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CHAPTER 11

HEALTH AND SAFETY AT WORK III STATUTORY COMPENSATION FOR WORK-RELATED INJURY, DISEASE AND DEATH
Para. 1. Introduction ............................................................................................................................. 11.001 2. Employees Compensation Ordinance .................................................................................... 11.002 (a) Overview of the ECO regime .......................................................................................... 11.002 (b) Contract of service requirement ...................................................................................... 11.015 (c) Injury by accident ........................................................................................................... 11.023 (d) Arising out of and in the course of the employment ....................................................... 11.034 (i) Arising in the course of the employment ........................................................... 11.038 (ii) Arising out of the employment .......................................................................... 11.042 (iii) Section 5(4)(a): general deeming provision ........................................................... 11.044 (iv) Section 5(4)(b): employee acts done for the purposes of and in connection with the employers trade or business ............................................. 11.056 (v) Section 5(4)(c): work-related rescue or rst-aid activities ..................................... 11.058 (vi) Sections 5(4)(d) and 5(4)(e): commuting in employer transportation .................... 11.059 (vii) Section 5(4)(f ): commuting during gale and rainstorm warnings .......................... 11.063 (viii) Section 5(4)(g): work-related travel outside Hong Kong ....................................... 11.065 (e) Occupational diseases under the ECO ............................................................................ 11.067 (f ) Sections 5(2) and 5(3) limitations on Section 5(1) ECO claims ..................................... 11.073 (i) Section 5(2) limitations .......................................................................................... 11.075 (ii) Section 5(3): serious and wilful misconduct .......................................................... 11.082 (iii) Conict between section 5(2)(d) and section 5(3) .................................................. 11.087 (g) Notice requirement and 24-month time limit .................................................................. 11.089 (h) Medical examination and treatment under section 16 .................................................... 11.094 (i) Calculation of compensation ........................................................................................... 11.100 (i) Death ...................................................................................................................... 11.101 (ii) Permanent total incapacity ..................................................................................... 11.107 (iii) Permanent partial incapacity .................................................................................. 11.110 (iv) Temporary incapacity ............................................................................................. 11.113 (v) Medical expenses .................................................................................................... 11.120 (vi) Prosthetics and surgical devices ............................................................................. 11.121 (vii) Pre-existing conditions ........................................................................................... 11.122 ( j) Commissioners certicates under section 16A .............................................................. 11.123 (k) Ordinary and Special Assessment Boards ...................................................................... 11.131 (l) Review of periodical payments ....................................................................................... 11.142

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HEALTH AND SAFETY AT WORK III (m) Role of the courts in ECO claims .................................................................................. 11.145 (i) Appellate jurisdiction of District Court under section 18 ...................................... 11.145 (ii) Primary jurisdiction of District Court under section 18A ...................................... 11.147 (iii) Role of the Court of Appeal in ECO claims ........................................................... 11.153 3. Pneumoconiosis and Mesothelioma (Compensation) Ordinance .......................................... 11.155 (a) PMCO regime in general ................................................................................................ 11.155 (b) Qualication requirements and time limitations ............................................................. 11.160 (c) Types of compensation and payment .............................................................................. 11.162 (d) Claims process ................................................................................................................ 11.166 (i) PMB medical examination and certicate of determination .................................. 11.168 (ii) Further medical examination under section 23A ................................................... 11.174 (iii) Commissioners certicate under section 15 .......................................................... 11.177 (iv) Interim payments to family members of deceased ................................................. 11.178 (v) Determination of amount of compensation and issuance of board certicate ...... 11.180 (vi) Payment of compensation ....................................................................................... 11.181 (vii) Review of Commissioner, Board and PMB decisions .............................................11.185 (e) Role of the courts ............................................................................................................ 11.187 (i) Judicial appeals of Commissioner, Board and PMB decisions .............................. 11.187 (ii) Actions in civil court to enforce payment by Board ............................................... 11.191 (iii) Role of the Chief Justice in making rules and setting fees ..................................... 11.192 (iv) Role of the Court of Appeal on questions of law ................................................... 11.193 (f ) False statements .............................................................................................................. 11.194 4. Occupational Deafness (Compensation) Ordinance .............................................................. 11.195 (a) ODCO regime in general ................................................................................................ 11.195 (b) Requirements for compensation ..................................................................................... 11.197 (c) Claims process ................................................................................................................ 11.200 (d) ODC Board decisions, reviews and appeals ................................................................... 11.204 (e) Compensation and coverage for hearing assistive devices .............................................. 11.209 (f ) Rights at common law and under other enactments ....................................................... 11.211 (g) False information ............................................................................................................ 11.212

1. INTRODUCTION
Overview of chapter. Besides the tort-based remedies that have been examined in Chapter 10, an employee who is injured at work by accident or who suffers from certain occupational diseases has the right under the Employees Compensation Ordinance (ECO)1 to receive compensation from his employer. In addition, an employee who develops occupational deafness, or who suffers from either of the silica and asbestos-related diseases known as pneumoconiosis and mesothelioma may have the right to compensation under specic statutory regimes designed to provide compensation for those occupational hazards.2 These statutory regimes provide compensation on an essentially no-fault basis, but there are specic conditions to be satised and somewhat complex procedures to be followed in order to qualify for compensation, in particular in the case of the ECO, the oldest and most comprehensive of the three regimes. This chapter will outline the law and practice of each of these compensation schemes, with particular emphasis on the ECO because of its more general application and the substantial body of case law that it has generated. 11.001

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(a) Overview of the ECO regime ECO regime administered by Labour Department. The workers compensation scheme under the Employees Compensation Ordinance3 is administered by the Commissioner for Labour4 through the Employees Compensation Division of the Labour Department. Employer must notify Commissioner of accident. Under s.15 of the ECO, the employer must give notice in the prescribed form5 to the Commissioner for Labour of 11.002

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Cap.282, hereinafter referred to as the ECO. Namely, the Pneumoconiosis and Mesothelioma (Compensation) Ordinance (Cap.360) (PMCO), discussed below at paras 11.15511.194, and the Occupational Deafness (Compensation) Ordinance (Cap.469) (ODCO), discussed below at paras 11.19511.212. Any attempt to understand the ECO is best begun with the observations of Yeung JA in Lau Suet Fung v Future Engineering Co (unrep., CACV 110/2003, [2004] HKEC 150): Regrettably, the ECO which had its origins in English statutes drafted nearly a century ago but which has since incorporated both English and local amendments, is by no means easy to follow. This is particularly regrettable when the purpose of the legislation is to provide for payment of compensation to injured employees, a class covering a wide spectrum of the community with various educational backgrounds. Their interests would be better served by a statute which is more layman-friendly. In the ECO, Commissioner means the Commissioner for Labour: s.3(1). References to the Commissioner appear throughout the Ordinance. This is a reference to Form 2 in the Schedule to the Employees Compensation Regulations (Cap.282A). For the legal status of the information provided by the maker of Form 2, see Chapter 2 at paras 2.0312.033, Chapter 10 at fn 5, and fn 83 below.

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any accident resulting in death or injury of an employee.6 In the case of death, notice shall be given within seven days of the accident,7 and in the case of injury resulting in total or partial incapacity, within 14 days of the accident.8 Where the accident does not come to the attention of the employer within these time frames, notice must be given within 7 or 14 days after the accident rst comes to his knowledge.9 Death of an employee on the work premises is deemed to be within the knowledge of the employer.10 Failure to notify without reasonable excuse, or submitting false or misleading statements or information, is an offence punishable by ne at level 5.11 11.004 Notice of accident to be given and application to be brought within 24 months of accident. By virtue of s.14(1) of the ECO, proceedings for the recovery of compensation are not maintainable unless notice of the accident has been given to the employer by the employee as soon as practicable after the accident,12 and unless the application for compensation has been made within 24 months from the occurrence of the accident causing the injury or death. However, under s.14(4), the court may hear the application if it is satised that there was reasonable excuse for the failure to give notice of the accident or to make the application within the time limit.13 The s.14(4) power should be exercised liberally, but the onus is on the applicant to make the case for an extension of time.14 No-fault compensation based on employment relationship. The right to compensation is not based on fault, but rather on the existence of an employment relationship. For this reason, it can be described as no-fault compensation. The

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In 2008, 59,867 cases (including 15,826 minor cases involving sick leave not exceeding three days) were reported to the Employees Compensation Division, of which 196 were fatal cases (Labour Department Annual Report 2008, Fig 6.4). In 2007, 62,241 employees compensation cases were reported (including 16,239 minor cases). In 2007, of the 46,002 non-fatal cases with sick leave exceeding three days and 186 fatal cases, 42,976 were settled by the end of 2008. A total sum of HK$593 million was payable as compensation to the injured employees or, in cases of death, to family members of deceased employees. The number of working days lost was 1,145,017: all gures from Labour Department Annual Report 2008, Chapter 6 at http://www.labour.gov.hk/eng/public/ iprd/2008/chapter6.htm. ECO s.15(1) states: Notice of any accident which results in the death of the employee within 3 days after the accident shall be given in the prescribed form to the Commissioner by the employer not later than 7 days after the accident irrespective of whether the accident gives rise to any liability to pay compensation. Also, ECO s.15(2) requires the employer to report a work-related death to the Commissioner within seven days of having knowledge of it, even when the death occurs later than three days after the accident. ECO s.15(1A) states: Notice of any accident which results in the total or partial incapacity of the employee shall be given to the Commissioner by the employer not later than 14 days after the accident, irrespective of whether the accident gives rise to any liability to pay compensation. ECO s.15(1B). Moreover, where an employer has notied the Commissioner of an accident resulting in total or partial incapacity not exceeding three days, and the employees incapacity extends beyond three days, the employer must give further notice to the Commissioner within 14 days: ECO s.15(1BA). ECO s.15(5). ECO s.15(6). The employers failure to notify does not affect the employees right to claim compensation: ECO s.15(7). Notice to the employer can be given orally or in writing: ECO s.14(2). Ignorance of the law is no excuse, but a reasonable belief by the employee that the injury was trivial will generally sufce: Lau Suet Fung v Future Engineering Co (fn 3 above). Also, delays after the point at which the employee became aware of the need to make an application can be taken into account in the exercise of discretion. Tsui Man Cheong v Lee Hung Ying Vicky (unrep., DCEC 1290/2008, [2009] HKEC 1565). See also Tiempo Victoria Dagoc v Lai Yee Cheong Trudo (unrep., DCEC 1102/2008, [2009] HKEC 1611). For more on the notice requirement and time limit, see paras 11.08911.093 below.

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applicant must show that he was an employee, that is, engaged in a contract of service,15 and that he suffered a personal injury by accident arising out of and in the course of the employment,16 or, alternatively, that he suffers from one of the occupational diseases listed in Sch.2 of the ECO. Employers liability extends to all contractors. Under s.5(1), an injured workers employer is liable to pay compensation under the ECO. However, s.24 extends liability to the principal contractor17 (if there is one) as well as any sub-contractors in the chain of contracts between the employer and the principal contractor.18 The principal contractor is, however, entitled to indemnication from the sub-contractor/employer under s.24(2).19 Liability of third parties. Under s.25, where a third party is liable to the employee for the occupational accident, the employee may claim ECO compensation from the employer and bring a civil action for common law damages against the third party.20 In such cases, an employer or principal contractor who has paid ECO compensation to an injured employee has a right of action against the third party to recover any compensation paid,21 and may exercise that right by joining in the employees action, 11.006

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ECO s.2(1). For more on the contract of service requirement, see paras 11.01511.022 below. ECO s.5(1). For more on this requirement, see paras 11.02311.066 below. ECO s.24(1), which states, in part: Where any person (in this section referred to as the principal contractor), in the course of or for the purposes of his trade or business, contracts with a sub-contractor for the execution by or under the sub-contractor of the whole or any part of any work undertaken by the principal contractor, the principal contractor shall be liable to pay to any employee employed by that sub-contractor or by any other sub-contractor in the execution of the work any compensation under this Ordinance which the principal contractor would have been liable to pay if that employee had been immediately employed by him (emphasis added). Thus, a person not in business as a principal contractor, for example an end-user home owner, is not subject to ECO s.24(1) liability: see So Yuk Kam v Lau Kam Yuen (unrep., DCEC 30/2008, [2008] HKEC 2184) at paras 57; and Chan Yiu Man v Sin Kam Tong (unrep., DCEC 46/2006, [2007] HKEC 373). The question whether or not a principal contractor had undertaken the work in question was a question of degree and remoteness to be determined in the circumstances of each case: Wong Leung Tak v Hip Hing Construction Co Ltd [1991] 2 HKLR 345. See e.g. Chong Yiu Tat v Fong Man Chi (unrep., DCEC 877/1999, [2003] HKEC 1543) and Chan Sik Pan v Wylams Service Ltd [2004] 4 HKC 393. The principal contractors liability under ECO s.24 is not alternative to the employers s.5 liability. The combined effect of the two sections is that the employee can claim against both in the same proceedings, and that the employer and principal contractor are jointly and severally liable to the injured employee: Ernst Eduard Sprecher v Zingrich Cabletrans GmbH & Bank of China Group Insurance Co Ltd (Intervener) (unrep., DCEC 1498/2006, [2007] HKEC 2133). See also Shaq Mohammad v Wong Chor Wai (unrep., DCEC 1403/2008, [2010] HKEC 434), citing Wong Leung Tak v Hip Hing Construction Co Ltd (ibid). ECO s.24(2). Section 24 also gives the employee of a sub-contractor the right to nd out from his employer the name of the principal contractor, and makes it an offence to fail to provide that information when requested: ECO ss 24(3)(5). ECO s.25(1)(a). See e.g. Caritas-Hong Kong v Yu Kwong Man (unrep., DCCJ 2441/2007, [2009] HKEC 702). See also Secretary for Justice v Jarabe Cleofe Domingo (unrep., DCCJ. 1722/2003, [2009] HKEC 790), where judgment was entered under ECO s.25 against the tortfeasor (a domestic helper) in negligence for mismanagement of a large dog not on a leash, and against the tortfeasors employer who was found vicariously liable.

