Hong Kong: The law relating to termination of employment contracts

Subject to certain exceptions, employers and employees in Hong Kong may terminate their employment relationship by providing the other with requisite notice of the termination, or by making a payment in lieu of such notice.

Any decision to dismiss an employee must be based on one of the five broad reasons cited in the Employment Ordinance, which include the employee’s conduct, capability or qualifications, or any other reason of substance. Upon dismissal, an employee is entitled to be paid for certain accrued but unused contractual entitlements, such as annual leave, end of year payments and a long service payment.

Employees may also be dismissed without notice in certain circumstances, including where an employee has wilfully disobeyed a lawful and reasonable order, engaged in misconduct, is guilty of fraud or dishonesty or has been habitually neglectful in their duties.

Summary dismissal, however, is a serious disciplinary outcome. Prior to taking any decision to summarily dismiss, prudent employers should carry out a thorough investigation in respect of an employee’s alleged misconduct, maintain a detailed paper trail in respect of any such investigation and afford the employee the opportunity to explain his/her position.

Certain categories of employees are protected in Hong Kong and generally speaking, an employer may not dismiss any employee who:

• has served notice of pregnancy or is on statutory maternity leave;
• is on paid sick leave; or
• is suffering from a work related illness or injury and is in receipt of employees’ compensation under the Employees’ Compensation Ordinance.

Employers are also prohibited from terminating the employment of an employee by reason of:

• the employee giving evidence or information in any proceedings or inquiry in connection with the enforcement of labour legislation, industrial accidents or breach of work safety regulations;
• trade union membership and activities; or
• jury service.

Employers must also conform with all applicable anti-discrimination laws.

An employee who believes he/she has been dismissed other than for one of the five permitted reasons may bring a claim in the Hong Kong Labour Tribunal against their former employer. Possible remedies include an order for reinstatement, payment of unpaid statutory or contractual entitlements, and/or compensation up to HK$150,000.

Actions for employers

While dismissing employees in Hong Kong is generally regarded as reasonably straightforward, there are traps which employers can fall in to if they are not careful. Ensuring employees are afforded procedural fairness, are dismissed for one for the five permitted reasons under the Employment Ordinance and are not a protected category of employee, will go towards ensuring these traps are avoided.

Article written by Gareth Thomas, Partner and Helen Beech, Senior Associate.