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The below does not reflect one of our cases or one of our clients but is rather a compilation of different approaches to this topic that we have seen recently.
Author: Stefan Schmierer, Managing Partner
Receiving the termination news: stay calm, ask for time to process, avoid decisions
Edward Employee (EE) is employed as manager in the back office of his middle-sized employer Unfair Company Limited (UCL). UCL has approximately 20 employees and EE has been working for UCL in his unchanged position for about 3 years. His employment contract follows the usual Hong Kong standard and provides for a notice period of one month.
On a sunny Tuesday afternoon, he is asked by his superior to join a meeting in the UCL meeting room, where one of the directors and the head of HR are already waiting. Facing all three people, EE is surprised to hear from the head of HR that UCL has decided to cease the employment of EE due to several reasons, without giving further details. Further, the head of HR presents EE with a sample termination notice and asks EE to sign the notice. The head of HR explains to EE that it would be in the best interest of EE that he resigns on his own account instead of getting terminated, since it would be easier for him to find a new job later. EE is asking for some time to think about the situation and consider his next steps, which is granted to him until the next morning 10am.
Our observation:
So far, EE acted correctly. Even though it is not uncommon that employers will confront the unprepared employee with the termination information, EE was in no position to decide right on the spot whether it would be in his interest to resign on his own account, and it is prudent for him to ask for some time to consider his decision.
From UCL’s perspective, it was prudent to involve at least 2 persons in this meeting, in case witnesses are required at a later stage to counter any accusations from EE.
Receiving the termination notice: resist the offer to resign yourself, no need to sign any receipt
At 10am the next morning, another meeting takes place and EE informs the UCL representatives that he has decided not to resign by himself.
Our observation:
This decision was prudent, because by resigning by himself he might have given up one or more claims against UCL regarding his termination.
Upon hearing his decision, the head of HR presents a termination notice to EE, signed by the responsible UCL director, according to which EE’s employment is terminated with the one month notice period as provided in the contract. Further, the termination notice contains stipulations which instruct EE to leave the UCL premises immediately, to refrain him from attending office anymore and to forbid him from contacting any suppliers, customers or other business partners of UCL.
Our observation:
Such a clause is commonly known as “Garden Leave Clause” in Hong Kong and the main purpose is for the employer to avoid having a disgruntled employee remain in the office. However, it is important that the employment contract must contain such a Garden Leave Clause to grant this right explicitly to the employer.
EE does not sign the receipt of the termination notice and is given 15 minutes to clear his private belongings from his office space and leave the UCL premises. Further, he needs to hand back the key to the office.
Our observation:
It is irrelevant for EE and the further proceedings whether he does or does not sign the receipt of the termination notice, since it is valid upon handing it over to him.
From an UCL perspective, it is reasonable to ask the employee to leave the office immediately after the decision. Besides collecting the office key, it would also be prudent for UCL to block EE’s access to his inbox and other online databases to which he had access to avoid EE tempering with or copying sensitive data.
Note to employers: this style of dismissal should only be applied after diligently indexing all responsibilities, current dealings, leads, etc. the employee has been working on prior to the dismissal, to avoid loss of continuity. It is far better to work together with the employee on their exit from the company, should the circumstances allow it.
Garden leave: adhere to the terms set in the termination notice, look out for and check last payment for accuracy
During the following weeks, EE enjoys his time during the garden leave period, since from his perspective, he still gets paid but does not need to work. UCL is also satisfied with the current arrangement, because EE does not seem to try to interfere with UCL affairs, nor does he seem to violate any other clause of his employment contract.
After a month, EE’s employment with UCL comes to an end without EE visiting UCL premises. Some days after this date, EE receives his final salary in his bank account but no additional amount.
Our observation:
UCL acted correctly since salary is due under Hong Kong laws not later than 7 days after the due date. Alternatively, UCL could have terminated EE with immediate effect and make a payment in lieu of notice in the amount of one month salary.
Contacting the Hong Kong Labour Department to get qualified information and help with filing a claim should there be grounds
EE is confused because he remembers having read somewhere that employees who are employed for more than 2 years are entitled to a Severance Payment (SP) under Hong Kong laws. After doing some research by himself, he found the information webpage of the Hong Kong Labour Department and was informed that he can book a personal meeting with one of their officers to get more information. He books an appointment at the Labour Department office next to his home and is advised to collect all relevant material and information for the meeting three days later.
During the meeting, EE explains the situation to the officer and supports his story with his employment contract, termination notice, MPF records, bank statements and other documents. The officer explains to EE that he can file a claim against UCL to receive his SP and a pro rata annual bonus for the time in 2024 until his end of employment.
Our observation:
In all previous years EE received an annual bonus between one and two monthly salaries and opines that he should be entitled to a bonus for 2024 as well.
Further, SP is due when an employment contract is terminated due to a limited number of reasons, and the reason used most for an SP claim is redundancy. The assumption in the Employment Ordinance is that a termination is due to redundancy unless the employer can claim that this is not the case; with other words, the burden of proof is on the employer’s side, giving EE a rather comfortable starting situation for his claim.