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or by instituting separate proceedings, against the third party.22 In cases where the employer is, along with the third party, partly to blame, contribution may be available under the Civil Liability (Contribution) Ordinance.23 11.008 Employee retains common law rights but no double recovery. An injured employee retains his common law rights to sue his employer for damages.24 This is an important right because the amount awarded under the ECO is typically lower than the amount of damages that would be awarded by a court in a common law action, since ECO compensation is calculated according to specic provisions in the ECO and its schedules, and is subject to upper limits.25 Although a claim under the ECO exists independently of any right at common law, double recovery is not allowed. Compensation awarded under the ECO will be deducted from any common law damages awarded by a court.26 No compensation for pain and suffering under the ECO. Compensation under the ECO is limited to three main heads: (1) loss of earnings or earning capacity;27 (2) medical expenses; and (3) cost and maintenance of prostheses and surgical appliances, if necessary. In contrast to common law actions, under the ECO there is no compensation for pain and suffering. Death or permanent incapacity compensated by lump sum. Compensation for death or for permanent (partial or total) incapacity is paid in the form of a lump sum. Only temporary incapacity is compensable on a periodical payment basis.28 ECO regime is mandatory. The compensation regime created under the ECO is not optional. It applies universally to all employers and employees in Hong Kong.

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ECO s.25(1)(b). Note that the amount recoverable shall not exceed the amount of damages, if any, which would have been awarded to the employee but for the provisions of this Ordinance: ibid. The amount recoverable can include legal costs (its own and the applicants) paid by the employer in defending the ECO claim: Hong Kong Red Cross v Hong Kong Federation of Youth Groups (unrep., DCCJ 2233/2007, [2010] HKEC 225), applying the Court of Appeal decision in Wah Kwong Construction Material v Wong Man Yip [1995] 1 HKLR 85. See also ECO s.27, which stipulates that, where the employee is contributorily negligent, the employer or principal contractor who has paid ECO compensation to the injured employee may only recover from the third party an amount proportionate to the third partys contribution to the accident. Cap.377. See e.g. Yardway Motors Ltd v Tam Siu Lun [2005] 2 HKLRD 118. Where an injured worker is awarded ECO compensation and subsequently obtains a common law judgment against the employer and co-tortfeasor third parties, if the employer seeks contribution from the co-tortfeasor third parties, the amount for which contribution can be obtained includes the amount of ECO compensation paid by the employer: Cheng Wai Li v Far East Aluminium Works Co Ltd [2009] 1 HKLRD 161. ECO s.26(1). On the other hand, since contributory negligence does not reduce an ECO award, in cases of substantial contributory negligence, it is possible that the ECO award may be higher than that in the common law action. Note that, where an injured employee elects to bring a civil action in court rather than making an administrative claim under the ECO, if the court action fails the employee may still recover under the ECO, although the court may deduct from such compensation all or part of the costs, which, in its judgment, have been caused by the plaintiff bringing the action instead of proceeding under this Ordinance: ECO s.26(2). Moreover, ECO s.26(3) stipulates that, where the civil action ends in a nding of contributory negligence, the employee may elect to recover under ECO s.26(2) or in the civil action, but not both. Finally, under ECO s.26(4), the court may, at its discretion, order that interest be paid on part or all of an ECO s.26(2) award. ECO s.26(1). By the same token, no compensation will be awarded in an ECO action if a common law award has been obtained that covers the claims made in the ECO proceedings: Gurung Dunga Bahadur v Kam Tai Construction Co Ltd (unrep., DCEC 224/2002, [2009] HKEC 1671). Incapacity includes incapacity due to psychiatric injury. See e.g. Chan Kam Sau v Yee Hing Construction Transportation Co Ltd (unrep., DCEC 1361/2005, [2007] HKEC 515). ECO ss.610. For more on calculation of compensation, see paras 11.10011.119.

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Any contract or agreement whereby an employee relinquishes the right to ECO compensation is null and void.29 ECO regime supported by mandatory private insurance. The compensation regime under the ECO is supported by mandatory private insurance. Under s.40 of the ECO, all employers are required to obtain sufcient accident insurance to cover all their workers. Under s.44, an employee is entitled to recover the amount of insured compensation against the insurer directly.30 Insolvency of employer does not deprive injured employee of compensation. If an employer against whom compensation is sought failed to take out insurance as required by s.40 of the ECO, the employee is still entitled to be paid compensation by the employer. Where an employer is insolvent or unable to pay, a fund created by and administered under the Employees Compensation Assistance Ordinance (ECAO) is available to meet employee claims.31 In addition, the Employees Compensation Insurer Insolvency Bureau, an insurance industry body established in 2003, operates a fund from which ECO payments can be made where the insurer is insolvent.32 ECO administrative decisions subject to jurisdiction of the courts. Although the purpose of the ECO is to provide an efcient administrative mechanism for the expeditious payment of accident compensation to injured workers, there is nonetheless provision for appeals and applications to the District Court under ss.18 and 18A of the ECO.33 (b) Contract of service requirement Contract of service is required. Section 5(1) of the ECO imposes liability on the employer to pay compensation if in any employment, personal injury by accident arising out of and in the course of the employment is caused to an employee (emphasis added). Section 2(1) of the ECO denes an employee as any person who has entered into or works under a contract of service or apprenticeship with an employer in any employment, whether by way of manual labour, clerical work or otherwise, and whether the contract is express or implied, is oral or in writing (emphasis added). Thus, a contract 11.015 11.012

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ECO s.31(1). For an application of s.31(1) striking out such an agreement, see Ahmed Altaf v Yuen Wui Engineering Ltd (unrep., DCEC 1141/2006, [2010] HKEC 726). ECO s.31(2) allows for one exception: where a person by reason of old age or serious physical defect or inrmity is specially liable to meet with an accident or to sustain injury in connection with a contract of employment, the Commissioner may authorise the person and the employer to enter into an agreement in writing reducing or giving up the right of such person to compensation under the provisions of this Ordinance in respect of any accident which is caused or contributed to by the old age or serious physical defect or inrmity. In these rare cases, the agreement is ineffective unless the Commissioner certies that the agreement is fair and reasonable: ECO s.31(3). See e.g. Ernst Eduard Sprecher v Zingrich Cabletrans GmbH & Bank of China Group Insurance Co Ltd (Intervener) (fn 18 above). Enacted in 1991, the Employees Compensation Assistance Ordinance (Cap.365) (ECAO) establishes the Employees Compensation Assistance Fund (ECAO s.7), which is administered by the Employees Compensation Assistance Fund Board (ECAFB) (ECAO ss.36). Employees entitled to compensation who are unable to recover from their employers may apply for compensation from the fund under ECAO s.16(1). Under s.25 of the ECAO, an application for compensation can be made against the Board as if it were the employer. For an application of s.25, see Tsoi Chung Kak v Employees Compensation Assistance Fund Board [2009] 3 HKLRD 380. For the background to this non-statutory scheme, see Legislative Council Paper No.CB(1)376/0203(03), available online at http://www.legco.gov.hk/yr0203/english/panels/fa/papers/fa1202cb1-376-3e.pdf. For more on appeals to the District Court under ss.18 & 18A, see paras 11.14511.150 below.

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of service between the employer and injured employee is a basic condition for entitlement to compensation under the ECO.34 11.016 Few exceptions to the denition of employee. In general, the ECO applies to all workers in a contract of service, whether part-time or full-time, save for these few exceptions identied in the proviso to the s.2(1) denition of employee: (b) any person whose employment is of a casual nature, and who is employed otherwise than for the purposes of the employers trade or business, not being a person employed for the purposes of any game or recreation and engaged or paid through a club and not being a part-time domestic helper;35 or an outworker;36 or a member of the employers family employed by such employer and who resides with the employer.

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Most casual workers covered under the ECO. Despite the less than clear drafting of s.2(1)(b), most casual workers are included within the terms of the ECO.37 Even a worker hired on a one-day labour only basis has been found to be in a contract of service and entitled to compensation under the ECO.38 ECO applies to government employees. By virtue of s.4, the ECO applies to public sector employees of the Government of the HKSAR, subject to some minor exceptions, most notably members of the armed forces and those who are otherwise compensated by pension or gratuity for the same injury.39 ECO applies to persons employed on Hong Kong ships. By virtue of s.29, the ECO applies to masters, seafarers and others who are employed as members of the crew on board any ship licensed or registered in Hong Kong.40 Furthermore, s.30 provides that the ECO will apply to seafarers who have been recruited or engaged in Hong Kong as members of the crew of a non-Hong Kong ship, if the employer submits or has

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The requirements for a contract of service, discussed in Chapter 2, are generally applicable here. For a case considering this exception, see On Hang Chu v Chan Ngun [2003] 2 HKLRD H10. The court held that an employer seeking to rely on this exception must expressly plead the point so that the matter can be fully dealt with at the hearing. ECO s.3(1) denes an outworker as a person to whom articles or materials are given out to be made up, cleaned, washed, altered, ornamented, nished or repaired, or adapted for sale in his own home or on other premises not under the control or management of the person who gave out the materials or articles. See e.g. Lee Ting Sang v Chung Chi Keung [1990] 1 HKLR 764 and Poon Chau Nam v Yim Siu Cheung (2007) 10 HKCFAR 156. Chan Yiu Man v Sin Kam Tong (unrep., DCEC 46/2006, [2007] HKEC 373). ECO s.4(1). From the case reports it is apparent that the Government is less likely to contest ECO claims. Certainly, its human resources practices are of a generally high standard and not likely to lead to disputes about whether the claimant is an employee or independent contractor. For a case in which the issue of whether the accident occurred in the course of employment was contested (unsuccessfully), see Chan Man Lap v Secretary for Justice (unrep., DCEC 261/1998, [2001] HKEC 1357). ECO s.29 provides special rules that apply only to persons employed on ships. For example, an injured employee may submit notice of the accident and a claim for compensation to the ships master as if he were the employer, and, where the accident happened and the incapacity commenced on board the ship, it is not necessary to give notice of the accident: ECO s.29(1)(a). Also, in the case of death, the application for compensation must be made within two years after the occurrence of the death or, where the ship has been or is deemed to have been lost with all hands, within two years of the date on which the ship was, or is deemed to have been, so lost: ECO s.29(1)(b).

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agreed to submit to the jurisdiction of the Court, and notwithstanding that the accident causing the personal injury occurred outside Hong Kong.41 ECO may apply to employees working outside of Hong Kong. Under s.30B(2), the ECO applies to employees injured while working outside Hong Kong where the employees contract of employment is entered into in Hong Kong with an employer who is a person carrying on business in Hong Kong.42 Moreover, if an employer carrying on business outside Hong Kong submits or has agreed to submit to the jurisdiction of the Court, then the ECO applies to his employees who have been recruited or engaged in Hong Kong, notwithstanding that the accident causing the personal injury occurred outside Hong Kong.43 Note that compensation awarded under the ECO will be reduced by the amount of any foreign compensation paid.44 Court may apply ECO to illegal workers. By virtue of s.2(2) of the ECO, where an employee is injured while working under an illegal contract, for example, an illegal immigrant or a tourist working without an Immigration Department work visa, the court has the discretion to treat the employment as a valid contract of service. In such cases, the discretion will now generally be exercised in favour of the worker.45 A prevailing principle in the exercise of discretion is that illegal employment is more likely to stop if employers are obliged to pay compensation for injured undocumented workers.46 Burden of proving contract of service lies with applicant. The burden of proof lies with the applicant to establish that he (or, in the case of death, the deceased) is an employee who has entered into a contract of service and not an independent contractor engaged in a contract for services.47 While problems may occasionally be encountered 11.020

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ECO s.30(1). ECO s.30B(2). For an unsuccessful attempt by a Hong Kong resident injured while working in Macau to qualify under s.30B(2), see Ahmed Ishtiaq v Tin Wo Engineering Co Ltd (unrep., DCEC 572/2009, [2010] HKEC 721) (discussed in Chapter 2 above, at fn 169 & 173). ECO s.30B(5). ECO s.30B(3). Moreover, where foreign compensation is paid to an employee after ECO compensation for the same injury, the amount paid under this Ordinance, not exceeding the amount of the foreign compensation paid, shall be repaid to the employer by the employee and the amount is recoverable as a civil debt: ECO s.30B(4). To facilitate the handling of cases of injuries occurring outside of Hong Kong, ECO s.30A provides that, where the testimony of a witness is required, on proof that the witness cannot be found in Hong Kong, a signed, sworn deposition, or a certied copy of it, made by the witness outside Hong Kong before a justice or magistrate is admissible in evidence without proof of the signature or ofcial character of the person appearing to have signed the deposition. See ECO s.29(1)(c) for a similar provision specic to injuries occurring on Hong Kong ships. See e.g. Chan Cheuk Ting v Analogue Engineering Co Ltd [1986] HKLR 935; Tsang Siu Hong v Kong Hoi For (unrep., DCEC 529/1999, [2002] HKEC 618); Lee Mui Fong v Wong Kit Man (unrep., DCEC 455 and 693/2002, [2005] HKEC 1890); Yu Nongxian v Ng Ka Wing [2007] 4 HKLRD 159; Chen Xiu Mei v Li Siu Wo [2008] 2 HKLRD 211; and Amir Nazir v Sino Construction Engineering Co (unrep., DCEC 855/2006, [2009] HKEC 639. In Lee Mui Fong v Wong Kit Man the court held that the overriding consideration in exercising discretion under this section was whether or not the work was, taken on its own, lawful. On this basis, illegal immigrants taking up work that is otherwise lawful would generally qualify for the exercise of discretion. On the other hand, and by implication, if the work was plainly unlawful, for instance contravening the criminal law, the exercise of discretion in favour of the worker is much less likely. Yu Nongxian v Ng Kaw Wing (fn 45 above). Moreover, it matters not in the exercise of judicial discretion whether the employer took out employees compensation insurance, and that the Employees Compensation Assistance Fund Board may be called upon to pay. Yeung Tin Sang v The Brothers Co (unrep., DCEC 800/2000, [2001] HKEC 1493).

