HONG KONG: RESIGNATION, REPUDIATION OR DISMISSAL?

In the recent decision of Lam Sin Yi Sindy v Leung King Wai William [2020] HKCFI 2525, the plaintiff challenged her former employer’s treatment of the termination of employment as a resignation. The decision is a useful reminder of the legal principles in relation to valid notice of termination and the perils of accepting a resignation given in the heat of the moment.

Background

The issues leading to the dispute arose after the employee submitted a leave request for the following morning in order to take her mother to see a doctor. The following day, the principal of the employer (a law firm) told the employee via WhatsApp that her leave request was not approved and a minimum of 7 days’ notice for leave requests was required. The principal also said that employees of the firm were employed to work, and not to take leave without reasons and “I am now considering whether you have absented from work without cause.  If yes, you have to leave immediately!” The employee queried the position taken by the principal and then stated that she had been prepared to return to work in the afternoon, but this did not matter if she was to pack her things. The employee collected her personal belongings from the office that day but did not speak to the principal. She did not return to work thereafter. When the employee received her final pay, the employer had deducted an amount as payment in lieu of 7 days’ notice.

The Minor Employment Claims Adjudication Board (the “Board”) initially dismissed the employee’s claim for underpayment. The employee was then granted leave to appeal the Board’s decision on the question of whether, in construing whether her words and actions constituted a resignation, the Board should have considered the entire context and circumstances and not just the literal meaning of the words used. On appeal, the Court also considered whether the employee had accepted the employer’s repudiation of contract.

The heat of the moment

It is well established that to be valid, notice of termination must be clear and unambiguous. In its decision the Court referred to authorities which provide that the circumstances in which oral notice is purportedly given may be sufficiently special that, notwithstanding the clear and unambiguous words, the notice is not effective. For instance, where a resignation is given in an acrimonious exchange with an employer, the real intention of the employee to terminate the employment may be questionable. The authorities further provide that words used by an employee or employer in the heat of the moment should not be accepted at face value and the party should be given the opportunity to recant those words. This is on the basis that, notwithstanding the actual words spoken, when considered in the context of the exchange or the broader circumstances, there was no real intention to terminate the employment relationship.

The Court also found that, as in any type of contract, the question of whether there has been a repudiation will be fact-sensitive and must be considered in context, bearing in mind the relationship between the parties, the conduct constituting breach, and whether there is evidence of unequivocal conduct which demonstrates the intention of the party said to be in breach no longer to be bound. This can be particularly difficult when the relationship terminated is one which is personal, such as that between an employer and employee, and when the termination is charged with emotions and takes places in circumstances in which impulsive words and heated arguments are exchanged.

Decision

The Court found that the Board had failed to take into account the circumstances in which the WhatsApp messages were exchanged. The employee was obviously indignant and felt aggrieved and her comment that “it would not matter” if she returned to the office in the afternoon to pack her belongings was an impulsive statement expressed in a moment of anger and not a resignation. The Court further found that, if the employee had mistakenly thought she had been dismissed, the employer did not correct the employee’s belief or understanding nor give her any opportunity to clarify the position and she therefore had not accepted any repudiation by the employer. Instead, by requiring the employee to leave, the employer had effectively dismissed the employee.

Key takeaways

The decision serves as a useful reminder of certain principles in giving notice of termination. When giving or receiving notice of termination, employer’s should remember:

• The notice of termination (by either party) must be clear and unambiguous.
• Where the employment contract provides that notice must be in a certain form (e.g. in writing), this should be complied with to avoid any uncertainty about its validity.
• The notice of termination should indicate (expressly or by easy inference) the date on which the termination of employment should occur.
• Where there are special circumstances, such as a heated exchange between the parties, any notice of termination given should be reaffirmed.
• An exception to the general rule that, once given notice of termination cannot be unilaterally withdrawn, may be where notice is given in the heat of the moment and then promptly retracted.

Finally, the decision reinforces that the question of whether a party has repudiated the contract or whether the other party has accepted the repudiation will often not be straightforward in the employment context and careful consideration of the specific circumstances will be required.