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Termination of Employment Contracts in Hong Kong

1. Grounds for Termination without Notice (List)

The Employment Ordinance authorizes termination by the employer summarily without notice or payment in lieu of notice where the employee has, in relation to his employment:

  • willfully disobeyed a lawful and reasonable order;
  • misconduct, inconsistent with due and faithful employee duties;
  • is guilty of fraud or dishonesty or;
  • is habitually neglectful of his duties;

or on any other grounds on which the employer would be entitled to terminate his contract without notice under the Common Law.

An employee may terminate his employment contract without notice or payment of wages in lieu of notice if –

  • he reasonably fears physical danger by violence or disease;
  • he is subjected to ill-treatment by the employer; or
  • he has been employed for not less than 5 years and he is certified by a registered medical practitioner as being permanently unfit for the type of work he is engaged.

2. Redundancies

a. Is severance pay required?

Any employee who has been employed under a continuous contract for not less than 24 months shall be entitled to receive statutory severance payment if:

  • he is dismissed by his employer for reasons of redundancy;
  • he is laid off.

Statutory severance payments may be reduced by any contractual gratuities or benefits, which are calculated based on length of service and payable to the employee.

3. Separation Agreements

a. Is a Separation Agreement required or considered best practice?

A separation agreement is not statutorily required. In suitable circumstances however, the employer and employee may negotiate a mutually agreed upon separation agreement setting out the terms of conditions relating to the termination of employment.

b. What are the standard provisions of a Separation Agreement?

As in any other employment contract, the employer provides consideration to the employee, especially if post-termination restraints or any other new terms not in the original contract are introduced. The separation agreement should take account of and expressly include any statutory benefits or entitlements, which an employee would otherwise be entitled to upon termination to ensure compliance with the Employment Ordinance.

c. Does the age of the employee make a difference?

No.

d. Are there additional provisions to consider?

Some mutual agreements may take the form of a “settlement” or ”release” agreement between the employer and departing employee to fully and finally settle all the employee’s claims, which he has or may have against the employer.

4. Remedies for employee seeking to challenge wrongful termination

Where an employee has been employed under a continuous contract for not less than 24 months and is dismissed by the employer other than for a “valid reason”, or where he is employed under a continuous contract and the employer, without his consent and, in the absence of an express term in his employment contract, varies the terms of the employment contract other than for a “valid reason”, or where the employee has been unlawfully dismissed, the employee has a right of action against the employer and the following penalties may be ordered:

  1. reinstatement;
  2. re-engagement;
  3. award of terminal payment; and
  4. award of compensation not exceeding HK$150,000.00.

Under the Employment Ordinance, the five valid reasons for dismissal or variation of the terms of the employment contract are:

  1. the conduct of the employee;
  2. the capability or qualifications of the employee for performing his work;
  3. redundancy or other genuine operational requirements of the business;
  4. statutory requirements; or
  5. other substantial reasons.

Instances where a dismissal would be in contravention of the law include, without limitation, the following:

  1. An employer shall not dismiss a female employee who has been confirmed pregnant and has served a notice of pregnancy.
  2. An employer shall not dismiss an employee whilst the employee is on paid sick leave.
  3. An employer shall not dismiss an injured employee before having entered into an agreement with the employee regarding compensation or before the issue of a certificate of assessment.
  4. An employer shall not dismiss an employee for providing evidence or information in any proceedings or inquiry in connection with the enforcement of the Employment Ordinance, work accidents or breach of work safety legislation.
  5. An employer shall not dismiss an employee for trade union membership and activities.

The Labour Tribunal in Hong Kong shall have jurisdiction to determine such claims.

For more information, please contact L&E Global.
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