Hong Kong: Which laws apply in cross-border employment?

The Macau Judicial Base Court recently held that Macau law (not Hong Kong law) governed an employment relationship between a Hong Kong citizen and his Hong Kong based employer, notwithstanding that the employment contract clearly stated that Hong Kong law governed the relationship.

This case is a useful reminder that it is often not possible to exclude the operation of the laws of the jurisdiction in which an employee works and that an employer may sometimes have exposure under the laws of more than one jurisdiction.

The Macau Judicial Base Court decision

In assessing which law applied, the Macau court gave considerable weight to the fact that the employee had travelled to Macau regularly for work and received a salary supplement for each day that he worked in Macau. In light of these factors, the court formed the view that the employment relationship was mainly developed in Macau and that Macau law had a closer connection to the case; the consequence being that the former employee was able to claim compensation under Macau law for work undertaken during his employment on Macau public holidays and rest days.

Concurrent application of Hong Kong law?

Although the Macau court applied the laws of Macau in determining the above dispute, that does not prevent the concurrent application of Hong Kong law. That is because if the same employee commenced proceedings in a Hong Kong court or the Labour Tribunal, claiming rights under Hong Kong law (notwithstanding that a significant amount of his work is performed in Macau), the Hong Kong court would apply general conflict of law principles to conclude whether Hong Kong law applied. Those principles can be summarised as follows:

1. Where the contract specifies that a particular law will govern the relationship, that law will generally be treated as the proper law of the contract, subject to one qualification (see below).
2. If there is no express choice of law in the contract, the courts will seek to infer the parties' intention as to the applicable law from the nature and terms of the contract and the general circumstances of the case.
3. Where no such inference can be made, the applicable law will be the system of law to which the contract has the "closest and most real connection", taking into account such things as the place of performance of the contract, the place of negotiating the contract and the domicile of each of the parties and any jurisdiction clause of the contract.

Those rules provide useful guidance when considering whether Hong Kong law will apply to an employee who is working solely or predominantly outside Hong Kong. However, the 2012 case of Cantor Fitzgerald Europe & Ors v Boyer & Ors (HCA 1160/2011) demonstrates that where there is a real connection between the work performed and Hong Kong, the application of the rules may not be so straight-forward. In that case, the Court of First Instance interpreted broadly the scope of the Hong Kong Employment Ordinance, holding that it applied to individuals working in Hong Kong, irrespective of any express choice of governing law in the employment contract.

What does this mean for cross-border employment?

The cases referred to above demonstrate the difficulties employers face in implementing cross-border employment arrangements where the law of the employment contract differs from the law of the place in which the employee predominantly performs work. In such cases, there is a risk of disgruntled employees "forum shopping" for the most favourable forum in which to bring their claim.

Accordingly, employers will need to be alive to the possibility that multiple sets of laws may apply in the scenario described above, and should conduct a risk assessment as to whether a different governing law in the contract (from that of the place of work) is necessary or presents more risks than benefits.