Lessons to learn
The anti-discrimination Ordinances are still applicable to existing practice established well before they have come into effect if employment continues after the legislation is operative. Existing practices therefore have to be carefully reviewed and any loopholes rectified as soon as possible. An employee has two years to sue for discrimination and the two year limitation does not start to run until the act of discrimination complained of has discontinued.
3. Pregnancy discrimination – Chang v. Wyeth (26 February 2001)
Ms. Chang was a product manager at Wyeth. She informed her employer of her pregnancy in September 1997 and shortly thereafter was informed that her work was unsatisfactory and was given an ultimatum to either resign or accept a demotion to the position of marketing assistant although at the same salary. This came as a shock to Ms. Chang as she just had a salary increase above the industry average and nothing had been said to her in her recent performance appraisal about unsatisfactory work. When Ms. Chang asked for an explanation for the ultimatum and for specific details of her poor performance, she was refused and told that the company would not agree to a further evaluation. Following Ms. Chang’s complaint to the EOC she was not given a salary increase in 1998 and in 1999 her increase was less than other product managers. She was given an unreasonable workload, made subject to new reporting requirements and unreasonable warnings. The Court held that the employer had unlawfully discriminated against Ms Chang by reason of her pregnancy and unlawfully victimized her by reason of her complaint to the EOC. Ms. Chang was entitled to treat herself as being constructively dismissed and that she was accordingly entitled to resign as she did and claim compensation.
Lessons to learn
• Employers should be careful to record all incidents of poor performance, lack of initiatives, etc. in performance appraisals or other written records. Employers should always communicate clearly to employees on what was unsatisfactory about their performance, and allow a period for proper evaluation and rectification before deciding the next step, be it to dismiss, demote or issue a warning letter. If you have disciplinary procedures, be sure to follow them and if you do not have such disciplinary procedures, seriously consider whether you need to have them in place.
• While it is important to record poor performance and warnings in writing, refrain from overdoing it, and unfairly criticizing or imposing additional requirements on the employee in circumstances that you would not do so to other employees. That in itself, would amount to discrimination or victimization.
• Refrain from suggesting that a transfer of employment to a position with less pressure, duties, or travelling (albeit with same pay) would be beneficial to a pregnant employee. This is an overgeneralization about pregnant employees, which is what the Sex Discrimination Ordinance sets out to prevent.
4. Pregnancy discrimination – Yuen Wai-han v. South Elderly Affairs Limited (28 October 2002)
Ms. Yuen worked for an elderly home. The employer was well aware of Ms. Yuen’s pregnancy when offering her a promotion to the post of supervisor. The promotion, however, was subsequently rescinded by the company. The employer claimed that the main reason for the rescission was Ms Yuen’s inexperience in handling social welfare allowance application. Furthermore, as a supervisor, one would have to take the lead in moving tables and chairs regularly in the elderly home and that therefore, the position of a supervisor was not suitable for a pregnant woman.
Held
Ms. Yuen’s lack of knowledge in relation to social welfare allowance applications could not have been the only reason for the company rescinding her contract. A supervisor only had to explain social welfare allowances to the elderly and the procedural matters would be handled by a clerk. Ms. Yuen had already shown her understanding of the procedures for making such applications. Moreover, applications for social welfare allowances were not included in the job duty list of a supervisor. The Judge found on balance that pregnancy was at least one of the reasons for the termination of the contract with Ms. Yuen. The test for discrimination is the “but for” test, i.e. whether the pregnant woman would receive the same treatment as others but for the pregnancy. The intention or
motive of the company to discriminate is not a necessary condition of liability.
Lessons to learn
In this case, the results may have been different if the company had had more understanding of the anti-discrimination rules in Hong Kong and had approached the matter differently. For example, the company should have compiled a list of selection criteria in accordance with the Code of Practice on Employment, issued by the Equal Opportunities Commission before undertaking any interview, and consistently applied such criteria to all job applicants. If undertaking physical work had genuinely been an important part of a supervisor’s job, this should be one of the clearly stated selection criteria. During the interview stage, all job applicants should have been asked to state their immediate availability to undertake all aspects (i.e. including the physical aspect) of the work. Similarly, if experience in handling social welfare allowance application was required for the job, it should also have been included in the list of selection criteria. Ms. Yuen would not have scored well against such consistent selection criteria, and it would then have been legitimate not to offer her the post of a supervisor.
