Member Article

In this article, we have summarised several recent employment cases that address the issues of maternity protection, summary dismissal, notice of termination of employment, payable wages and vicarious liability. Some of these cases ascertain the established position of the law whilst others shed new lights on some areas of uncertainties. The case of Sun Min v. Hong Kong Ming Wah Shipping Co. Ltd. [2004] 2 HKC 1 ascertains the established position of law on maternity protection as provided under the Employment Ordinance. The case of Law Ngai Ming v. Kowloon Club Ltd. [2004] 1 HKC 364 sheds new lights on the area of summary dismissal in ruling that the lack of specific warning as to possibility of dismissal is justified in some circumstances. The case of Law Shiu Kai, Andrew v. Dynasty International Hotel Corporation and Others, HCA 4/2002 confirms the legal position that the length of notice required to terminate an employment contract in a case without written employment contract and where there is no provision to provide for the length of notice required. The case of Ng Chiu Kow and Another v. Chan Sau Lin, HCLA 65/2003 casts new lights on the area of wages payable in respect of a wage period which is a matter of contract for the employer and the employee to work out. Finally, the case of Ming An Insurance Co (HK) Ltd. v. Ritz-Carlton Ltd. [2003] 1 HKC 225 extends the doctrine of vicarious liability by adopting a decision of the House of Lords in 2001 and the employer in the Ming An Insurance Co case was held to be liable for the unauthorised tortious act of the employee that was so closely connected with the employment that it would be fair and just to hold his employer vicariously liable. Maternity protection A pregnant employee is entitled to certain protections under the Employment Ordinance. An employer cannot terminate the pregnant employee’s continuous employment after service of the pregnancy notice unless there are grounds justifying summary dismissal under section 9 of the Employment Ordinance. The Sun Min case dealt with whether the employer can lawfully terminate the employment of a pregnant employee if the employee refuses to accept the internal transfer to a related company after serving the notice of pregnancy. The employee, a Mainland citizen was seconded to work in a Hong Kong company from China. She became pregnant and served a medical certificate on the company confirming her pregnancy. She subsequently served a notice of pregnancy in accordance with section 12(4) of the Employment Ordinance. The company notified the employee by two notices that she would be transferred back to a related company in China and was asked to report duty on a specified date. The employee refused to accept the transfer and she did not report to duty. She lodged her claims with the Labour Tribunal that the company has unlawfully dismissed her when she refused to accept the transfer. The employee claimed for a sum equivalent to one month’s wages, maternity leave pay for 10 weeks, severance payment, terminal payment and compensation. Her claims were dismissed by the Tribunal and she appealed against the decision. The Court of First Instance ruled that the company could not terminate the pregnant employee’s employment during the period from the service of the medical certificate to the expiry of her maternity leave or the date of cessation of pregnancy (otherwise than by reason of confinement). When the company served the notices on the employee, the legal effect of such notices was that the employee would be transferred to the related company and upon such transfer, her employment with the company would necessarily come to an end. They were legally notices of termination of employment and thus the company was in contravention of the Employment Ordinance. Even if the notices did not constitute termination notices, the company was guilty of constructive dismissal because the transfer would result in a termination of employment and the employee was entitled not to accept it. The company had committed a fundamental breach of contract if it did not retract and so the employee could legitimately terminate the employment. The appeal was allowed. Summary dismissal An employer is entitled to summarily dismiss an employee in certain circumstances provided by the Employment Ordinance and the employer is not required to pay the employee any wages in lieu of notice nor severance payment/long service payment. The Law Ngai Ming case decided on the issue whether summary dismissal is justified when there was acquiescence of the malpractice and when there was no specific warning as to possibility of dismissal. The employee was employed as an assistant in the kitchen. He was summarily dismissed after he had taken an unauthorised cigarette break during working hours. He found the summary dismissal unjustified and lodged his claims with the Labour Tribunal. The Tribunal ruled that the authorised cigarette break was a serious breach of duty and the employee’s attitudes were disobedient and so the summary dismissal was justified. The employee appealed against the decision. In particular, he argued that the employer had acquiesced the practice of cigarette breaks. The Court of First Instance ruled that acquiescence required knowledge on the part of the innocent party and the breach must be of the same nature as previous breaches which had been tolerated. Even if loose discipline had been tolerated in the past, that does not mean that the management could not make changes to tighten up the discipline. The employee in this case had behaved in a way that showed that he had no intention to obey the order of the company in the future and his conduct had made the continuation of the employment relationship