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in identifying the true employer,48 the most contentious and thus the most litigated issue in ECO case law is that of contract of servicein other words, the presence or absence of an employment relationship.49 (c) Injury by accident 11.023 Injury by accident a question of mixed law and fact. According to s.5(1) of the ECO, in order to qualify for compensation, it must be shown that the employee suffered personal injury by accident arising out of and in the course of employment.50 This is a question of mixed law and fact. Whether or not an accident causing injury occurred is a question of fact;51 whether that event constitutes an accident for the purposes of the ECO is a question of law.52 An accident is an unlooked for or unexpected event. An accident is an unlooked for or unexpected event, in the sense that it was unexpected from the perspective of the worker.53 This is exibly interpreted and covers a wide range of mishaps that typically occur in the workplace, whether or not resulting from inadvertence. The injury by accident requirement has been satised in cases of collapse from fatigue54 and death by stroke or heart attack triggered by work activities,55 unless the heart attack was totally unrelated to the work56 or a triggering event is absent.57 The mere occurrence of a stroke or heart attack at work and nothing more does not necessarily prove the occurrence of an accident under the ECO.58 An accident requires an identiable event. An accident requires that there be an identiable event (or events) that cause the injury. A continuous process, such as

11.024

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48

49

50

51 52 53

54 55

56 57 58

See e.g. Tsang Kwong Tong v Tennille Decoration & Design Ltd (unrep., CACV 42/2006, [2006] HKEC 1880). In this regard, the ECO s.3 denition of employer should be noted, according to which, an employer who temporarily lends the services of an employee to another is deemed to continue as the employer for the purposes of the Ordinance. The deeming provision has been held to be irrebuttable, and to give rise to joint and several liability of lender and borrower: Wong Wing Cheung v Interlite (Asia) Ltd [2003] 3 HKLRD 473. Each year, a dozen or more cases are heard in the District Court and the appeal courts in Hong Kong concerning the question of whether the injured worker was in a contract of service (not an independent contractor) and thereby qualies for compensation under the ECO. Despite the plethora of appellate-level decisions setting out the guidelines for deciding this issue, the application of those principles to the facts of individual employment situations continues to challenge the courts. While the discussion in Chapter 2 is generally relevant here, the specic issue of continuity of employment is not relevant. Since casual workers are covered under the ECO, an injured worker need only show that, at the moment of the injury, he was engaged in an employment contract. See also para 11.015 above. Note that there are no deeming provisions in the ECO relevant to the determination of whether or not an injury occurred by accident. Langley v Reeve (1910) 3 BWCC 175. Fenton v Thorley [1903] AC 433. Ibid. In Warner v Couchman [1912] AC 35, the House of Lords noted that the wording of the provision is by accident and not by an accident suggesting that it goes beyond the conventional meaning of accident to include unexpected events more generally. Lam Sik v Sen International Ventures Corp (HK) Ltd [1994] 3 HKC 405. See Ho Woon King v The Hong Kong & Kowloon Wharf & Godown Co Ltd [1965] HKDCLR 265; Wong Yau Ho v Hei Hing Tea House [1966] HKDCLR 124; and Yip Ho v The Hong Kong & Kowloon Wharf & Godown Co Ltd [1969] HKDCLR 1. O-Anan Umphai v National Lacquer & Paint Products Co Ltd (unrep., DCEC 103/1998, [2001] HKEC 450). Tang Siu Chun v Yan Chung Yee (unrep., DCEC 702/1999, [2002] HKEC 100). Wong Yuet Yung v Wah Fung Hong Gas Engineering Ltd (unrep., DCEC 1315/2003, [2007] HKEC 75).

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exposure to loud noise over a prolonged period of time resulting in deafness,59 will not qualify as an accident.60 Applicant must identify the specic accident that caused the injury. The applicant must identify the specic accident (or accidents) that happened to him and caused the injury. Thus, a re ofcer who suffered post-traumatic stress disorder as a result of attending at various aircraft and motor vehicle accidents over a period of years in the normal course of his duties was not considered to have been injured by accident within the meaning of s.94 of the Social Security Contributions and Benets Act 1992 (UK), a provision worded identically to s.5(1) of the ECO.61 Assaults are considered accidents. Recent case law conrms that assaults are considered accidents under the ECO, even though they are intentional and not accidental in the ordinary sense of the term. In Cheng Wai Yin v Lung Fung Estate Agency,62 the applicant, an estate agent, was injured when unknown criminals forcibly entered the estate agency and attacked him. In nding that the worker was injured by accident, the court considered the relevant test to be whether or not the assault could have occurred to any other employee in the same position as the applicant.63 By that logic, the accidental nature of the incident lies in the injured employee happening to be there at that particular time. Thus, a lorry driver, who struck a pedestrian and was then attacked by onlookers blaming him for the accident, was found to have been injured by accident under the ECO.64 Deliberate self-injury excluded from accident. Deliberate self-injury, including suicide, will in most cases be excluded from the meaning of accident under the ECO, as such occurrences are intentional and not an unlooked for event in the sense meant in Fenton v Thorley.65 The theoretical possibility remains that in some cases the suicide, if brought on by work-related stress or trauma, might satisfy the accident requirement, but there is currently no case authority to support such a view. Injury by accident requires a causal connection. Injury by accident requires a causal connection between the accident and the injury. It is not enough for the applicant 11.026

11.027

11.028

11.029

59

60

61 62 63

64

65

Note that deafness cases are now covered by the Occupational Deafness (Compensation) Ordinance (Cap.469), discussed below at paras 11.19511.212. Wong Chick v Swire Pacic Ltd (unrep., ECC 165/1990, [1992] HKLY 460). The legal basis for excluding injuries acquired gradually through cumulative exposure to continuous workplace risks is called the doctrine of process, a doctrine that has been criticised as unnecessarily harsh, since it operates to deny compensation to workers who suffer from cumulative injuries in circumstances where the connection to the employment is clear: see e.g. Lewis, Compensation for Industrial Injury (Abingdon, Oxon: Professional Books Ltd, 1987), 4243. These concerns are somewhat mitigated by the ECO provisions extending coverage to the occupational diseases listed in Sch.2; qualifying claimants can thus circumvent the doctrine of process and the accident requirement. For further discussion, see paras 11.06711.072 below. Chief Adjudication Ofcer v Faulds [2000] 1 WLR 1035. (unrep., DCEC 797/2000, [2001] HKEC 1147). This test is similar to that adopted by the Court of Appeal in United Ford Development v Fung Yin Yee [1993] 2 HKLR 290 in the context of the arising out of ... the employment issue: see paras 11.04211.043 below. So Yiu Sang v Manow Co (unrep., DCEC 150/1998, [2001] HKEC 86). Similarly, an attack by unknown assailants on a brothel cleaner, as in Law Yim Ming v Cheung Hang Fook (unrep., DCEC 450/2001, [2002] HKEC 799), and an attack by a visitor on a sleeping barge worker, as in Chan Ho v 999 HK Petroleum Co Ltd (unrep., DCEC 481/2002, [2004] HKEC 387), were both held to be injury by accident under the ECO. Fn 52 above and para 11.024.

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to show that there was an accident and an injury. As indicated by Ribeiro PJ in LKK Trans Ltd v Wong Hoi Chung,66 s.5(1) of the ECO requires not only a causal connection between the employment and the accident, but also a causal connection between the accident and the injury suffered by the employee: the accident must cause the injury.67 11.030 Causation requirement complicated by contrasting medical views. As in the common law of negligence, the applicant may have difculty proving causation due to contrasting medical views of the aetiology of the injury. The courts will have close regard to the medical evidence and draw inferences where necessary to ll in the gaps. Such a commonsense judicial approach may not always conform to the rigorous standards of medical science.68 Chang Sanchez v Hin Sum Manpower. In Chang Sanchez v Hin Sum Manpower Co Ltd,69 a worker developed gangrene, allegedly due to pebbles and water trapped in his boots while working on a ooded worksite. Although there was no immediate report of any accident and no identiable date of occurrence for the injury, in the absence of any other explanation, the court inferred that the injury must have been caused by accident as alleged.70 Triggering event for a pre-existing medical condition may be an accident. Where a workplace injury is causally connected to a pre-existing medical condition, a triggering event that exacerbates the condition and results in injury may constitute an accident under the ECO. In Chao Yuan Chiao v Regal Hotels International Limited,71 a chambermaid suffered a back injury while lifting a heavy mattress. Although the injury was brought about in part by a pre-existing condition, the incident was considered an accident by the application of the thin skull principle. Heart attacks or strokes may or may not be accidents. Where the accident consists of a heart attack or stroke that appears to arise from a pre-existing medical condition, the legal outcome is uncertain. The key consideration seems to be the degree of causal connection. For example, in O-Anan Umphai v National Lacquer & Paint Products Co Ltd,72 where the deceased painter died at work from a ruptured aneurysm, the court allowed the claim on the basis that it is only if the accidental injury has no causal connection with the employment at all that it can be said not to arise out of it. By contrast, in Tang Siu Chun v Yan Chung Yee ,73 the deceased, an electrician, was seen sitting down, feeling unwell, pale and covered in sweat, while at work; he died later the same day from a heart attack. Medical evidence showed that he suffered from a pre-existing heart condition, and was likely to have a heart attack eventually.

11.031

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66 67

68 69 70

71 72 73

(2006) 9 HKCFAR 103. See also Chow Mui v Chow Cheuk Chung [1970] HKDCLR 94; and Fung Wing Fuk v Fu Ming Management Co Ltd (unrep., DCEC 967/2005, [2010] HKEC 1177). Lee Kin Kai v Ocean Tramping Co Ltd [1991] 2 HKLR 232. (unrep., DCEC 859/2002, [2005] HKEC 985). Note that, in this case, the workers subsequent death by liver disease could not be inferred to be caused by accident. Other medical conditions concurrently suffered by the worker could not be shown to be causally connected with the accident that occurred on the ooded worksite. (unrep, DCEC 593/2000, [2001] HKEC 939). Fn 56 above. Fn 57 above.

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Following the House of Lords decision in Chief Adjudication Ofcer v Faulds,74 the court took the view that to prove accident there must be a distinct triggering event that caused the injury. In the absence of any evidence of what the deceased was doing immediately before the incident that might be said to have triggered the heart attack, the court found that the requirement of accident was not met. (d) Arising out of and in the course of the employment Arising out of and in the course of the employment. Section 5(1) of the ECO requires the employer to pay compensation to employees who suffer personal injury by accident arising out of and in the course of the employment (emphasis added).75 Burden of proof lies with applicant. The burden of proof lies with the applicant to prove that the injury by accident arose out of and in the course of the employment.76 Requirement contains two criteria. This requirement contains two distinct criteria. Not only must the personal injury by accident be shown to have arisen in the course of the employment, it must also be shown to have arisen out of the employment. These criteria can be controversial in cases where a worker is injured while doing something unrelated or only tangentially related to the employment. Section 5(4) deeming provisions. The deeming provisions found in subss.5(4)(a) to (g) of the ECO assist the applicant in proving that the accident causing injury arose out of and in the course of the employment.77 In general, these deeming provisions cover both criteria (arising out of and in the course of ) together, thus rendering the distinction between them less of an obstacle for claimants. (i) Arising in the course of the employment Arising in the course of the employment criterion involves largely spatial and temporal considerations. The course of employment issue is largely a matter of time and space, but each decision turns on its own particular facts.78 It normally requires that the worker was engaged in work or incidental activities at the time of the accident,79 but this is not a strict requirement, taking into account waiting time between 11.038 11.034

11.035 11.036

11.037

74 75

76 77 78

79

Fn 61 above. Section 5(1) of the ECO is subject to the provisos contained in subss.5(2) and 5(3), which are discussed below at para 11.073. Wong Chun Tai v Yau Cheung Hey (unrep., DCEC 939/2007, [2009] HKEC 714). The specics of ECO s.5(4) are discussed in detail below at paras 11.04411.066. Moreover, previous decisions, particularly under the old English Workmens Compensation Acts are to be given only limited regard as precedents, and the court should adopt a broad approach in weighing all the factors: Chen Xiu Mei v Li Siu Wo (fn 45 above). See e.g. Lord Dunedin in Davidson v MRobb [1918] AC 304, who said that the accident must have occurred in the course of the work which the workman is employed to do and what is incident to it and connotes the idea that the workman or servant is doing something which is part of his service to his employer or master. Judge Bokharys more recent statement in Lam Sik v Sen International Ventures Corp (HK) Ltd (fn 54 above) that in the course of employment includes anything that happens to a person while he or she is at work, is probably an over-simplication.

