Employment Law &

Practice
LG5 - Unreasonable dismissal and other remedies

Darcy Davison-Roberts
November 2022
Recap ...................................................................................................................................................... 2

Wrongful dismissal .............................................................................................................................. 3

WRONGFUL DISMISSAL UNDER THE EO ............................................................................................................................ 3
Circumstances of wrongful dismissal: ......................................................................................................................... 3
COMMON LAW DAMAGES FOR WRONGFUL DISMISSAL .................................................................................................... 4
Mitigation ........................................................................................................................................................................ 4
STATUTORY COMPENSATION (S 8A OF THE EO) ............................................................................................................... 4

Unlawful dismissal ............................................................................................................................... 5

REMEDIES FOR UNLAWFUL DISMISSAL ............................................................................................................................... 6
Statutory ......................................................................................................................................................................... 6
1. Unlawful termination of a pregnant employee (s 15(1) of the EO) .....................................................................6
2. Unlawful termination of an injured or ill employee (s 32(4B) of the EO) ...........................................................6

Unreasonable dismissal - Part VIA of the EO................................................................................ 6

1. UNREASONABLE DISMISSAL (S 32A(1)(A) OF THE EO) ........................................................................................... 7
2. UNREASONABLE VARIATION OF A CONTRACT OF EMPLOYMENT (S 32A(1)(B) OF THE EO) ................................. 7
3. UNREASONABLE AND UNLAWFUL DISMISSAL (S 32A(1)(C) OF THE EO) ............................................................... 7
‘Specified statutory provisions’ .................................................................................................................................... 7
‘Valid reason’ (s 32K of the EO) ................................................................................................................................... 8
Remedies ......................................................................................................................................................................... 8

Payments due upon termination ...................................................................................................... 9

WHERE AN EMPLOYEE RESIGNS BY NOTICE OR BY WAY OF PAYMENT IN LIEU OF NOTICE .............................................. 9
WHERE AN EMPLOYER TERMINATES THE EMPLOYMENT BY WAY OF NOTICE OR PAY IN LIEU OF NOTICE ....................10
SUMMARY TERMINATION ..................................................................................................................................................10
CONSTRUCTIVE DISMISSAL ...............................................................................................................................................11
WRONGFUL TERMINATION BY EMPLOYER .......................................................................................................................11
WRONGFUL TERMINATION BY THE EMPLOYEE ................................................................................................................12

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Recap
§ The law governing termination of employment is substantially regulated by common law
principles that have been modified or in some instances been overridden by express
statutory provisions.

§ Termination of a contract of employment can be achieved as follows:

– By either party exercising a contractual or statutory right to terminate;

– By agreement of the parties to the contract; or

– By operation of law.

§ There are a variety of ways in which this can happen including:

– Discharge of contract of employment by performance

– By mutual agreement of the parties who are parties to the contract of

employment

– By notice or pay in lieu of notice

§ By an employee:

– In the event of being suspended

– Being certified as permanently unfit to continue working

– Treating himself as being constructively dismissed

§ By an employer:

– By way of a summary dismissal

§ By operation of law:

– Impossibility of performance

– By the death of the employer

– Dissolution of either the employer or the employee

§ Termination of a contract of employment in HK is governed by both statute and

contract.

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§ There is no concept of ‘unfair dismissal’ in HK like what one might find in other common-
law jurisdictions such as England, Australia, and Canada. In such jurisdictions, one might
find prescriptive requirements and mandatory ‘fair procedures’ that are to be followed
when an employment contract is terminated. This is not the case in HK.

Wrongful dismissal
§ Wrongful dismissal is where the employer terminates the employee’s employment
otherwise than by way of notice, pay in lieu of notice or in circumstances that justify
summary dismissal. If this is the case, the termination is wrongful, and the employee is
entitled to bring a common law action for wrongful dismissal.

§ Where an employee terminates their employment otherwise than by way of notice, pay
in lieu of notice or in circumstances that justify constructive dismissal, the termination is
wrongful and the employer is entitled to bring a common law action for wrongful
dismissal (they of course must prove loss – unless it is a wrongful dismissal that falls
under section 8A in which case, there is no need to prove loss).

Wrongful dismissal under the EO

§ Where a party terminates a contract of employment in breach of the EO, the termination
will constitute a wrongful termination.

Circumstances of wrongful dismissal:

(1) Breach of sections 6 & 7 of the EO: the contract of employment is terminated by
either party without notice or pay in lieu of notice

(2) Breach of section 9 of the EO: an employer summarily dismisses an employee

without sufficient grounds to do so

(3) Breach of section 10 of the EO: an employee terminates the contract of

employment summarily on the grounds of constructive dismissal, without
sufficient grounds to do so

(4) Breach of section 6(2A) of the EO: the contract of employment is terminated by
either party including in the notice period any period being taken as statutory
annual leave

(5) Breach of section 6(2B) of the EO: the contract of employment is terminated by
either party including in the notice period any period being taken as statutory
maternity leave.