By Judith Wong, Senior Associate, Employment Group, Allen & Overy
Retrenchment of Pregnant Employee
A company is to retrench a senior staff who so happened to be pregnant. If we do so, we will compensate her with retrenchment compensation and maternity leave; or is there any ways we could handle the case smoothly?
Legal Advice
There was a new law passed on 12 April 2001 dealing with this matter. Under the Employment Ordinance it is not legally possible to terminate the employment of pregnant females unless for serious disciplinary reasons. In other words, under the Employment Ordinance you cannot retrench until the female employee returns to the workplace six weeks after giving birth. It is not legally possible to buy your way out of this requirement. It is a criminal offence to do so.
The Sex Discrimination Ordinance and the Family Status Discrimination Ordinance make it unlawful for an employer to terminate the employment of a female by reason of her pregnancy or by reason of her having responsibility for caring for new born child. We do not see any problem under these Ordinances if 100% of your staff are to be retrenched, however if the female concerned is the only one (or one of a small group of staff) who is to be retrenched then you will have to act very carefully on this matter as the Equal Opportunities Commission is likely make you pay in the region of $200,000 - $500,000 to avoid civil proceedings.
Discrimination - Termination of Employment with Employee with Mental Illness (Jun 2001)
An employee commenced duty on 12.4.01. She has been granted sick leave since 29.4.01 due to mental illness as certified by a medical practitioner.
(a) Will there be any legal implication, especially on violating the discrimination ordinances, if we terminate the captioned staff employment by giving her sufficient notice/ payment in lieu of notice?
(b) Can we treat the resignation letter from the staff concerned, if submitted, as a legal and formal document? Do we need, or is it useful, to arrange for the presence of a witness when asking the staff concerned to sign anything, or explaining something to her?
Legal Advice
(a) There could be serious implications under both the Employment Ordinance and Disability Discrimination Ordinance if the employment of this employee is terminated even with payment in lieu of notice. Because of the serious implications we would not advise on this matter as part of our complimentary advice service.
(b) A resignation will normally be regarded as a legal document. A resignation cannot usually be withdrawn without the agreement of both parties. A resignation will be legally binding unless the employee can prove that he/she resigned by reason of some improper pressure or misrepresentation. Witnesses are always useful but not necessary in the case of a resignation. Your company could think about acknowledging acceptance of each resignation in writing.
General remedies available on termination of employment
Every employment contract which is subject to the laws of Hong Kong is regulated by the provisions in the Employment Ordinance (“EO”). The combined effect of sections 6, 7 and 8A of the EO is to enable the parties to a contract of employment to terminate it by notice (section 6) or payment in lieu of notice (section 7) and that if either party terminates otherwise than in accordance with section 6 or section 7 of the EO, then under section 8A of the EO, the terminating party must pay a sum described in exactly the same terms as the sum payable under section 7(1) of the EO, which means the amount must be equivalent to “wages” in lieu of notice. “Wages” is defined in section 2 of the EO, which excludes benefits-in-kind, such as provision of company car and staff quarters. Other items payable on termination of employment may include accrued wages, payment in respect of accrued but unused annual leave, holiday pay, end-of-year payment, severance pay or long service pay.
Any employee who has been employed for a period of not less than 24 months has also the statutory right under Part VIA of the Employment Ordinance not to be “unreasonably dismissed”. These provisions are intended to cover situations where, in the absence of any “valid reason”, an employee is unreasonably dismissed to deprive him of his statutory payment such as severance pay or long service pay. The provisions are not intended to apply to situations of unfair dismissal generally.
In circumstances such as constructive dismissal, an employee may in addition to the usual statutory remedies claim damages from the employer if the employer had, without reasonable and proper cause, conducted itself in a manner which destroyed or seriously damaged their relationship of trust and confidence.