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instructions, toilet breaks and the like.80 In Chan Lap Sin v Gold Lion Productions Co,81 relevant considerations included the following questions: Was the worker injured at the place of work, and during work hours? Was he engaged in an activity within his duties of service? Was he acting with the employers consent and under instructions from a superior? Was he acting in the employers interest? The court must consider such questions in the aggregate in making its determination.82 11.039 Activities incidental to the employment included. The Hong Kong courts accept that the phrase in the course of the employment includes activities incidental to the employment, and that this requires a liberal interpretation.83 Judge Caird in Yan Tong Kan Alice v Gammon (HK) Ltd84 amplied the meaning of incidental to the employment as follows: I have no doubt whatsoever that a worker remains in the course of his employment despite his ministering to himself in such ways as quenching his thirst, relieving his hunger, obeying the calls of nature, changing his clothes (e.g. judges robing). Any acts which are reasonably necessary to protect an employees health and comfort are incidental to the employment and acts of service therein within the meaning of the Ordinance albeit they are personal to the employee and only indirectly connected to the object of his employment.85 Adopting this approach, toilet breaks will be included as incidental to the employment,86 as will rest breaks where the worker is encouraged or required to remain on-site.87

80

81 82

83

84 85 86

87

In Cheung Wai Yick v Lau Kin Wing (unrep., DCEC 1164/2007, [2009] HKEC 268), Judge Mimmie Chan said: an employee is not usually expected to be at work unceasingly, without either rest or pause, and allowance should be made for the ordinary habits of human nature , in that case, a chat with his employer following the completion of a task and while awaiting lunch break and his next set of instructions. (unrep., ECC 300/1990, [1995] HKLY 583). In Chiu Yuk Ming v Sun Plaza Ltd (unrep., DCEC 363/2001, [2002] HKEC 490), a restaurant worker who suffered cuts when she picked up pieces of a glass table top broken in a fall by a co-worker was found to have been injured in the course of her employment, despite evidence that her supervisor had sounded a general alarm to employees to be careful and not touch anything. The court may need to draw inferences in ambiguous circumstances, as in Yan Tong Kan Alice v Gammon (HK) Ltd [1981] HKDCLR 1, where the employee was knocked down by a motor vehicle while crossing the road to get to an off-site public toilet. Since the worker was not departing for home, but going to use the toilet, after which he would return to work, the court found him to have been injured in the course of employment. See also Yan Kwok Man v Tak Lee Trading Co (unrep., DCEC 1322/2004, [2007] HKEC 1767). In Cheung Shuk Wah Jessica v Wong Kang Hung Darwin (unrep., DCEC 842/2007, [2009] HKEC 1105), Judge Leung observed: a liberal meaning is often adopted to what is reasonably incidental and this can be extended to acts which are habitually done by an employee to the knowledge of the employer without question in a changed social matrix, the foundation of the employment relationship is no longer so much based on orders and instructions as on requests and information, and contractual rights and duties are often supplemented by mutual expectations of cooperation. Form 2, in which the employer declared that escorting his colleague was part of the deceaseds responsibility, was relevant in the determination. Although Form 2 is not conclusive on issues involving its contents, where there appears to have been no mistake in completing it, it carries weight, even on the issue of course of employment. Fn 82 above. Ibid at 3. See also Cheung Wai Yick v Lau Kin Wing (fn 80 above). See e.g. Yan Tong Kan Alice v Gammon (HK) Ltd (fn 82 above) and Wong Yuet Yung v Wah Fung Hong Gas Engineering Ltd (fn 58 above). Davidson v MRobb (fn 79 above).

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Commuting time and off-site rest breaks normally excluded. The in the course of employment criterion normally excludes toilet breaks before reaching the worksite;88 commuting time to and from work;89 and the taking of off-site rest breaks. Exceptions have been made where the only available means of travelling for a rest break was provided by the employer and the worker was injured or killed while so travelling;90 and where the worker was required to be on call at all times, including his lunch break, during which time he was the victim of an assault.91 Injury outside of normal working hours may be included. The fact that the accident occurred outside of the workers normal working hours is not always conclusive. In United Ford Development v Fung Yin Yee,92 an attack on kitchen staff playing mahjong with customers in the restaurant after hours at the request of their superiors was found to be an accident arising in the course of employment.93 More recently, in Cheung Shuk Wah Jessica v Wong Kang Hung Darwin an attack on a bartender accompanying a female co-worker to her destination after hours following a dispute at the pub between the female co-workers and customers, in circumstances where there was a practice of accompanying female workers to transportation after hours, was found to be an injury arising in the course of employment.94 (ii) Arising out of the employment Arising out of the employment criterion related to causality. The applicant is also required to prove that the accident causing the injury arose out of the employment. This criterion has been explained as relating to causality.95 The question is: Did the injury by accident arise from a risk inherent in or incidental to the performance of the work? Was the risk one which the work normally subjected the worker to?96

11.040

11.041

11.042

88 89

90

91 92 93

94 95 96

Fong Fung Yi v A-G [1991] 2 HKLR 133. Hsu Shu Chiao v Lung Cheong Toys Ltd [2001] 1 HKLRD 512; however, see the ECO s.5(4) deeming provisions, discussed below at paras 11.044066. The Court of Appeal decision in this case is discussed in detail at para 11.066. Lam Min v Yau On Construction Co [1981] HKLR 646. See also Chan Man Lap v Secretary for Justice (fn 39 above) where the applicant, a CSD employee injured while travelling from the CSD canteen back to the correctional centre to resume duty, succeeded in his claim even when using his own vehicle in the return trip. So Yiu Sang v Manow Co (fn 64 above). Fn 63 above. See also Cheung Shuk Wah v Wong Kang Hung (fn 83 above). The arising in the course of employment criterion under the ECO is different from the in the course of employment consideration in vicarious liability. Nonetheless, in So Yiu Sang v Manow Co (fn 64 above), the court referred to principles from vicarious liability cases to resolve the issue in favour of the applicant. This seems incorrect given the different legal contexts of the ECO and vicarious liability. Vicarious liability involves an examination of the tortfeasor/co-workers behaviour, for example, whether he was engaged in employment activities or diversions; this frolic concept is unknown to the ECO. Also, the close connection principle in vicarious liability has no application to the ECO understanding of in the course of employment. The ECO criterion should be understood in the social context of the ECO generally and interpreted purposively, as many judges have reminded themselves when interpreting the various provisions of the ECO. See e.g. Bokhary PJ in LKK Trans Ltd v Wong Hoi Chung (fn 66 above) at 107 and Clough JA in Wong Leung Tak v Hip Hing Construction Co Ltd (fn 17 above). Fn 83 above. As per Lord Wright in Dover Navigation Co Ltd v Craig [1940] AC 190. Dennis v AJ White & Co [1917] AC 479. Examples that might satisfy this criterion could include a scaffolding worker who falls from a height, a sherman who drowns in a storm, and a cook who suffers kitchen burns. Attacks by third parties (unless the attack is a risk of that kind of work), deliberate self-injury, injuries caused by a pre-existing condition, and activities for the workers personal benet would generally be excluded.

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11.043

Flexible interpretation of arising out of required. The phrase arising out of the employment requires a exible interpretation, as in most cases employment involves many different kinds of risks that do not lend themselves to easy categorisation. As a result of this ambiguity, the arising out of criterion is more likely to cause difculties for claimants than the in the course of the employment criterion.97 (iii) Section 5(4)(a): general deeming provision

11.044

Section 5(4)(a): general deeming provision. In considering the arising out of criterion, reference must be made to s.5(4)(a) of the ECO, a general deeming provision that is applicable to all cases. Section 5(4)(a) provides: an accident arising in the course of an employees employment shall be deemed, in the absence of evidence to the contrary, also to have arisen out of that employment. By virtue of this provision, once an applicant has shown the accident causing injury to have satised the in the course of criterion, he will be deemed to have met the arising out of criterion as well, in the absence of evidence to the contrary. Evidence to the contrary can rebut the presumption. Section 5(4)(a) shifts the burden of proof to the employer, who must adduce evidence to the contrary in order to rebut the presumption that the accident causing injury arose out of the employment. Alternatively, where appropriate, the court may draw the necessary inference that there is evidence to the contrary from the facts of the case. Evidence, not proof, to the contrary is required. It is important to note that s.5(4) (a) does not require proof to the contrary to rebut the presumption, but merely the existence of evidence to the contrary.98 Evidence t to be left to a jury required. As to what sufces as evidence to the contrary, in Wong Gun Fook v McLean,99 Judge Hooper quoted Lord Devlin in R v National Insurance (Industrial Injuries) Commissioner Ex p Richardson,100 holding that the standard of evidence required was evidence t to be left to a jury. In that case, the murder of a domestic helper in circumstances where nothing was stolen from the at was held to satisfy this standard and the applicants claim was dismissed. Assaults and extreme medical incidents can constitute evidence to the contrary. The case law shows that assaults, blackouts, epileptic ts, strokes, and heart attacks can constitute evidence to the contrary.101 Assaults are not normally a risk arising out of most employment situations. As for blackouts, epileptic ts, strokes and heart attacks, such occurrences typically arise from a pre-existing vulnerability or medical

11.045

11.046

11.047

11.048

97

98

99 100 101

For a discussion of the ECO s.5(1) requirements, see Glofcheski R, Connecting the Injury with the Employment in the Proof of Employees Compensation Claims in Young and Jen (eds.), Law Lectures for Practitioners 2005 (Hong Kong: Sweet & Maxwell Asia, 2005), pp 126. See Wong Gun Fook v McLean [1973] HKDCLR 75, where Judge Hooper said: the words of the section are not in the absence of proof to the contrary or unless the contrary is proved; the words of the section are in the absence of evidence to the contrary. See also Wong Yuet Yung v Wah Fung Hong Gas Engineering Co Ltd (unrep., CACV 33/2007, [2008] HKEC 275), applying R v National Insurance (Industrial Injuries) Commissioner Ex p Richardson [1958] 1 WLR 851. Ibid. [1958] 1 WLR. 851. See e.g. Wong Yuet Yung v Wah Fung Hong Gas Engineering Co Ltd (fn 98 above).

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condition. Of course, the result will be otherwise if the blackout or heart attack can be shown to have been caused by heavy work, as in Lam Sik v Sen International Ventures Corp (HK) Ltd.102 Pre-existing medical conditions and work-related accidents. Where the injury arises both from a pre-existing medical condition and from a work-related accident, the applicant will generally have favourable access to the s.5(4)(a) deeming provision. However, much turns on the courts view of the medical evidence. For example, in Leung Koon Chun v City Act Trading Ltd,103 a carpenter who was a heavy smoker died of a heart attack at work. Despite the manual nature of his work and the overtime work that was regularly required of him, the court found that his work had no part to play in the heart attack: the overwhelming medical feature in this case is the high level of cholesterol that went unmonitored and the fact that the deceased was a regular smoker.104 As a result, the claim for compensation failed. Assaults on workers now treated more exibly. In the years following the decision in Wong Gun Fook v McLean,105 the courts have taken a more exible approach to the interpretation of assaults on workers in the course of employment. Courts are more prepared to assume that workers, like all citizens, are vulnerable to criminal attacks, even random criminal attacks, and are less likely to interpret s.5(4)(a) to deprive an assaulted worker of ECO compensation. Thus, in Law Yim Ming v Cheung Hang Fook,106 an attack on a brothel cleaner by unknown assailants did not constitute evidence to the contrary, despite the employers invitation to the court to draw the inference that the workers habits of taking prostitutes to the villa and placing horse racing bets were connected to the attack.107 Motive for attack may constitute evidence to the contrary. Where the court has evidence regarding the motive for the attack, the question of the existence of evidence to the contrary will be easier to resolve. In Chan Ho v 999 HK Petroleum Co Ltd,108 the worker was asleep on board the employers barge during a 48-hour shift when he was attacked and murdered by an intruder. There was evidence that the attack was prompted by a dispute between the intruder and the worker regarding the intruders right to stay on board overnight. Nevertheless, there was nothing to suggest a purely 11.049

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11.051

102 103 104

105 106 107

108

Fn 54 above. (unrep., DCEC 915/2000, [2002] HKLRD (Yrbk) 430). Ibid at para 40. Against this, see Lam Kim Fai v Express Security Ltd (unrep., DCEC 652/2008, [2010] HKEC 761), where the applicant lost consciousness, fell and suffered brain injury, The applicant had suffered from hyper-tension but the evidence did not establish that his injuries were due solely to the impact on falling, or from a pre-existing condition causing the fall. In these circumstances the court found that there was no evidence to the contrary and that the deeming provision applied, distinguishing Wong Yuet Yung v Wah Fung Hong Gas Engineering Co Ltd (fn 98 above) on the basis that some of his injuries were caused by the impact on falling. Fn 98 above. Fn 64 above. See also Lam Chi Biu v Mak Kee Ltd (unrep., DCEC 1203/2002, [2005] HKEC 875), in which a warehouse worker was attacked by unknown assailants; the court refused to infer evidence to the contrary, despite the employers argument that the attack may have been related to the workers recent appearance on a local television programme. More recently, in Cheung Shuk Wah Jessica v Wong Kang Hung Darwin (fn 83 above), concerning an attack on a bartender after hours while accompanying a female co-worker to meet her companion, the issue of evidence to the contrary was not even raised. Fn 64 above.