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Common law damages for wrongful dismissal

§ Damages are limited to what the employee would have received in net payments
(including wages, allowances, commission, bonuses, and any other benefits) from the
date on which the contract was wrongfully terminated up to the date on which the
contract could have been lawfully terminated had proper notice been given.

§ This period can include any time relating to the employer following the proper
disciplinary procedure, thus, up to the date on which a proper dismissal could have been
achieved after the time it would have taken for the employer to exhaust the disciplinary
procedure.

§ See: Blakeney-Williams v Cathay Pacific Airways Ltd.

§ Damages are usually limited to pecuniary losses directly attributable to employment less
any amount that the employee could reasonably have expected to earn in other
employment (if the employee has failed to mitigate). However, damages can include
extended periods such as those referred to in Blakeney-Williams v Cathay Pacific
Airways Ltd.

Mitigation

§ The employee is required to mitigate his/her damages and any amount(s) recovered will
be reduced by amounts recovered by the employee in alternate employment.

§ For mitigation:

a) It is the employer who bears the onus of showing that the employee has not properly
mitigated

b) An employee is only required to act reasonably, e.g., he or she cannot refuse

reasonable alternate employment

c) The test of whether an employee has acted ‘reasonably’ is objective and is based on
the totality of the evidence

d) In applying the test, the circumstances in which an offer of employment was made
and refused, the attitude of the former employer, the way in which the employee had
been treated and all the surrounding circumstances should be considered, including
the employee’s state of mind

e) The court is not to be too strict in its expectations of the injured party

Statutory compensation (s 8A of the EO)

§ Section 8A of the EO provides that where a contract is terminated otherwise than in

accordance with sections 6 or 7, the party terminating the contract must pay to the other

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 party an amount equal to what should have been paid if the contract had been
terminated by way of payment in lieu of notice.

§ Section 8A does not apply where:

a) The employee terminates the contract of employment under section 10 by way of

constructive dismissal or section 11(2) in response to a suspension of employment; or

b) An employer terminates on the grounds of summary dismissal under section 9.

c) Entitlement to section 8A damages does not preclude any claim to additional

damages at common law for wrongful dismissal and/or breach of contract, subject to
the rule against double recovery. e.g., the loss of a chance related to the way in which
the dismissal was handled (see: Bachicha v Poon)

d) Section 8A does not require proof of loss and does not require that the injured party
mitigate.

§ Section 8A also does not limit any further entitlements that the employee may have such
as outstanding wages, long service, severance, maternity pay, sickness pay, holiday pay,
annual leave, end of year payments.

Unlawful dismissal
§ There are enumerated circumstances set out in the EO pursuant to which a contract of
employment cannot be terminated. Where the employer terminates an employee in
contravention of these provisions, this constitutes an unlawful termination.

§ The following categories of employee are protected:

1) Where a female employee is employed under a continuous contract of employment

and has served notice on her employer (s 15(1) of the EO)

2) During an employee’s absence on a sick leave, on any sickness day on which he/she is
entitled to statutory sickness allowance (s 33(4B) of the EO)

3) Where an employee has agreed to give evidence in enforcement proceedings under

the EO (s 72B(1)(a) of the EO) or the Factories Industrial Undertakings Ordinance
(Cap 59) (s 6 of the FIUO)

4) Where an employee is entitled to receive compensation under the Employees’

Compensation Ordinance (Cap 282) (“ECO”) (s 5 of the ECO)

5) Where an employee is a trade union member or is involved in trade union activity (s

21B(2)(b) of the EO)

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 6) Where an employee has a spent conviction, or fails to disclose a spent conviction

7) Where an employee is performing or due to perform jury service

Remedies for unlawful dismissal

Statutory

§ Where an employee has been both unreasonably and unlawfully dismissed, Part VIA of
the EO provides for remedies (please see below).

§ The EO also provides for statutory civil compensation in the following circumstances:

1. Unlawful termination of a pregnant employee (s 15(1) of the EO)

o A sum that would have been payable had the contract of employment been
terminated by making a payment in lieu of notice;

o A further sum equal to the employee’s monthly average wage (calculated by

reference to what the employee earned during the 12 months immediately
preceding the termination); and

o Where entitled, maternity leave pay.

2. Unlawful termination of an injured or ill employee (s 32(4B) of the EO)

o The sum that would have been payable had the employer termi8nated the
employment by way of making a payment in lieu of notice; and

o A further seven days’ wages (calculated by reference to the employee’s daily

average wages).

