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Article exclusively contributed by Allen & Overy

Dismissal takes valid reasons

by Joyce Leung, associate, Employment Law Group, Allen & Overy

Mr Wong had been a full-time IT consultant for a fashion company for 4 years and 10 months. One morning the HR manager called him in and told him the company had decided to terminate his employment. The reason was that Mr Wong's boss did not like Mr Wong's attitude towards him and his fellow colleagues. Mr Wong's employment contract stated that either party could terminate his employment by giving two months' notice or payment in lieu of notice. The HR manager gave Mr Wong written termination notice of two months.

On Mr Wong's last day of employment, the HR manager gave him a cheque for his final payments comprising his last month's wages, pro-rated contractual bonus, payment for unused annual leave and other payments in accordance with his employment contract. Mr Wong was also provided with a statement showing the calculations relating to his final payments. He was asked to sign on a copy of the statement in acknowledgement of receipt of the cheque, and waiving his rights to make any future claims against the company.

Bearing in mind the information given above, was Mr Wong entitled to additional compensation under the Employment Ordinance?

Pursuant to the Employment Ordinance, an employee may claim remedies against an employer for dismissal without a "valid reason" if:

  • the employee has been employed under a continuous contract for a period of not less than two years; and
  • the employee is dismissed other than for a "valid reason" Under the Employment Ordinance, "valid reasons" refer to:
  • the employee's conduct
  • the employee's capability or qualification for performing work of the kind which he was employed by the employer to do
  • redundancy or genuine occupational requirements of the employer's business
  • the fact that the employee or employer or both of them would be in contravention of the law if the employee were to remain in employment
  • any other reason of substance which would be sufficient cause to warrant the dismissal of the employee in the opinion of the Labour Tribunal or court

The Labour Tribunal has the power to grant remedies for dismissal without a "valid reason" including an order of reinstatement or re-engagement or an order to award terminal payments. An order for reinstatement or re-engagement will not be made unless both the employer and employee consent to it. If both parties agree, such an order will be made on such terms as the Labour Tribunal considers just and inappropriate in the circumstances (including that the continuity of the employment period be preserved).

If no reinstatement or re-engagement order is made, the Labour Tribunal may order that terminal payments be made to the employee by the employer. "Terminal payments" refer to statutory entitlements under the Employment Ordinance that the employee has not been paid but is entitled to upon termination of employment or that the employee might reasonably be expected to be entitled to upon termination of employment had he been allowed to continue with his original employment or original terms of employment to attain the minimum qualifying service period required for statutory entitlements. An employee may be granted terminal payments even if he has not attained the qualifying service period required for a statutory entitlement. "Terminal payments" include any unpaid wages, payment in lieu of notice, contractual bonus, statutory severance or long service payment and payment for unused annual leave.

Mr Wong had been paid his last month's wages, pro-rated contractual bonus and payment for unused annual leave. However, as his dismissal was not due to any of the "valid reasons", Mr Wong could approach the Labour Department for assistance in filing a Notice of Claim against the company for remedies for dismissal without a "valid reason" under the Employment Ordinance. The Notice of Claim would be served on the company, and the authorised representative of the company would be asked to attend a conciliation meeting with Mr Wong in the presence of a Labour Department officer. Generally, if the parties could not agree to settle the matter after the meeting, Mr Wong could then file a formal claim at the Labour Tribunal against the company. The company would be required to file a defence with the Labour Tribunal, and a copy of it served on Mr Wong. Generally, the case would be set down for hearing before a presiding officer at the Labour Tribunal.

If at the Labour Tribunal no order for reinstatement or re-engagement were made, the Labour Tribunal may award terminal payments to Mr Wong. In this case, it is possible that a terminal payment at an amount equal to a statutory long service payment calculated and pro-rated according to Mr Wong's actual length of service (being four years and 10 months) would be awarded. (Normally, a dismissed employee would only be entitled to a statutory long service payment on completing not less than five years' service.)

Q & A on remedies for dismissal
Q1 Does the burden fall on an employer to show that there is a "valid reason" for dismissal?
A1 Yes. Unless the employer is able to show that there was such a "valid reason" for dismissal, the Labour Tribunal may make a reinstatement or re-engagement order or an award of terminal payments if the employee has completed not less than two years' service. (Now revised: Not less than one year's service)

Q2 Mr Wong had signed a waiver of his rights to make any claims against the company in future. Why was he still able to claim remedies for dismissal without a "valid reason"?
A2 Pursuant to section 70 of the Employment Ordinance, any employment term which purports to extinguish or reduce an employee's rights, benefits or protection under the Employment Ordinance will be void. The waiver signed by Mr Wong was therefore void.


Taken from Career Times 09 February 2007

(Last review date: 23 August 2013)


Disclaimer: The opinions expressed in this article are those of the contributor

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