Confronting the employer with help from the Labour Department - giving mediation chance
The officer helps EE file the relevant claim forms and will send the claim forms together with supporting documents to UCL. After two weeks, EE receives a reply from UCL rejecting his claims stating that the termination was not due to redundancy but due to personal reasons on EE’s side. Further, no bonus for 2024 is due, since EE’s contract does not contain a provision granting him a bonus.
One set of documents is also sent to the Labour Department, and upon review of the documents and the rejection, the officer calls EE and UCL and asks whether they would be interested in a mediation meeting.
Our observation:
Such a mediation meeting is voluntary for both sides and does not have negative consequences if a party does not agree to participate or does not show up. In such a case, the matter will be directed to the Labour Tribunal (see below).
During the meeting, both sides insist on their points of view, and neither UCL nor EE is willing to give up their claims or enter into negotiations to settle the matter.
Our observation:
In case EE and UCL reach a settlement (usually the payment of an amount between both positions), the officer will draw up a settlement agreement, which both parties need to sign and which is binding on both sides.
Still disagreement, then restart the claim at the Labour Tribunal - seek legal advice to draft the Statement of Claim / Statement of Defense
Since the negotiations do not come to a solution, the officer asks EE whether he would like to uphold his claim and submit it to the Labour Tribunal. Upon confirmation, the officer makes a phone call to the Labour Tribunal and secures an appointment for EE to submit his claim.
Our observation:
Submitting the claim to the Labour Tribunal is not a continuation of the mediation meeting at the Labour Department; EE will need to restart his claim from scratch.
Upon arriving for his appointment at the Labour Tribunal (in which UCL does not take part), EE meets an officer of the Labour Tribunal. As before, he explains his case to the officer, and the officer helps him to write down the Statement of Claim with supporting documents. EE is required to complete the Statement at home, since some documents requested by the officer are online and need to be downloaded.
Our observation:
The Statement of Claim is usually more detailed and lengthier than the statement issued at the Labour Department, and it might be a good idea to obtain advice from a solicitor for the preparation of the Statement of Claim.
Further, an employee can appoint a representative (usually a lawyer) for the meeting with the officer, so that employees that live overseas do not need to travel to Hong Kong for filing the claim with the Labour Tribunal.
After completing the Statement of Claim at home, EE sends one set of documents to UCL and the other one to the Labour Tribunal. Upon receiving the Statement of Claim, UCL contacts its local law firm, which helps UCL draft and issue a Statement of Defense to EE and to the Labour Tribunal. After receiving it, the Labour Tribunal issues a date and time for the first oral hearing of the case.
Attending the first oral hearing at the Labour Tribunal - attending to all the details, if not complete additional document may be requested to be discussed at future hearings
During the hearing, EE and one of the directors of UCL face each other in court (before a presiding officer) to discuss the case. The presiding officer asks both parties certain questions to better understand details of the case. The presiding officer further asks both parties to submit additional documents; from EE’s side these are bank statements that show that he received his annual bonus every year, and UCL needs to submit written witness statements of persons that are involved in the case and that can support UCL’s position.
Our observation:
For this hearing, and for all future hearings, EE needs to appear personally and cannot appoint somebody else (lawyer, friend, etc.) to appear for him. UCL must be represented by one of their employees (usually a director, HR employee, or in-house lawyer).
Before the end of the hearing, the presiding officer asks both parties whether they are willing to settle the case amicably, but to no avail.
Our observation:
This question is common and will be asked at every forthcoming meeting, and the presiding officer often tries to actively encourage both parties to enter into settlement negotiations.
Both parties have several weeks’ time to prepare their additional documents and to serve them to the other side and the Labour Tribunal. These documents will then be discussed during the next oral hearing.
How it will continue:
If the parties are not willing to settle the case, either in or outside of court, the case will be set up for a trial, once the presiding officer decides that all questions are cleared, all documents are in good order and the case is ready to go to trial (this usually takes 2 to 4 oral hearings prior to the trial).
The actual trial then starts in the morning with EE as the claimant giving an opening statement, followed by UCL as the defendant with their opening statement. After the opening statements, the presiding officer will usually ask both parties several questions, before the claimant calls his first witness. The claimant will then put questions to his witness, which is then followed by the defendant cross-examining the witness. After all claimant witnesses are heard, the same continues with the defendant witnesses, i.e. questioned by the defendant and then cross-examined by the claimant.
After this, both parties will have a chance to present their closing submissions (including submitting details of their incurred costs), and then the trial is concluded. The judgment will usually follow 2 to 6 weeks after the conclusion of the trial.
The oral trial with its oral statements is very technical and requires substantial legal knowledge; the same goes for the examination of the witnesses. It is recommended to obtain legal advice from an early stage onwards.
Ravenscroft & Schmierer has a strong track record in employment and unfair dismissal cases. Should you find yourself in a similar position either as an employer or as an employee, do reach out to us for more information about how we can help.
Please also read our article about wrongful termination we published earlier, click here.
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
For specific advice about your situation, please contact:
Managing Partner
+852 2388 3899
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