of employment and beyond the scope of the Employment Ordinance.

In Lee Man Yee Norman v International Contractors Supply Limited, the Court of First Instance dismissed the defendant employer's argument that the plaintiff's claim fell within the Labour Tribunal's exclusive jurisdiction on the basis that there was an arguable case that the claim arose from an agreement which was separate to the parties' employment contract.

The decision re-iterates the often overlooked advantage of bypassing the Labour Tribunal's exclusive jurisdiction by using separate agreements to govern arrangements outside the employment contract itself. This is particularly desirable in relation to complex cases which go beyond the more routine claims the Tribunal is more accustomed to dealing with.

Facts

The plaintiff was employed by the defendant under an employment contract entered into in 2008 (the "Employment Contract"). In 2011, the plaintiff introduced the defendant to a project to be tendered by MTR (the "Project"). The defendant agreed to pay the plaintiff a commission if the plaintiff successfully obtained the Project for the defendant. The parties signed a commission agreement letter (the "Commission Agreement Letter"), shortly after which MTR awarded the defendant the Project. Between December 2013 and March 2014, the plaintiff issued four invoices to the defendant for his commission (amounting to about HK$1.87 million) none of which were paid. Accordingly, the plaintiff commenced court proceedings for the payment of his commission. The defendant unsuccessfully applied for a stay and referral of the claim to the Labour Tribunal and subsequently brought an appeal against this decision. On appeal, the defendant sought an order for stay of the action, or in the alternative, an order that the action be struck out.

Decision

The Court dismissed the appeal and allowed the claim to proceed in the High Court. To succeed in its application, the Court held that the defendant had to show that it was "plain and obvious that the claim is in the exclusive jurisdiction of the Labour Tribunal". Whether the plaintiff's claim was within the Labour Tribunal's exclusive jurisdiction depended on whether it arose from a breach of a term of "a contract of employment" or a separate agreement. Only claims arising from the former would qualify.

On the facts, the Court held that the defendant failed to satisfy the Court that it was "plain and obvious" that this was the case. The Court noted that preparing documents for the tendering of the Project was not within the plaintiff's duties stipulated under the Employment Contract. Whilst the duties listed in the Employment Contract were not exhaustive and such a contract may be constituted by various other documents (such as handbooks), the defendant presented no evidence as to what other duties the plaintiff owed as an employee. The Court also referred to the four invoices the plaintiff issued and observed that "it would seem unusual for it to be a term of [the plaintiff's] employment that [the plaintiff] would need to issue invoices to [the defendant] for any remuneration". Accordingly, there was an arguable case that the claim arose from an agreement other than the Employment Contract and therefore that it was not within the Labour Tribunal's exclusive jurisdiction.

Comments

The decision illustrates an important point of practice that claims between parties who are in an employment relationship can bypass the Labour Tribunal's exclusive jurisdiction if the terms from which such claims arise are recorded in a separate agreement and outside the scope of the Employment Ordinance. Given the purpose of the Labour Tribunal is to deal with the more common types of claims which arise out of an employment relationship, it may be that the Tribunal is not always best-placed to determine more complex disputes that might arise between an employer and employee. As well as claims for a sum of money arising from a breach of an employment contract, other types of claims which typically fall within the Tribunal's exclusive jurisdiction include those relating to wages, severance payments and failures to comply with the Employment Ordinance or the Apprenticeship Ordinance. Therefore, the scope of the Labour Tribunal's jurisdiction is fairly broad. If parties wish to reduce the likelihood of having a dispute between them heard by the Labour Tribunal, they should consider carefully the terms they want to include in an employment contract and those they want to keep outside of that relationship.

If you wish to discuss, please contact Gareth Thomas or Helen Beech of our Employment Pensions and Incentives team.