Unreasonable dismissal - Part VIA of the EO

§ Part VIA of the EO deals with employment protection for the following three categories:

1) Unreasonable dismissal, ie, termination in order to extinguish/reduce a benefit owed

to the employee under the EO;

2) Unreasonable variation of the contract of employment; and

3) Unreasonable and unlawful dismissal, ie, termination for other than a valid reason
and in a manner prohibited by law.

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§ In order to be eligible for the protections conferred by Part VIA, the employee must meet
the following criteria:

1. Unreasonable dismissal (s 32A(1)(a) of the EO)

§ The employee must be:

– employed under a continuous contract of employment;

– for a period of not less than 24 months as at the relevant date; and

– be dismissed by the employer because the employer intends to extinguish

any right, benefit or protection conferred or to be conferred upon the
employee per the EO.

2. Unreasonable variation of a contract of employment (s 32A(1)(b) of the EO)

§ The employee must be:

– Employed under a continuous contract of employment

– The employer, without the employee’s consent and in absence of an

express term in the contract of employment that permits variation,
unilaterally varies the contract of employment; and

– The employer varies the contract of employment because he intends to

extinguish or reduce any right, benefit or protection conferred or to be
conferred upon the employee by the EO.

3. Unreasonable and unlawful dismissal (s 32A(1)(c) of the EO)

§ The employee is:

1) Dismissed by the employer otherwise than for a valid reason (see below for what
qualifies as a ‘valid reason’); and

2) In contravention of specified statutory provisions (see below for the ‘specified

statutory provisions’)

Note that all of the above are subject to the employer successfully proving that the dismissal was
for a ‘valid reason’. What constitutes a valid reason for Part VIA of the EO is set out below.

‘Specified statutory provisions’

§ The following are the ‘specified statutory provisions’ referred to above. Recall that per
the EO, termination under these circumstances constitute an unlawful termination of a
contract of employment:

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 1) Where the employee is pregnant or on maternity leave (per s 15(1) of the EO);

2) Where the termination was due to the employee engaging in union activities outside
of working hours (per s 21B(2)(b) of the EO);

3) Where the employee is on leave and eligible to receive sickness allowance (per s
33(4B) of the EO);

4) Where the employee has given evidence against the employer (s 72B(1) of the EO
and s 6 of the Factories and Industrial Undertakings Ordinance (Cap 59);

5) Where the employee has brought an unresolved claim under the Employees’
Compensation Ordinance (Cap 282) (“ECO”) (s 48 of the ECO).

‘Valid reason’ (s 32K of the EO)

§ Section 32K of the EO sets out 5 valid reasons on which an employer can rely where
he/she is alleged to have dismissed an employee in circumstances that fall under Part
VIA of the EO. They are:

1) The conduct of the employee;

2) The capability or the qualifications of the employee for performing work of the kind
that the employee was employed to do;

3) The redundancy of the employee or other genuine operational requirement of the

employer’s business;

4) The fact that the employee and/or the employer would be in contravention of the
law if the employment were to continue or were to continue without the variation
of the term/terms that the employer is seeking to vary; or

5) Any other reason of substance.

Remedies

§ Where an employee has been unreasonably dismissed, she can be:

– reinstated/re-engaged (for unreasonable dismissal and variation of the

contract of employment, this order is subject to mutual agreement
between the parties); or

– recover terminal payments representing statutory entitlements due to the

employee upon termination, including, wages due under the contract,
annual leave pay, statutory holiday pay and severance or long service
payments.

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§ Where an employee is both unreasonably and unlawfully terminated and is not
reinstated or re-engaged, they can be awarded compensation, in addition to their
terminal payments (including severance or long service) up to a maximum amount of
HK$150,000 (s 32

Payments due upon termination

§ Upon termination, an employer is to pay to the employee:

– All outstanding wages; and

– Statutory and contractual entitlements.

§ These payments are to be paid as soon as practicable and in any event, not later than 7
days after the employment terminates (s 25 of the EO) (NOTE: limited exception for
severance payment, which is payable within 2 months of the employer receiving
notification of a claim for severance from the employee).

§ By virtue of s 63C, any employer who wilfully and without reasonable excuse, fails to pay
wages on termination within the time specified by s 25 is guilty of an offence and liable
to a fine of $350,000 and imprisonment for three years.