Case Report: Mark Sun v The BOC Group Ltd [2003] HKEC 500
The facts
Mark Sun was a Business Manager of an international company which supplies industrial gas. Although Mr. Sun’s contract was governed by Hong Kong law, he was assigned to work in the PRC and was not required to work in Hong Kong. Owing to the company’s realignment of its organizational structure, certain staff members had to be made redundant and Mr. Sun was one of them.
Pursuant to the terms of Mr. Sun’s employment contract, the company was entitled to terminate his employment by giving him 6 months’ notice. There was a slightly unusual feature in Mr. Sun’s employment contract in that there was no express provision allowing the company to give him wages in lieu of notice. Relying on its statutory rights under section 7 of the Employment Ordinance, however, the company terminated Mr. Sun’s contract partly by notice and partly by paying him wages in lieu of notice. In addition, Mr. Sun was also paid his accrued wages, severance pay, annual leave pay and other contractual entitlements. On termination of his employment, Mr. Sun has worked for the company for a period of approximately three and a half years.
Being discontented with the company’s “unfair” termination decision and its manner of terminating his employment, Mr. Sun retained lawyers to pursue his claim against the company in the High Court of Hong Kong.
The legal issues
In the writ issued by Mr. Sun’s lawyers against the company, amongst other things, Mr. Sun argued: • the company was prompted by certain alleged “ulterior ill motive” in terminating his employment; • the company was not entitled to give him wages in lieu of notice; • he was entitled to have his employment continued until the end of the six months’ notice period and he should be provided with benefits that fall outside the definition of “wages” until the end of the six months’ notice period. (For instance, he argued he was entitled to loss of use of company car and compensation for not having a performance appraisal for the year 2000/2001); and • the company breached its obligation of trust and confidence and/ or was negligent in failing to terminate his employment contract properly. The company, on the other hand, refuted his claim and argued those contentions were plainly unarguable. To eradicate the unarguable and scandalous parts of Mr. Sun’s claims, Johnson Stokes & Master as solicitors for the company applied to the court for an order to strike them out. The key issue before the court was whether, assuming the facts asserted were true, Mr. Sun’s contentions were plainly unarguable and incontestably bad.
At first instance, the company’s strike out application was made to a High Court Master by Johnson Stokes & Master and was successful. Being discontented with the outcome, Mr. Sun sought to appeal the Master’s decision.
The Court’s decision
In this case, the High Court Judge accepted the company’s argument that Mr. Sun’s contentions were plainly unarguable. The Judge also held that termination of a contract of employment pursuant to a power conferred by the EO cannot be invalidated by some alleged ulterior ill motive on part of the employer. In concluding that Mr. Sun’s contentions were plainly unarguable, the Judge also highlighted the following issues which are important to employers and employees generally:
1. The nature of an employment contract is a contract for personal services. It would be quite unreasonable to force an employer to accept the services of an employee against its will.
2. Even in the absence of any express contractual term which provides for payment of wages in lieu of notice, an employer may still rely on section 7 of the EO to terminate an employee’s contract by giving him wages in lieu of notice or partly notice and partly wages in lieu of notice.
3. The implied obligation of mutual trust and confidence and the implied duty not to injure an employee’s health cannot operate to cut down the statutory termination rights conferred either by section 6 or section 7 of the EO or by the express terms of the contract.
In other words, these implied obligations must yield to the express termination provisions of the contract and the termination rights conferred by statute.
4. Mr. Sun has no viable claim for not having his performance appraisal. As the company was successful in striking out the offending and scandalous allegations, Mr. Sun was ordered by the court to pay the company’s legal costs.
Conclusion
Employers who wish to dismiss part of their workforce as a result of change in business needs should take great care in calculating the amounts due to staff members in terminating their contracts. Any delinquent employee who wishes to challenge the process leading to dismissal and the fairness of the employer’s dismissal decision will invariably face an uphill battle if the employee has received all payments which should have been paid to him upon termination of his employment.