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personal dispute or grudge, so the court refused to draw the inference that the murder constituted evidence to the contrary. 11.052 Court draws inferences from the available evidence. In cases where the exact circumstances of the accident causing death are unknown, the court will draw natural inferences from what evidence is available. In Chow Shu Ki v Osram Prosperity Co Ltd,109 the applicants husband was a sales manager heading to a clients ofce on his employers business. While boarding a crowded public bus, he got into an altercation with a fellow passenger over queue-jumping. The altercation continued in the bus, and, in the fracas, near the exit where many passengers were alighting, the applicants husband was shoved or fell through the door and suffered head injuries, from which he later died. The court allowed the ECO claim and found the accident to have arisen out of the employment. Taking a global view of the matter, the court found that the accident was caused by the crowded condition of the bus, and not by any misbehaviour on the part of the deceased. Thus the s.5(4)(a) deeming provision had not been rebutted.110 Applicants burden of proof where there is evidence to the contrary. Where the s.5(4)(a) presumption is rebutted by evidence to the contrary provided by the employer or inferred by the court, the applicant no longer has the benet of the deeming provision and must then prove on the balance of probabilities that the accident causing injury arose out of the employment. In other words, the applicant must show on the evidence that it is more probable than not that the accident was caused by work-related factors rather than the extraneous cause(s) implied by the evidence to the contrary. United Ford Development v Fung Yin Yee. In United Ford Development v Fung Yin Yee,111 kitchen workers who complied with their employers request to stay after hours to serve as mahjong playing partners for a regular customer were killed in an arson attack committed by unknown assailants. The families of the deceased workers applied for ECO compensation, and the defendant employer pointed to the arson attack as evidence to the contrary under s.5(4)(a). Accepting this to be evidence to the contrary, the trial judge still found that the accident arose out of the employment on the basis that mahjong clubs by their nature attracted unsavoury types who might resort to violence. On appeal, the Court of Appeal agreed with the trial judges result but stated the principle in broader terms, citing Lord Atkin in Brooker v Thomas Bortwick & Sons (Australasia) Ltd,112 a case in which debris fell on workmen in various locations due to an earthquake. In that case, Lord Atkin held that where a workman is injured by the falling upon him of the premises where he is employed the accident necessarily arises out of the employment. On this basis, the Court of Appeal pointed to the fact that the kitchen workers employment brought [them] to the particular spot where the accident occurred, and the spot in fact turned out to be a dangerous spot; this was enough to establish that their deaths were caused by accident arising out of

11.053

11.054

109 110

111 112

(unrep., DCEC 1059/2000, [2001] HKLRD (Yrbk) 619). See also Cheung Kai Chi v Chun Wo Contractors Ltd (unrep., DCEC 415/2003, [2004] HKEC 1347), where a construction worker was crushed by a crawler crane with no eye-witnesses present. The s.5(4)(a) deeming provision was applied in favour of the applicant, despite the unusual circumstances that the crane operator was subsequently investigated for manslaughter in relation to the incident. Fn 63 above. [1933] AC 669.

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the employment. United Ford Development v Fung Yin Yee is an important decision because it eases the burden of proof on injured workers who do not have access to the s.5(4)(a) deeming provision due to the existence of evidence to the contrary.113 Could the accident have befallen any other employee? Care must be taken to distinguish cases where, for instance, an employee is hunted down and attacked at work by assailants settling a private grievance not related to the employment. In such cases it is not the work location that is dangerous, since presumably the employee would be attacked and injured at some point whether at work or not. An appropriate test might be: Could the accident that befell the employee have happened to any other employee who might have been at that location at that particular moment in time? That was the question posed by Judge Li in Cheng Wai Yin v Lung Fung Estate Agency,114 a case involving a criminal attack on business premises. Judge Li answered the question in the afrmative, on the basis that the applicant, an estate agent, was simply the unfortunate victim of the intruders violent intentions directed toward the employers premises. There was no evidence that the intruders had a personal, non-employment related grudge against the applicant. (iv) Section 5(4)(b): employee acts done for the purposes of and in connection with the employers trade or business Section 5(4)(b) deeming provision. Under s.5(4)(b) of the ECO, any act done by an employee for the purposes of and in connection with the employers trade or business is deemed to arise out of and in the course of the employment, even if it was done in contravention of any applicable regulation or of any orders given by the employer, or in the absence of instructions from the employer.115 Far-reaching effect of s.5(4)(b). The circumstances to which s.5(4)(b) apply are unclear from the wording and thus this deeming provision is potentially far-reaching. In Chan Ka Leung v Golden Island Metal Manufactory,116 a worker unloading goods using a lorry tailgate that he knew to be defective was able to rely on s.5(4)(b) because the work was done for the purpose of and in connection with his employment.117 Similarly, in Ng Mung Khian v Wing Kwong Painting Co, it was applied where a worker was killed in a re while preparing paint materials during his lunch break and 11.056 11.055

11.057

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114 115

116 117

See Glofcheski R Arising out of ... the Employment: Employees Compensation (1994) 24 Hong Kong Law Journal 341, for a discussion of the far-reaching impact of this decision. By virtue of this ruling, a case like Wong Gun Fook v McLean (fn 98 above) would now be decided differently in favour of the applicant. So too would Lai Fong v Shun Fung Ironworks Ltd (unrep., WCC 100 and 101/1976), in which sleeping workers who were required to remain on-site and who were inexplicably attacked by a co-worker were held to have been injured by accident not arising out of the employment. Fn 62 above. ECO s.5(4)(b) states: an accident to an employee shall be deemed to arise out of and in the course of his employment, notwithstanding that the employee was at the time when the accident happened acting in contravention of any statutory or other regulation applicable to his employment, or of any orders given by or on behalf of his employer, or that he was acting without instructions from his employer, if such act was done by the employee for the purposes of and in connection with his employers trade or business. (unrep., DCEC 813/2003, [2005] HKEC 567). This provision was also relied on in Chen Xiu Mei v Li Siu Wo (fn 45 above), where a labourer, without qualications and without express authorisation, operated a forklift in the course of his work, which he mishandled, causing his death.

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before work had formally resumed.118 A reasonable and plain reading of this provision suggests that it could extend to a wide range of work-related activities, including those that take place well outside of work hours.119 (v) Section 5(4)(c): work-related rescue or rst-aid activities 11.058 Section 5(4)(c) deeming provision. Under s.5(4)(c) of the ECO, any accident suffered by an employee engaged in work-related rescue or rst-aid activities is deemed to arise out of and in the course of his employment. Section 5(4)(c) contains language similar to s.5(4)(b) and extends ECO coverage to workers engaged in rescue work who are acting reasonably in the interests of their employer, notwithstanding contravention of regulations or orders given by the employer, or in the absence of instructions from the employer.120 (vi) Sections 5(4)(d) and 5(4)(e): commuting in employer transportation 11.059 Section 5(4)(d) and (e): commuting in employer transportation. Section 5(4) of the ECO contains two separate deeming provisions concerning accidents that occur while an employee is commuting to and from work in transportation that is provided or arranged by the employer. Employer involvement in providing transportation seems to be the common rationale behind these two deeming provisions that extend the scope of arising out of and in the course of the employment to include the commute from home before work and back home after work.121 Section 5(4)(d): passenger on employer transportation. Section 5(4)(d) provides that an accident shall be deemed to arise out of and in the course of the employment if it happens while the employee, with the employers express or implied permission, is travelling as a passenger to or from work, and the transport is operated by or on

11.060

118

119

120

121

[2005] 3 HKC 48. For a liberal application of the predecessor provision see TK Shen Construction Co v Yip Pak Ying (unrep., CACV 22/1973), noted by Ribeiro in Workmens Compensation and Informal Work Practices (1974) 4 Hong Kong Law Journal 65. Nothing in ECO s.5(4)(b) limits its application to the workplace or to work hours. Thus, an employees unilateral decision to make a purchase of work-related equipment outside of work hours could arguably be included as falling within the course of the employment, particularly since this provision applies even in the absence of instructions from the employer. ECO s.5(4)(c) states: an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens (i) while, with the consent of his employer, the employee is being trained in rst aid, ambulance or rescue work or engaged in any competition or exercise in connection therewith; (ii) in, at or about any premises other than his employers while, with the consent of his employer, the employee is engaged in any rst aid, ambulance or rescue work or in any competition or exercise in connection therewith; or (iii) in, at or about his employers premises while the employee is engaged in any rst aid, ambulance or rescue work, notwithstanding that in the case of rescue work the employee was acting in contravention of any statutory or other regulation applicable to his employment, or of any orders given by or on behalf of his employer, or that he was acting without instructions from his employer, if when such act was done the employee reasonably acted in order to rescue, succour or protect any other person who had suffered, or who was reasonably believed to be in danger of, injury, or to avert or minimize serious damage to property of the employer. By contrast, under ECO ss. 5(4)(f) and 5(4)(g), the employer need not be involved in providing or arranging the transportation for these deeming provisions to apply: see paras 11.06311.066 below.

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behalf of the employer or by some other person pursuant to arrangements made with the employer, and other than as part of a public transport service.122 Section 5(4)(d) strictly interpreted. Section 5(4)(d) was strictly interpreted in Chek Chor Ching v Wik Far East Ltd,123 a case in which the applicant was struck by a passing motor vehicle while walking across the street from one employer-operated coach in order to board another employer-operated coach. The court held that this deeming provision must be strictly interpreted. By a plain reading of the provision, the accident fell outside the scope of s.5(4)(d) since the employee was not injured while travelling as a passenger. Section 5(4)(e): operator of employer transportation. Section 5(4)(e) provides that an accident shall be deemed to arise out of and in the course of the employment if it happens while the employee is driving or operating any means of transport arranged or provided by or on behalf of his employer, between his place of residence and his place of work, travelling by a direct route, for the purposes of and in connection with his employment.124 Both subss.5(4)(d) and 5(4)(e) cover commuting circumstances, with the former applying to passengers and the latter applying to operators of employer provided transportation. (vii) Section 5(4)(f): commuting during gale and rainstorm warnings Section 5(4)(f): commuting during gale and rainstorm warnings. Section 5(4)(f) of the ECO provides that an accident shall be deemed to arise out of and in the course of the employment if it happens to an employee travelling by a direct route between his place of residence and his place of work during a gale warning or rainstorm warning. This provision applies only within a specic window of time, namely four hours before his work shift begins and four hours after it ends; and it is subject to the denitions of gale warning and rainstorm warning used by the Hong Kong Observatory.125 This deeming provision effectively extends ECO coverage to accidents that occur during an employees commute in a gale or rainstorm. 11.063 11.061

11.062

122

123 124

125

ECO s.5(4)(d) states: an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens to the employee while he is, with the express or implied permission of his employer, travelling as a passenger by any means of transport to or from his place of work and at the time of the accident, the means of transport is being operated(i) by or on behalf of his employer or by some other person pursuant to arrangements made with his employer; and (ii) other than as part of a public transport service. [1991] HKDCLR 71. ECO s.5(4)(e) states: an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens to the employee while he is driving or operating any means of transport arranged or provided by or on behalf of his employer or by some other person pursuant to arrangements made with his employer between his place of residence and his place of work, travelling by a direct route: (i) to his place of work for the purposes of and in connection with his employment; or (ii) to his place of residence after attending to those purposes. ECO s.5(4)(f) states, in part: an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens to the employee when, within the duration of a gale warning, or of a rainstorm warning, he is travelling between his place of residence and his place of work(i) to his place of work, by a direct route within a period of 4 hours before the time of commencement of his working hours for that day or to his place of residence, within a period of 4 hours after the time of cessation of his working hours for that day, as the case may be. Subsection 5(4)(f)(ii) goes on to dene gale warning and rainstorm warning by reference to the system of warnings issued by the Hong Kong Observatory.

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11.064

Distinction between s.5(4)(f) and ss.5(4)(d) and (e). Like ss.5(4)(d) and (e), s.5(4)(f) deals with employees commuting to and from work. However, unlike ss.5(4)(d) and (e), the employer need play no role in providing or arranging for the transportation. Section 5 (4)(f) is triggered by the mere occurrence of a gale warning or rainstorm warning. The only connection with the employment is the proximity in time before or after work and the fact that the employee is commuting to or from work.126 (viii) Section 5(4)(g): work-related travel outside Hong Kong

11.065

Section 5(4)(g): work-related travel outside of Hong Kong. Section 5(4)(g) of the ECO provides that an accident shall be deemed to arise out of and in the course of the employment if it happens while the employee, with the employers express or implied permission, is travelling by any means of transport for the purposes of and in connection with his employment between Hong Kong and any place outside Hong Kong, or between any place outside Hong Kong and any other such place.127 This provision is much broader than ss.5(4)(d), (e) or (f), in that it applies to any work-related travel outside Hong Kong, by any means of transport, not just that provided by the employer, not just ones commute to and from home, and not just in certain weather conditions. Section 5(4)(g) addresses the increasingly common situation of employers with business interests outside of Hong Kong and a mobile workforce that is accustomed to work-related travel. For example, it would presumably apply to employees of Hong Kong companies who must travel across the border to China and between places within China for work purposes. Section 5(4)(g) application to China-Hong Kong travel. In Hsu Shu Chiao v Lung Cheong Toys Ltd,128 an employee was required to work in Guangdong, China. His employer provided transportation from his workplace in Dongguan to Shenzhen, where he would get onward transportation back to Hong Kong. On the day in question, he was required to work late and missed the transportation. Pursuant to a standing agreement with his employer, he took a taxi that was involved in an accident in which the employee was killed. The trial judge held that s.5(4)(d) of the ECO did not apply to deem the accident to have arisen out of and in the course of employment, since the taxi was not being operated by or on behalf of his employer.129 Moreover, according to the trial judge, the travel was not otherwise in the course of the employment, because it was not connected to his work, and was for the purpose of getting him home to Hong Kong and to meet his girlfriend in Shenzhen.130

11.066

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127

128 129 130

It is unclear why gales and rainstorms which have nothing to do with the employer or employment merit special treatment under s.5(4)(f). Perhaps the rationale behind this provision is that an employee who takes extra risks by commuting in a storm to get to or from work does so for his employers benet and thus should be covered by the ECO in case of an accident. By that rationale, one could also argue that the inherent risks of an employees daily commute should also be covered by the ECO regardless of meteorological conditions. For further discussion of s.5(4)(f), see Martin R, Employees Compensation: Arising Out of and in the Course of Employment (1986) 16 Hong Kong Law Journal 1; and Glofcheski R, Conditions for Compensation under the Employees Compensation Ordinance in Law Lectures for Practitioners 1995 (Hong Kong: HKLJ Ltd 1995). ECO s.5(4)(g) states: an accident to an employee shall be deemed to arise out of and in the course of his employment if it happens to the employee while he is, with the express or implied permission of his employer, travelling by any means of transport for the purposes of and in connection with his employment between Hong Kong and any place outside Hong Kong or between any place outside Hong Kong and any other such place. (unrep., CACV 754/2001, [2002] HKEC 188). The trial court decision is cited at fn 89 above. See the text of ECO s.5(4)(d)(i) at fn 122 above. Fn 89 above.

