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Money Matter


Exclusively contributed by the
Labour Relations Promotion Unit of
the Labour Department

Employment protection


Lily was a full-time merchandiser working in a department store. Her company suffered a substantial drop in sales this year. To cover the shortfall, the company decided to reduce the wages of all staff to 70 percent of the wage rate stipulated in their employment contracts.

Last Monday, the human resources department issued a notification to all staff to inform them of the wage reduction. The employees were required to indicate within a week whether they accepted the reduction by filling in a reply slip attached to the notification.

Lily seriously considered the issue and decided to reject the company's proposal. She went to see her supervisor yesterday and told him of her decision. This morning, she received a notification saying that she was dismissed because she refused to accept the wage cut. As termination compensation, the company paid her a month's wages in lieu of notice and pro rata annual leave pay.

Lily was unsatisfied with the amount of compensation because she had been working with the company for four years and eight months. However, the company stated that a severance payment was not appropriate because Lily had not been made redundant and would be replaced. The company also claimed that Lily was not entitled to long service payment, as her period of service was less than five years.

Is Lily entitled to any additional compensation under the Employment Ordinance?

According to the Employment Ordinance, an employee may claim remedies against an employer for unreasonable dismissal if:
- the employee has been employed under a continuous contract for a period of not less than 24 months; and
- the employee is dismissed other than for a valid reason as specified in the ordinance.

Valid reasons for dismissal are related to:
- the conduct of the employee
- the ability or qualification of the employee to perform his or her work
- redundancy or other genuine operational requirements of the business
- statutory requirements (i.e. it would be contrary to the law to allow an employee to continue with the original terms of his or her employment contract)
- other substantial reasons

Remedies for unreasonable dismissal to be awarded by the Labour Tribunal include an order of reinstatement or reengagement, or an award of terminal payments.

An order for reinstatement or reengagement will only be made if both the employer and the employee agree to it. If such an order is made, the employee's continuity of employment should not be treated as broken.

If no such order is made, the Labour Tribunal may make an award of terminal payments to be payable by the employer to the employee. The term "terminal payments" means the statutory entitlements to which the employee is entitled under the Employment Ordinance but has not yet been paid upon dismissal and any other payments due to the employee under his or her contract of employment. An employee may be awarded terminal payments even if he or she has not attained the qualifying length of service required for the entitlements. In such a case, the terminal payments shall be calculated according to his or her actual length of service.

The company claimed that Lily was dismissed not because of redundancy but because she refused to accept a wage cut. This is not a valid reason as specified in the Employment Ordinance. Lily can claim for remedies under the ordinance. If no order for reinstatement or reengagement were made, Lily would be entitled to terminal payments as awarded by the Labour Tribunal.

The above case only serves as an illustration of the provisions of the Employment Ordinance on employment protection. The Employment Ordinance, however, remains the sole authority for the provisions explained above and in case of dispute the final decision rests with the court.

The above case only serves as an illustration of the provisions of the Employment Ordinance on employment protection. The Employment Ordinance, however, remains the sole authority for the provisions explained above and in case of dispute the final decision rests with the court.

The above case only serves as an illustration of the provisions of the Employment Ordinance on employment protection. The Employment Ordinance, however, remains the sole authority for the provisions explained above and in case of dispute the final decision rests with the court.

The above case only serves as an illustration of the provisions of the Employment Ordinance on employment protection. The Employment Ordinance, however, remains the sole authority for the provisions explained above and in case of dispute the final decision rests with the court.

The above case only serves as an illustration of the provisions of the Employment Ordinance on employment protection. The Employment Ordinance, however, remains the sole authority for the provisions explained above and in case of dispute the final decision rests with the court.

Q & A on employment protection
Q1 What does the term "terminal payments" mean?
A1 The term "terminal payments" refers to the statutory entitlements that an employee is entitled to but has not yet been paid upon dismissal.

These payments include:
(a) wages;
(b) payment in lieu of notice;
(c) end of year payment;
(d) maternity leave pay;
(e) severance payment;
(f) long service payment;
(h) holiday pay;
(i) annual leave pay; and
(j) any other payments due to the employee under the Employment Ordinance and his or her contract of employment.

Q2 Under what circumstances does a dismissal contravene the law?
A2 A dismissal contravenes the law in the following circumstances:
(a) dismissal of a pregnant employee;
(b) dismissal while the employee is on paid sick leave;
(c) dismissal by reason of an employee giving evidence or information in any proceedings or enquiry in connection with the enforcement of labour legislation, industrial accidents or breach of work safety regulations;
(d) dismissal for trade union membership and activities; or
(e) dismissal of an injured employee before the parties concerned have entered into an agreement for the employee's compensation or before the issue of a certificate of assessment.


Taken from Career Times 07 March 2003

(Last review date: 23 August 2013)


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

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