Member Article

Under the Employment Ordinance, an employer has the right to terminate an employee’s employment summarily without notice or payment in lieu of notice in certain situations, one of which is employee misconducting himself, such conduct being inconsistent with the due and faithful discharge of his duties. The following case indicates that the employer should be aware that such right could be waived by the employer if the employer elects to terminate the employee’s contract by payment in lieu of notice. In Li Heung Sang v Compuware Asia Pacific Ltd [2004] 2 HKLRD 732, the employee was a sales director for the North Asia region. The employer found that there were a high level of accounts receivable for the North Asia operations and it was revealed in an internal audit that a manager in the employer’s Beijing office had entered fictitious sales figures in the books of the business. The employer found that the sales director was responsible for the act of such manager as it was his duties to ensure that the manager acted properly. Instead of summarily dismissing the employee, the employer terminated his employment by giving him salary in lieu of notice of termination. The Court ruled that the employee had misconducted himself by omitting to take proper care of the management of the Beijing office. He had not ensured that the purported sales figures were genuine and therefore his conduct was inconsistent with the due and faithful discharge of his duties and the employer had had the right to dismiss him summarily. The employer elected to terminate the employment by payment in lieu of notice rather than to dismiss him summarily at the stage when it knew of facts which would have entitled it to dismiss the employee summarily and when it had taken legal advice. By doing so, the employer had waived its right to summarily dismiss the employee and it could not subsequently purport to dismiss the employee summarily.