§ The following are the payments due upon termination, depending upon the way in which
the contract of employment was brought to an end:-

Where an employee resigns by notice or by way of payment in lieu of notice

1) Wages for work performed up to the date of termination (s 25 of the EO);

2) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO);

3) Pro rata annual leave (a pro rata entitlement will be payable to an employee who has
been employed for more than 3 months within a current leave year prior to the
termination of employment, s 41D(2) of the EO); and

4) Accrued annual bonus / end of year payment (an employee is entitled to receive
compensation for any end of year payment that had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment. NOTE: if the employee resigns, no
unaccrued pro rata end of year payment is payable, s 11E(2) of the EO).

§ They are not entitled to:

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 – Proportional end of year payment (s 11F of the EO)

– Severance payment (s 31D(1)(a) of the EO)

– Long service (s 31T(1)(a) of the EO)

Where an employer terminates the employment by way of notice or pay in lieu of

notice

1) Wages for work performed up to the date of termination (s 25 of the EO)

2) Accrued pro rata annual leave (s 41AB(3) of the EO)

3) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO)

4) Unaccrued pro rata annual leave (a pro rata entitlement will be payable to an
employee who has been employed for more than 3 months within a current leave
year prior to the termination of employment, s 41D(2) of the EO)

5) Accrued annual bonus / end of year payment (an employee is entitled to receive
compensation for any end of year payment that had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment, s 11E(2) of the EO)

6) Outstanding holiday pay (s 40A(2) of the EO)

7) Pro rata end of year payment (an employee who has been continuously employed for
at least 3 months in any payment period is entitled to be paid a pro rata end of year
payment, s 11E(2) of the EO)

8) Long service or severance payment (an employee who is otherwise eligible for these
payments, is to be paid per Part VA and VB of the EO)

9) Remedies for unreasonable dismissal (Part VIA of the EO)

Summary termination

1) Wages for work performed up to the date of termination (s 25 of the EO)

2) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO)

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 3) Accrued annual bonus / end of year payment (at had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment, s 11E(2) of the EO)

Constructive dismissal

1) Wages for work performed up to the date of termination (s 25 of the EO)

2) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO)

3) Pro rata annual leave (a pro rata entitlement will be payable to an employee who has
been employed for more than 3 months within a current leave year prior to the
termination of employment, s 41D(2) of the EO)

4) Accrued annual bonus / end of year payment (an employee is entitled to receive
compensation for any end of year payment that had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment, s 11E(2) of the EO)

5) Pro rata end of year payment (an employee who has been continuously employed for
at least 3 months in any payment period is entitled to be paid a pro rata end of year
payment, s 11E(2) of the EO)

6) Long service or severance payment (an employee who is otherwise eligible for these
payments, is to be paid per Part VA and VB of the EO)

7) Remedies for unreasonable termination (Part VIA of the EO)

Wrongful termination by employer

1) Wages for work performed up to the date of termination (s 25 of the EO)

2) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO)

3) Pro rata annual leave (a pro rata entitlement will be payable to an employee who has
been employed for more than 3 months within a current leave year prior to the
termination of employment, s 41D(2) of the EO)

4) Accrued annual bonus / end of year payment (an employee is entitled to receive
compensation for any end of year payment that had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment, s 11E(2) of the EO)

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 5) Pro rata end of year payment (an employee who has been continuously employed for
at least 3 months in any payment period is entitled to be paid a pro rata end of year
payment, s 11E(2) of the EO)

6) Long service or severance payment (an employee who is otherwise eligible for these
payments, is to be paid per Part VA and VB of the EO)

7) Remedies for unreasonable dismissal (Part VIA of the EO)

8) Compensation payable by employer (an employer is liable to pay compensation to an

employee for wrongful termination - the amount of compensation is equal to the
amount that would have been payable had the employment contract been terminated
by notice or pay in lieu of notice, s 8A of the EO)

Wrongful termination by the employee

1) Wages for work performed up to the date of termination (s 25 of the EO)

2) Accrued annual leave (an employee is entitled to receive compensation for

outstanding annual leave that had accrued prior to the period of the termination, s
41D(1) of the EO)

3) Pro rata annual leave (a pro rata entitlement will be payable to an employee who has
been employed for more than 3 months within a current leave year prior to the
termination of employment, s 41D(2) of the EO)

4) Accrued annual bonus / end of year payment (an employee is entitled to receive
compensation for any end of year payment that had accrued prior to the date of
termination. Such a payment is payable regardless of whether the termination
occurred prior to the scheduled time for payment, s 11E(2) of the EO)

5) Pro rata end of year payment (an employee who has been continuously employed for
at least 3 months in any payment period is entitled to be paid a pro rata end of year
payment, s 11E(2) of the EO)

6) Compensation payable by employee (an employee is liable to pay compensation to an

employer for wrongful termination - the amount of compensation is equal to the
amount that would have been payable had the employment contract been terminated
by notice or pay in lieu of notice, s 8A of the EO)

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