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On appeal, however, the Court of Appeal decided in favour of the applicant relying on s.5(4)(g) of the ECO. The employee was working outside Hong Kong and, at the time of the accident, he was travelling with the permission of his employer in connection with his employment between a place outside Hong Kong and another such place.131 This ruling demonstrates the reach of s.5(4)(g) and fulls its purpose, to provide ECO coverage to workers required to travel to and from China for work-related reasons. As Cheung JA observed: many of the travelling cases decided in the past were in the context of a local environment of an employee travelling to and from his work. The courts were not concerned with cross-border travelling such as many Hong Kong residents are doing these days. In deciding this case, there is no escape from this new social dimension, which takes into account of a modern employment relationship and the practical consideration that, while a person injured on a road in Hong Kong may be covered by compulsory third party insurance, there is no certainty that the same protection is afforded him in another jurisdiction.132

(e) Occupational diseases under the ECO Schedule 2 occupational diseases qualify for compensation. The ECO provides that certain occupational diseasesthose listed in Sch.2 of the Ordinance qualify for ECO compensation.133 Section 32(1) of the ECO effectively exempts applicants with Sch.2 occupational diseases from the injury by accident requirement and allows those with listed cumulative injuries to circumvent the limitations of the doctrine of process.134 Indeed, subs. 32(1)(a) explicitly states that, for Sch.2 claims, the incapacity or the death shall be treated as the happening of the accident. Non-schedule 2 diseases. Only those occupational diseases listed in Sch.2 qualify for such claims.135 For other occupational diseases a claim for compensation can be made 11.067

11.068

131

132 133

134 135

See the text of ECO s.5(4)(g) at fn 127 above. For an unsuccessful application of the s.5(4)(g) deeming provision, where the reason for the delay return from Shenzhen to Hong Kong was a side-trip to a karaoke night club, see Chen Ho Yuen v Multi Circuit Board (China) Ltd (unrep., DCEC 549, 1527/2008, [2010] HKEC 1394). Fn 128 above at para 26. The relevant provisions are to be found in ECO ss 3236 and Sch.2. ECO s.32(1) states: If the total or partial incapacity (whether of a permanent or temporary nature) or the death of an employee results from an occupational disease and is due to the nature of any employment in which the employee was employed at any time within the prescribed period immediately preceding such incapacity or death, whether under one or more employers, then, the employee or members of his family, as the case may be, shall be entitled to compensation under this Ordinance as if such incapacity or death had been caused by an accident arising out of and in the course of employment in respect of which the provisions of section 5 apply . For more on injury by accident, see paras 11.02311.033 and para 11.025 in particular. ECO s.35 provides that the Commissioner for Labour may from time to time amend Sch.2. For example, in 2004, the list of occupational diseases was expanded to include Severe Acute Respiratory Disease (SARS) and Avian Inuenza A (Avian Flu). As both medical consensus and legislative action are required for occupational diseases to be listed in Sch.2, there is sometimes a long time lag between when employees begin to suffer from new occupational diseases and when a consensus emerges about the specic work-related causes of such injuries, ultimately leading to statutory amendment and inclusion in Sch.2.

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only on satisfaction of the injury by accident requirement. In theory, it is possible for an occupational disease not listed in Sch.2 to qualify for ECO compensation under s.5 if it was triggered by an accident and otherwise satises the s.5 requirements for compensation. However, it has been held that death at work from a longstanding non-scheduled disease (a heart condition) was not an accident in the absence of a triggering event, despite the likelihood that the employment conditions contributed substantially to the development of the disease over time.136 11.069 Listed diseases tied to specic working conditions and time frames. Schedule 2 lists specic occupational diseases by category, namely those caused by physical agents, by biological agents, by chemical agents, and by miscellaneous agents. Each listed disease is tied to specic working conditions, exposure to which would give rise to that disease. Finally, a specic time frame is prescribed for each listed item. A successful applicant must show that the incapacity or death resulted from the listed disease, that he was exposed to the specied working conditions, and that it occurred within the time frame prescribed in Sch.2.137 Rebuttable presumption of causal link. By virtue of s.34 of the ECO, where an employee suffers incapacity or death as a result of a listed occupational disease, once he shows that he was employed in the specied trade, industry or process within the prescribed time frame, it shall be presumed, until the contrary is proved, that such disease was due to the nature of such employment.138 Wilful misrepresentation of pre-existing condition can disqualify claim. Under s.32(1)(b) of the ECO, compensation will not be payable to an employee with a preexisting medical condition if it is proved that the employee, at the time of entering into the employment, wilfully and with intent to deceive represented in writing that he had not previously suffered from the disease resulting in the incapacity or death.139 Refusal to undergo medical examination can disqualify claim. Section 33(1) of the ECO provides that an employer may, at his own expense, require an employee to undergo a medical examination by a registered medical practitioner before employing him in any trade, industry or process that is listed and linked to specic occupational diseases in Sch.2.140 Furthermore, s.33(2)(a) states that any employee who refuses to undergo a medical examination required under subs.(1) shall not be entitled to

11.070

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11.072

136 137 138

139

140

Chow Mui v Chow Cheuk Chung (fn 67 above), and Tang Siu Chun v Yan Chung Yee (fn 57 above). See ECO Sch.2 for details. ECO s.34 states: If an employee who suffers incapacity or dies as a result of an occupational disease was within the period specied opposite to that disease in the fourth column of the Second Schedule immediately preceding such incapacity or death employed in any trade, industry or process specied opposite to that disease in the third column of that Schedule, it shall be presumed, until the contrary is proved, that such disease was due to the nature of such employment. ECO s.32(1)(b) states: if it is proved that the employee, at the time of entering into the employment, wilfully and with intent to deceive represented in writing that he had not previously suffered from the disease resulting in the incapacity or death, compensation shall not be payable. ECO s.33(1) states: Any employer may, before employing an employee in any trade, industry or process specied in the third column of the Second Schedule, require the employee to undergo a medical examination by a registered medical practitioner at the cost of the employer. Note that registered medical practitioner means a medical practitioner who: (a) is registered under the Medical Registration Ordinance (Cap 161); or (b) is deemed to be a registered medical practitioner by virtue of s.29(a) of that Ordinance: ECO s.3.

EMPLOYEES COMPENSATION ORDINANCE

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recover from that employer compensation under this Ordinance for incapacity or death suffered as a result of an occupational disease.141 (f ) Sections 5(2) & 5(3) limitations on section 5(1) ECO claims Section 5(1) claims subject to ss.5(2) and 5(3). All claims brought under s.5(1) of the ECO are subject to the limitations and qualications stipulated in ss.5(2)142 and 5(3).143 Section 5(2) sets out four distinct disqualifying situations, and it takes an all-or-nothing approach, disentitling the disqualied claimant from any compensation at all when it applies. By contrast, s.5(3) lays down a general principle; it creates the potential for partial awards and invites the exercise of broad judicial discretion.144 Employee fault can disqualify claim. With the exception of subs.5(2)(a), the other provisions in ss.5(2) and 5(3) address the kinds of behaviour that can disqualify an employee from compensation. In general, these provisions provide an incentive for employees to avoid unsafe, inappropriate behaviour. Despite the essentially no-fault nature of the ECO vis--vis employers, the fault of employees becomes a relevant issue under these provisions. (i) Section 5(2) limitations No claim where injured employee continues to earn full wages. Subsection 5(2)(a)145 stipulates that, in the absence of a permanent incapacity, no compensation will be paid under the ECO when the injury is not serious enough to diminish the employees earning capacity or interfere with his ability to continue doing the same job earning full wages. The determination of this issue is largely a factual matter. Deliberate self-injury disqualies claim. Section 5(2)(b) of the ECO stipulates that no compensation shall be payable in respect of any incapacity or death resulting from a deliberate self-injury. Thus, a worker who commits or attempts to commit suicide in the workplace would not qualify for ECO compensation. 11.075 11.073

11.074

11.076

141

142

143

144 145

ECO s.33(2)(b) further stipulates that the refusal to undergo the medical examination must be evidenced by writing under the hand of the employee. ECO s.5(2) states: No compensation shall be payable under this Ordinance in respect of(a) any injury, other than an injury which results in partial incapacity of a permanent nature, which does not incapacitate the employee from earning full wages at work at which he was employed; (b) any incapacity or death resulting from a deliberate self-injury; (c) any incapacity or death resulting from personal injury if the employee has at any time represented to the employer that he was not suffering or had not previously suffered from that or a similar injury, knowing that the representation was false; or (d) any injury, not resulting in death or serious and permanent incapacity, caused by an accident which is directly attributable to the employees addiction to drugs or his having been at the time of the accident under the inuence of alcohol. ECO s.5(3) states: In any proceedings under this Ordinance where it is proved that the injury to an employee is attributable to the serious and wilful misconduct of that employee, or that an injury by accident arising out of and in the course of his employment is deliberately aggravated by the employee, any compensation claimed in respect of that injury shall be disallowed; except that where the injury results in death or serious incapacity, the Court on consideration of all the circumstances may award the compensation provided by this Ordinance or such part thereof as it shall think t. The potential for conict between s.5(2) and s.5(3) is discussed below at paras 11.087088. See the text of s.5(2)(a) at fn 142 above.

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11.077

Analysis of ss.5(2) and 5(1) may overlap. There is potential overlap between the s.5(2) disqualifying provisions and the s.5(1) requirement that injury be caused by an accident arising out of and in the course of the employment. For instance, where a worker is injured by deliberate self-harm and thus comes within s.5(2)(b), such an incident is also unlikely to be considered injury by accident arising out of the employment under s.5(1). Similarly, in cases of death by suicide at work, compensation would likely be ruled out under both s.5(2)(b) and s.5(1). However, the theoretical possibility remains that a suicide or self-harm triggered by work-related stress or a traumatic incident at work might be considered not deliberate in a clinical psychological sense and thus not come within s.5(2)(b), while also satisfying the s.5(1) accident arising out of the employment requirement. Misrepresentation of medical condition can disqualify claim. Section 5(2)(c) of the ECO stipulates that no compensation shall be payable in respect of any incapacity or death resulting from personal injury if the employee has at any time represented to the employer that he was not suffering or had not previously suffered from that or a similar injury, knowing that the representation was false. This provision ensures that employees do not falsely misrepresent their medical conditions to employers, both at the hiring stage and on an ongoing basis.146 Employees drug addiction or drunkenness may disqualify claim. Section 5(2)(d) of the ECO stipulates that no compensation shall be payable in respect of any injury, not resulting in death or serious and permanent incapacity, caused by an accident which is directly attributable to the employees addiction to drugs or his having been at the time of the accident under the inuence of alcohol. Under this provision, an employee cannot claim ECO compensation for injuries suffered due to an accident attributable to his own drug addiction or drunkenness. Section 5(2)(d) does not apply to death or serious and permanent incapacity. Section 5(2)(d) does not apply where the injury results in death or serious and permanent incapacity. Presumably, this exception is designed to provide relief to the dependents of the deceased or seriously disabled employee in spite of the workers fault in the matter. It is a policy-driven qualication that ensures that dependents of the deceased or seriously incapacitated worker will not be left destitute. Ma Shiu Wai v Chun Fai Container Transportation Co Ltd. Section 5(2)(d) was applied in Ma Shiu Wai v Chun Fai Container Transportation Co Ltd,147 where a lorry driver delivering a load of timber in China suffered head injuries when his vehicle hit a hole in the road and rolled over. According to the evidence, the driver had consumed at least two glasses of wine, if not more, so the court concluded that the accident was attributable to driving under the inuence of alcohol rather than to holes in the road. Since the head injuries did not result in death or serious and permanent incapacity, s.5(2)(d) was applied to deny the claim for compensation.

11.078

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11.080

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146 147

This provision operates similarly to ECO s.32(1)(b): see para 11.071 and fn 139 above. (unrep., DCEC 877/2002, [2003] HKEC 1463).

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(ii) Section 5(3): serious and wilful misconduct Serious and wilful misconduct may disqualify claim or reduce compensation. Section 5(3) of the ECO stipulates that a claim will be disallowed if the injury can be proven to be attributable to the serious and wilful misconduct of the employee, or where the injury is deliberately aggravated by the employee, except where such injury results in death or serious incapacity, in which case the court may award full or partial compensation, as it sees t, after considering all the circumstances.148 Section 5(3) has tremendous potential to disqualify claims and reduce compensation, although in practice it has rarely been applied. Death or serious incapacity treated more leniently. Section 5(3) treats cases of death or serious incapacity more leniently, giving the courts broad discretion to provide full or partial relief to the injured employee and/or his dependents, in spite of the employees serious and wilful misconduct.149 Serious and wilful misconduct not merely contributory negligence. It would seem that very serious and wilful misconduct is required to trigger the provision. Routine contributory negligence as it is understood in the common law would not come close to the kind of conduct contemplated by s.5(3). Consideration of all the circumstances construed broadly. Since the ECO provides no guidance as to how this discretion is to be exercised, it is an open issue for the trial judge to determine based on a consideration of all the circumstances of the case. In Yuen Yuk Ying v Chan Kam Wing,150 an employee driving his employers van while under the inuence of alcohol collided with a road-sweeping vehicle and was killed. The court determined that s.5(2)(d) applied to the exclusion of s.5(3).151 However, in considering the possible application of s.5(3) and the discretion contained therein, Godfrey JA said that the expression consideration of all the circumstances of the case should be construed broadly, and that the court is entitled to take into account all the circumstances of the case as revealed by the evidence; all the circumstances peculiar to the accident; and all the circumstances peculiar to the victim.152 Judicial discretion exercised compassionately. In Ng Mung Khian v Wing Kwong Painting Co,153 a paint worker was killed by re in a storeroom with no eyewitnesses who could attest to the cause of the re. The possibility was raised but not proven that the re was caused by the deceaseds careless lighting of a cigarette. The trial judge held that even if the deceased workers conduct were to be viewed as serious and wilful 11.082

11.083

11.084

11.085

11.086

148 149

150 151 152

153

For the full text of s.5(3), see fn 143 above. This operates similarly to s.5(2)(d), the drug addiction and drunkenness provision: see para 11.079 above. See also para 11.087 below. [1997] HKLRD 149. See para 11.088 below. Specic considerations in this case included these facts: the deceased was able to drive safely for 25 minutes; the deceased left behind a widow and two children; and the case fell within the apparent policy aim of the legislature to treat dependents of deceased or seriously incapacitated employees with leniency and compassion in spite of the employees misconduct. Moreover, on reconsideration of the facts, the court decided that the major cause of the accident was not alcohol, but an error of judgment enhanced by alcohol. In the courts view, all of these factors pointed to the proper exercise of discretion to allow the claim. Fn 118 above.