impossible. In this regard, the Court did not think that the employee could complain about lack of specific warning as to possibility of dismissal. The appeal was therefore dismissed. Notice of termination of employment The notice of termination of employment is largely governed by the provisions of the Employment Ordinance and the employment contract. The Law Shiu Kai case discussed the notice required in a case without written employment contract. This case involved an employee having been constructively dismissed by the employer which failed to pay salary. The employer was in breach of the employment contract and the employee was entitled to give notice to terminate the employment. On the evidence, one of the terms of the employment contract was that the employee was to work for the employer for a period of 3 years. However, the Court found that there was no written employment contract in this case. According to section 5(2) of the Employment Ordinance, unless the contract of employment is evidenced in writing signed by each of the parties, such contract would be deemed to be a contract for 1 month renewable from month to month. As regards the notice of termination, section 6(2)(a) becomes applicable. When there is no provision on the length of notice of termination required, section 6(2)(a) stipulates one month’s notice. The Court found that section 5(2) refers to evidence in writing of the “contract of employment” rather than merely the employment. What is required is written evidence of the essential terms of the contract of employment and the evidence must by signed by the parties. Payable wages The Ng Chiu Kow case discussed the wages payable in respect of a wage period. The employee was employed as a cross-border container truck driver and had been in the employ of the company for 12 years. He received no basic salary and his remuneration was calculated by reference to certain percentage of the transportation charges earned by the employer less expenses. The employer claimed that it was agreed between the parties that the remuneration for a particular month’s work would only be payable after 2 months. The Labour Tribunal found that no such agreement existed and held that the “wage period” was 1 month and the wages shall become due on the expiry of the last day of the wage period and shall be paid as soon as is practicable but in any case not later than 7 days thereafter according to section 23 of the Employment Ordinance. The agreement was void by reason of section 70 of the Employment Ordinance. The employee was entitled to terminate the employment as the wages due were not paid. The employer appealed against the decision. The Court of First Instance found that “wage period” refers to the period in respect of which wages under a particular contract of employment are payable. There is a rebuttable presumption that the wage period is 1 month. However, the Employment Ordinance does not provide for what wages are payable in respect of a particular period of employment, which must depend on what wages have been earned, have accrued, or have become payable within that period of time. It is a matter of contract for the employer and the employee to agree under what circumstances the wages are payable. Leaving sham agreements aside, the Employment Ordinance leaves it to the parties to agree between themselves under what circumstances or when wages are or shall become payable, based on which one may work out what wages are payable in respect of a particular period of employment, i.e. the wage period. Vicarious liability An employer is vicariously liable for the tortious act of its employee and the test for vicarious liability was dealt with in the Ming An Insurance Co case. The case concerned the true test of when an employer is vicariously liable for his employee’s tort committed during an unauthorised course of conduct. A doorman employed by a hotel company drove the bell-boy in the limousine hired by the hotel to collect food for the hotel’s forecourt staff when the chauffeur had gone off-duty and left the keys with the doorman. A traffic accident occurred and two pedestrians were seriously injured. The issue was whether the hotel as the employer was vicariously liable for the negligent act of its employee. The forecourt staff developed a practice of buying and collecting food from elsewhere. They collected the food by various means and one of which was to persuade the limousine chauffeur to drive them to collect food. In this case, the Court of Final Appeal adopted the “close connection” test in the House of Lords case of Lister v. Hesley Hall Ltd. [2002] 1 AC 215 for determining vicarious liability. Under this test, the question was whether the employee’s unauthorised tortious act was so closely connected with his employment that it would be fair and just to hold his employer vicariously liable. The Court found that the practice of collecting food existed in the hotel and was a purpose not only of the hotel’s staff but also of the hotel. It was in the interests of the hotel that its staff were adequately fed. Collecting food was properly to be regarded as incidental to the employment of the hotel staff involved. The doorman’s tortious act though unauthorised was found to be closely connected with his employment that it was fair and just to hold the hotel employer vicariously liable. Conclusion The above cases have reflected the present legal position in the areas discussed. The laws will be continually updated by future amendments in legislative provisions and/or court judgments. Therefore, the employers and the employees should pay attention to these updates to safeguard their respective positions. Cynthia Chung Head of Human Resources and Pensions Deacons Vickie Leung Assistant Solicitor Deacons