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misconduct under s.5(3), the courts discretion should still be exercised in favour of the applicant in view of the workers death and the fact that he left behind a widow, a child and an elderly father. Following the dictum of Godfrey JA in Yuen Yuk Ying v Chan Kam Wing,154 judicial discretion under s.5(3) was applied compassionately, in consideration of all the circumstances.155 (iii) Conict between section 5(2)(d) and section 5(3) 11.087 Conict may arise between ss.5(2)(d) and 5(3). Conict may arise between s.5(2)(d) and s.5(3). On the one hand, s.5(2)(d) preserves the entitlement to ECO compensation where death or serious and permanent incapacity results from the employees addiction to drugs or his having been under the inuence of alcohol at the time of the accident causing injury. On the other hand, under s.5(3), where death or serious incapacity results from the serious and wilful misconduct of an employee, the question of entitlement to ECO compensation is a matter of judicial discretion.156 A conict arises if an injured employees state of intoxication or impairment can also be considered serious and wilful misconduct and death or serious incapacity results. In such a case, s.5(2)(d) would operate to allow the compensation claim, but it could still be denied through the exercise of judicial discretion under s.5(3). Yuen Yuk Ying v Chan Kam Wing. The conict between s.5(2)(d) and s.5(3) was addressed in Yuen Yuk Ying v Chan Kam Wing,157 where an employee, driving his employers van while under the inuence of alcohol, collided with a road-sweeping vehicle and was killed. The trial judge applied s.5(3) and found that the accident was attributable to the deceased employees serious and wilful misconduct; in spite of the resulting fatality, the exercise of judicial discretion operated against the applicant and compensation was denied. On appeal, Godfrey JA of the Court of Appeal said: By enacting s.5(2)(d) the legislature has gone out of its way to treat the inuence of alcohol on the employee as irrelevant, in the case of a fatal accident, to the right to claim compensation. It would, in our opinion, produce a nonsense if the dependants of the employee, having had their right to compensation preserved by s.5(2)(d), were to have it taken away from them altogether (or left as a matter for the courts discretion) by the treatment of the same facts as serious and wilful misconduct for the purposes of s.5(3). We are therefore of the view that s.5(3) can have no application to the present case.158 In other words, as a matter of statutory interpretation, fact situations that fall within the specic scope of s.5(2)(d) should not be subjected to further scrutiny under the more general terms of s.5(3). If correct, this position would essentially carve out a s.5(2)(d) exception to the general application of s.5(3).

11.088

154 155 156

157 158

Fn 150 above and para 11.085. This nding, an alternative reason in the decision, was not disturbed on appeal. Note the difference in wording between s.5(2)(d) which refers to death or serious and permanent incapacity and s.5(3) which refers to death or serious incapacity. The former requires the incapacity to be both serious and permanent for the provision to be applicable. Fn 150 above. Ibid at 152.

EMPLOYEES COMPENSATION ORDINANCE

473

Godfrey JA went on to consider the position that s.5(3) did apply to this case, concluding that if the employees job is, as here, one which involves driving a motor vehicle (in unsafe hands, a lethal weapon) on a highway, any degree of impairment, due to the voluntary ingestion of alcohol, which has the effect of slowing his reaction time and dulling his senses, does constitute serious and wilful misconduct.159 Nevertheless, after a full consideration of all of the circumstances, Godfrey JA exercised the s.5(3) judicial discretion in favour of allowing the claim.160 (g) Notice requirement and 24-month time limit Notice of the accident must be given to employer. Section 14(1) of the ECO stipulates that proceedings for compensation under the ordinance are not maintainable unless notice of the accident has been given to the employer, by or on behalf of the employee as soon as practicable after the happening thereof and before the employee has voluntarily left the employment in which he was injured.161 Notice must provide details of the incident. Section 14(2) of the ECO stipulates that the notice of the accident must specify the name and address of the person injured, and shall state in ordinary language the cause of the injury and the date on which and the place at which the accident occurred. It may be given either in writing or orally to the employer (or, if there is more than one employer, to one of such employers), or to any foreman or other ofcial under whose supervision the employee is employed 162 Circumstances where lack of notice or defective notice not a bar. Lack of notice or defective notice will not bar the proceedings in cases of death resulting from a workplace accident where the injured employee dies on or in the general vicinity of the employers premises.163 Moreover, formal notice requirements will not bar proceedings: if the employer is proved to have had knowledge of the accident from any other source at or about the time of the accident, or if it is found in the proceedings for settling that claim that the employer is not prejudiced or would not, if a notice or an amended notice were then given and the hearing postponed, be prejudiced in his defence by the want, defect or irregularity, or that such want, defect or irregularity was occasioned by mistake, absence from Hong Kong, or other reasonable cause.164 Application for compensation must be made within 24 months of accident or death. Section 14(1) also stipulates that an application for compensation under the 11.092 11.089

11.090

11.091

159 160

161 162

163 164

Ibid at 153. For a more complete discussion of the issue of employees fault, see Glofcheski R, Worker Misconduct and the Denial of Claims under the Employees Compensation Ordinance (2005) 35 Hong Kong Law Journal 651. ECO s.14(1). ECO s.14(2). If multiple contractors and sub-contractors are involved, ECO s.14(3) provides that notice given by the employee to the sub-contractor, or to any foreman or other ofcial under whose supervision the employee is employed shall be deemed to be notice to the principle contractor. ECO s.14(1)(a). ECO s.14(1)(b).

474

HEALTH AND SAFETY AT WORK III

ECO must be made within 24 months from the occurrence of the accident causing the injury or, in the case of death, within 24 months from the date of death .165 11.093 Application can proceed despite non-compliance with s.14(1) if reasonable excuse provided. Section 14(4) of the ECO gives the court the discretion to: receive and determine any application for compensation in any case notwithstanding that the notice required by subsection (1) has not been given, or that the application has not been made in due time as required by that subsection, if it is satised that there was reasonable excuse for the failure so to give notice or to make an application, as the case may be.166 In Kwok Yau Tai v Tung Wah Group of Hospitals,167 the application was allowed to proceed two and a half months beyond the 24 month statutory time limit in circumstances where the reasonable excuse for the delay was that for 23 months the applicant had no reason to believe that there was going to be an issue over sick leave payments and the matter was proceeding ... amicably through the intervention of the Labour Department. She acted expeditiously to apply for legal aid and made her application immediately upon learning of the employers resistance.168 (h) Medical examination and treatment under section 16 11.094 Employer may require employee to undergo medical examination. Under s.16(1) of the ECO, where an employee has given notice of an accident, the employer may, within seven days, require the employee to undergo a medical examination without expense to the employee and the employee must comply.169 Any employee receiving periodical payments for temporary incapacity may also be required to undergo a medical examination from time to time at the employers expense and request.170 These medical examinations are conducted by either a registered medical practitioner,

165

166

167 168

169 170

ECO s.14(1). The time continues to run despite the intention of the parties to settle the claim under other provisions of the Ordinance. For this reason the Labour Department advises that if the claim has not been settled within 18 months of the accident causing injury, the injured worker should contact the Labour Department for assistance in registering the claim: see A Concise Guide to the Employees Compensation Ordinance at http:// www.labour.gov.hk/eng/public/ecd/pco360.pdf (visited 16 Mar 2010). ECO s.14(4). In Chan Wing Chuen v Sun Cheong Bleaching & Dyeing Factory Ltd [1989] HKDCLR 55, Remedios DJ held that ignorance of the right to claim compensation until after the expiry of the limitation period was not a reasonable excuse under ECO s.14, and that an excuse will only be reasonable if it operates for the whole of the period and not merely part of it. (unrep., DCEC 44/2000, [2002] HKEC 591). In Law Mei Ngo v Hospital Authority (unrep., DCEC 1637/2006, [2007] HKEC 1585), the applicant, a nurse who suffered post-traumatic stress disorder while treating SARS patients at the height of the SARS crisis, was permitted to make a claim despite being more than one year out of time because, as a sufferer of a stress disorder she was under a mental disability throughout the limitation period and beyond. ECO s.16(1). ECO s.16(1A). See also s.10 and para 11.113.

EMPLOYEES COMPENSATION ORDINANCE

475

registered Chinese medicine practitioner or registered dentist named by the employer,171 and the employee shall attend as required at the time and place specied, provided such time and place is reasonable.172 Failure to undergo medical examination suspends right to compensation. Section 16(4) of the ECO stipulates that if an employee fails to undergo a medical examination requested by the employer, his right to compensation shall be suspended until such examination has taken place. If such failure to comply extends over a period of 15 days from the date when the employee was required to undergo the examination no compensation shall be payable, unless the Court is satised that there was reasonable cause for such failure.173 No compensation is payable for the period of suspension.174 Medical report to be sent to employer and, upon request, to employee. As soon as reasonably practicable after the required medical examination, the relevant medical professional who conducted the examination shall, at the employers expenses(a) prepare a report on the examination, setting out all the ndings reasonably related to the injury of the employee; and (b) send the report to the employer.175 In addition, the employee may request in writing a copy of the report to be sent to him free of charge.176 It is an offence punishable by ne for the employer, without reasonable excuse, to fail to comply with such a request either 21 days after receiving the request or 14 days after receiving the report, whichever is later.177 Employer may require employee to submit to medical treatment. Under s.16(6) of the ECO, where the employee is not already receiving medical treatment, the employer may require the employee to submit to treatment by a registered medical practitioner, registered Chinese medicine practitioner or registered dentist without expense to the employee.178 Failure to submit to or comply with medical treatment limits compensation. Under s.16(7) of the ECO, if an injured employee fails to submit to required medical treatment or disregards the instructions of the medical professional concerned, 11.095

11.096

11.097

11.098

171

172

173 174

175 176 177 178

ECO s.16(1B). For the meaning of registered medical practitioner, fn 140 above. By virtue of ECO s.3, registered Chinese medicine practitioner has the meaning assigned to it by s.2 of the Chinese Medicine Ordinance (Cap.549); and registered dentist means a dentist whose name is entered in the General Register under s.9 of the Dentists Registration Ordinance (Cap.156). Even though the medical examination is conducted by a medical professional named by the employer, the employee is entitled to have, at his own expense, his own registered medical professional present at such examination: ECO s.16(5). ECO s.16(2). Furthermore, ECO s.16(3) stipulates that, if the employee is unable or not in a t state to attend, the relevant medical professional shall notify the employer of that fact, x a reasonable time and place for a medical examination of the employee, and notify the employee. ECO s.16(4). ECO s.16(8) states: Where under this section a right to compensation is suspended, no compensation shall be payable in respect of the period of suspension. ECO s.16(3A). ECO s.16(3B). ECO s.16(3C). ECO s.16(6). Note that, besides s.16(6) requests from the employer, there is no duty on the employee to mitigate damages by taking a prescribed form of medical treatment: Hong Kong Paper Mills Ltd v Chan Hin Wu [1981] HKLR 556.

476

HEALTH AND SAFETY AT WORK III

then if it is proved that such failure or disregard was unreasonable in the circumstances of the case and that the injury has been aggravated thereby, the injury and resulting incapacity shall be deemed to be of the same nature and duration as they might reasonably have been expected to be if the employee had submitted himself for such treatment, and had duly carried out the instructions of such medical practitioner, Chinese medicine practitioner or dentist, and compensation, if any, shall be payable accordingly.179 11.099 Failure to undergo medical examination or treatment resulting in death. Under s.16(9) of the ECO, where a claim for compensation is made in respect of the death of an employee, if the employee failed to undergo a medical examination or submit himself for treatment when so required, or having submitted himself for such treatment disregarded the instructions of the medical professional concerned, if it is proved that such failure or disregard was unreasonable in the circumstances of the case and that the death of the employee was caused thereby, the death shall not be deemed to have resulted from the injury, and no compensation shall be payable in respect of the injury.180 (i) Calculation of compensation 11.100 Compensation calculated based on severity of incapacity. Sections 6 to 13 of the ECO stipulate strict rules for the calculation of compensation awards for lost earnings and earning capacity.181 Under these rules, compensation can be awarded for accidents resulting in death,182 permanent incapacity (total or partial),183 and temporary incapacity184 that incapacitates an employee from earning full wages at work at which he was employed. The amount of compensation awarded varies based on the severity of the incapacity and on the age of the injured worker. (i) Death 11.101 Calculation of compensation in fatal cases. In cases of injury resulting in death, the amount of compensation varies depending on the monthly earnings and the age of the deceased. Compensation is calculated based on a multiplier/multiplicand formula.185 The multiplier is 84 months for those under the age of 40 at the time of death, 60 months for those between age 40 and 56, and 36 months for those age 56 or older. The multiplicand is the lesser of either the deceased employees monthly earnings or the amount stipulated in Sch.6 of the ECO, currently set at HK$21,000. This gure, which is adjusted from time to time to take into account

179 180 181

182 183 184 185

ECO s.16(7). ECO s.16(9). ECO ss 6 to 13 provide the general rules for calculating compensation, while Sch.6 stipulates the specic amounts to be used when applying the rules in ss 6 to 13 to calculate the compensation payable. ECO ss 6 and 6A to 6H of the ECO. ECO ss 7 to 9. ECO s.10. ECO s.6(1).

EMPLOYEES COMPENSATION ORDINANCE

477

ination, effectively sets an upper limit on awards. In addition, s.6(2) of the ECO sets a lower limit on awards, currently set at HK$303,000 in Sch.6; this gure is also subject to adjustment for ination.186 Earnings is dened broadly. The amount of monthly earnings is important in the calculation of compensation, whether for death or incapacity. Earnings is dened broadly.187 In addition to wages, it includes benets capable of being estimated in money; the value of any food, fuel, or quarters supplied by the employer if, as a result of the accident, the employee is deprived of such food, fuel or quarters; any overtime payments for work done, whether by way of bonus, allowance or otherwise, if of a constant character, including tips if the habitual giving and receiving thereof is open and notorious and is recognised by the employer.188 The method of calculating monthly earnings is set out in detail in s.11 of the ECO. Monthly earnings normally means the earnings for the month immediately preceding the accident, but s.11 provides for other possibilities, in particular where the amount of the previous months earnings is less than the average of monthly earnings,189 or where the period of employment is too short to form the basis for calculation under s.11(1)(a).190 Lump sum payment apportioned among members of deceaseds family. In case of injury resulting in death, compensation is paid in the form of a lump sum to the members of the deceaseds family. Under s.13 of the ECO, the employer pays the total amount of compensation to the court, which then distributes it to eligible family members according to the apportionment rules set out in s.6A and Sch.7 of the ECO.191 11.102

11.103

186

187

188

189

190

191

ECO s.6(2) states: The amount of compensation payable under subsection (1) shall in no case be less than the amount specied in the second column of the Sixth Schedule shown opposite section 6(2) specied in the rst column of that Schedule. ECO s.3(1) denes earnings as any wages paid in cash to the employee by the employer and any privilege or benet which is capable of being estimated in money and includes the value of any food, fuel, or quarters supplied to the employee by the employer if as a result of the accident the employee is deprived of such food, fuel or quarters; and any overtime payments or other special remuneration for work done, whether by way of bonus, allowance or otherwise, if of constant character or for work habitually performed and including tips if the employment be of such a nature that the habitual giving and receiving thereof is open and notorious and is recognized by the employer: but shall not include remuneration for intermittent overtime, or casual payments of a non-recurrent nature, or the value of a travelling allowance, or the value of any travelling concession or a contribution paid by the employer of an employee towards any pension or provident fund, or a sum paid to an employee to cover any special expenses entailed on him by the nature of his employment. For a case in which a nightclub hostess tips were recognized as earnings, see Hau Siu Mui v Kan Sik Huen (unrep., DCEC 711/2002, [2004] HKEC 752). The applicant may elect that the calculation be made under ECO s.11(1)(a) based on the earnings of the previous month, or under s.11(1)(b), based on the monthly rates of the previous 12 months, whichever is more favourable. The election is available even where the previous months earnings is unusually high: Chan Kam Sau v Yee Hing Construction Transportation Co Ltd (fn 27 above). ECO s.11(2). For a calculation of monthly earnings where the injury was suffered on the rst day of work, see Leung Wai Pong v Tang Hon Kong (unrep., DCEC 237/2007, [2008] HKEC 1950), Shaq Mohammad v Wong Chor Wai (fn 18 above), and Tang Chau Yuet v Fu Kin Po (unrep., DCEC 28/2008, [2010] HKEC 1053). For other short-term employment cases see Lai Cheung Kwong v Lo King Sum [2008] 3 HKLRD 643 and Or Wing Ming v Ho Bing Chi [2008] 4 HKLRD 337. See e.g. Lee Mui Fong v Wong Kit Man (fn 45 above).

478

HEALTH AND SAFETY AT WORK III

11.104

Proof of dependency not required for family members. According to s.3(1) of the ECO, member of the family means a person who has any of the following relationships in respect of the employee, whether by blood or an adoption specied in subsection (2)(a) a spouse or cohabitee; (b) a child; (c) a parent or grandparent; or (d) a grandson, granddaughter, stepfather, stepmother, stepson, stepdaughter, son-in-law, daughter-in-law, brother, sister, half-brother, half-sister, father-in-law, mother-inlaw, brother-in-law, sister-in-law, and child of a brother or sister of the whole blood, any of whom has been living with the employee as a member of the same household and has been so living for the period of 24 months immediately preceding the accident concerned. Note that proof of dependency is no longer a requirement to qualify as a member of the family following amendments to the ECO in 2000.192

11.105

No double compensation for death and permanent incapacity. In the case where an injured worker initially suffers a permanent incapacity and subsequently dies from the same accident, any amount of ECO compensation received for that permanent incapacity will be deducted from the amount of compensation awarded for the ensuing death. There can be no double compensation for both death and incapacity arising from the same accident.193 Funeral and medical attendance expenses reimbursable. In the case of death from injury, in addition to compensation for lost earnings, s.6(5) of the ECO provides for the reimbursement of the reasonable expenses of the funeral of the deceased employee and the reasonable expenses of medical attendance on the deceased employee.194 However, this amount is not to exceed the sum specied in Sch.6, currently set at HK$35,000.195 (ii) Permanent total incapacity

11.106

11.107

Permanent total incapacity dened as 100 per cent loss of earning capacity. Section 7 of the ECO lays out the rules governing compensation where permanent total incapacity results from the injury. Whether an incapacity qualies as permanent (as opposed to temporary) and total (as opposed to partial) is determined according to s.7(3) of the ECO and Sch.1, which lists various types of permanent injuries and the percentage loss

192 193

194

195

Yardway Motors Ltd v Tam Siu Lun (fn 23 above). ECO s.6(3) states: Notwithstanding anything in subsection (1) or (2), where in respect of the same accident compensation has been paid under section 7 or 9, there shall be deducted from the sum payable under subsection (1) any sums so paid as compensation. ECO s.6(5) states: Where death results from the injury, reimbursement of the reasonable expenses of the funeral of the deceased employee and the reasonable expenses of medical attendance on the deceased employee, not exceeding in all the sum of the amount specied in the second column of the Sch.6 shown opposite s.6(5) specied in the rst column of that Schedule, shall be paid by the employer to any person who has paid the expenses. The amounts specied in ECO Sch.6 are subject to adjustment for ination from time to time. See also ECO s.6E for more on the procedure for determining claims for funeral or medical attendance expenses.

EMPLOYEES COMPENSATION ORDINANCE

479

of earning capacity that each is deemed to represent.196 For example, the loss of two limbs, or both hands, or both feet, total loss of sight or hearing, or total paralysis would each constitute 100 per cent loss of earning capacity, while the loss of one leg below the knee represents 65 per cent incapacity, the loss of one eye 50 per cent, and the loss of one ear 30 per cent, etc. Section 7(3) stipulates that any injury or combination of injuries where the percentage or aggregate percentage of the loss of earning capacity amounts to 100 per cent according to Sch.1 will qualify as permanent total incapacity.197 Moreover, injuries not listed in Sch.1 may be deemed to qualify as assessed by an Ordinary Assessment Board, a Special Assessment Board or the Court.198 Calculation of compensation for permanent total incapacity. In cases of permanent total incapacity, compensation is calculated based on a multiplier/multiplicand formula similar to, but more generous than, in fatal cases.199 Section 7(1) of the ECO stipulates a multiplier of 96 months for those under the age of 40, 72 months for those between age 40 and 56, and 48 months for those age 56 or older. The multiplicand is the lesser of either the deceased employees monthly earnings or the amount stipulated in Sch.6, currently set at HK$21,000. This gure, which is adjusted from time to time to take into account ination, effectively sets an upper limit on awards. In addition, s.7(2) sets a lower limit on awards, currently set at HK$344,000 in Sch.6; this gure is also subject to adjustment for ination.200 Payment is made to the employee in the form of a lump sum. Compensation for attention required due to permanent incapacity. Section 8 of the ECO provides for additional compensation for the cost of personal care, referred to in the provision as attention, required by an injured employee suffering a permanent incapacity who is unable to perform the essential actions of life, without the attention of another person.201 The amount is determined by the Court as necessary to meet the cost of such attention,202or by agreement between the employer and injured worker and approved by the Commissioner;203 however, this gure cannot exceed the amount stipulated in Sch.6, currently set at HK$412,000. Section 8(2) provides that payment can be made as a lump sum calculated with regard to the probable duration and cost of the attention204 or periodical payments not to exceed two years, at the end of which 11.108

11.109

196

197 198 199 200

201

202 203 204

For ECO purposes, incapacity refers not to the physical disability itself, but rather to the reduction in or loss of working ability and earning capacity which that disability is deemed by Sch.1 to represent. Also, total incapacity is such incapacity whether of a temporary or permanent nature as incapacitates an employee for any employment which he was capable of undertaking at the time of the accident resulting in such incapacity.: ECO s.3(1). Note that the incapacity must result from the injury, raising the possibility of an argument that the injury resulted from an extraneous cause, for instance negligent medical treatment. Such arguments are generally not likely to succeed given the generous and purposive interpretations applied to the ECO, and the absence of express wording in the ECO permitting such arguments. ECO s.7(3) and subs.7(3)(a). ECO s.7(3) and subs.7(3)(b). For the equivalent multiplier/multiplicand formula in fatal cases, see ECO s.6 and para 11.101 above. ECO ss 7(1) and 7(2). The relevant date for calculation is the date of the accident: Chan Kam v Standard Chartered Bank Hong Kong Trustees Ltd [1991] 2 HKLR 455. It can be assumed that the same principle would apply to other calculations under ECO ss 69 as well. ECO s.8(1). Note that this provision is headed Employee requiring attention and uses the term attention rather than personal care throughout. ECO s.8(1)(a). ECO s.8(1)(b). ECO s.8(2)(a).

480

HEALTH AND SAFETY AT WORK III

the court may order an appropriate lump sum be paid to cover future needs.205 Finally, s.8(3) stipulates that no compensation shall be payable in respect of any period during which the employee is receiving free medical treatment as an in-patient in a hospital or otherwise.206 (iii) Permanent partial incapacity 11.110 Permanent partial incapacity dened as less than 100 per cent loss of earning capacity. Section 9 of the ECO lays out the rules governing compensation for injured workers who suffer permanent partial incapacity. Whether an injured workers incapacity is total or partial is determined by reference to the injuries listed in Sch.1 of the ECO and the corresponding percentage of incapacity that each injury is deemed to represent, or as assessed by an Ordinary Assessment Board, a Special Assessment Board or the Court.207 Under s.9(3), permanent partial incapacity is deemed to result from an injury where the percentage or aggregate percentage loss of earning capacity amounts to less than 100 per cent.208 Calculation of compensation for permanent partial incapacity. Compensation for permanent partial incapacity is calculated based on the same multiplier/multiplicand formula as in cases of permanent total incapacity,209 except that under s.9, the amount paid out will be a proportion based on the percentage (less than 100 per cent) of incapacity suffered in the particular case. Payment is made to the employee in the form of a lump sum. Where the injury is listed in Sch.1, the amount of compensation shall be such percentage of the compensation which would have been payable in the case of permanent total incapacity as is specied therein as being the percentage of the loss of earning capacity caused by that injury.210 Where the injury is not specied in Sch.1, the amount of compensation shall be such percentage of the compensation which would have been payable in the case of permanent total incapacity as is proportionate to the loss of earning capacity permanently caused by the injury in any employment which the employee was capable of undertaking at that time.211 Such cases are typically treated according to the formula provided by the Court of Appeal in Hong Kong Paper Mills Ltd v Chan Hin Wu.212

11.111

205 206 207

208

209 210

211

212

ECO s.8(2)(b). ECO s.8(3). Whether the permanent incapacity is partial or total is a question of fact: Chan Kam v Standard Chartered Bank Hong Kong Trustees Ltd (fn 200 above). See also Lee Kwok Sing v Reliance Security Ltd (unrep., DCEC 71/2007, [2010] HKEC 327). ECO s.3(1) denes partial incapacity as where the incapacity is of a permanent nature, such incapacity (which may include disgurement) as reduces his earning capacity, present or future, in any employment which he was capable of undertaking at that time. ECO ss 7(1) and 7(2). For permanent total incapacity, see para 11.107 above. ECO s.9(1)(a). Note that in the case of multiple injuries the aggregate amount of compensation payable under s.9 may not exceed the amount payable under s.7: ECO s.9(2). ECO s.9(1)(b). Note that the amount of compensation for the injury to a body part not amounting to the loss of that body part may not exceed the amount payable for total loss of capacity of that body part: ECO s.9(1)(b)(i). [1981] HKLR 556. The formula was modied by the Court of Appeal in Lui Kwong Yan v Shui Hing Decoration Works [1993] 1 HKLR 168 to correct a misprint in the formula in the Paper Mills case. Under the corrected formula as explained by Penlington JA, the compensation payable under s.9(1)(b) is (ba)/b multiplied by c, where a is the earning capacity at the time of the accident in any employment of which the employee is now capable, b is the earning capacity at the time of the accident, and c is the compensation payable upon permanent total incapacity.

EMPLOYEES COMPENSATION ORDINANCE

481

Section 9(1A) consideration of special circumstances of employee. Section 9(1A) of the ECO213 allows for an alternative means of assessment wherehaving regard to the special circumstances of the employee, such as the nature of the injury in relation to the employees former usual employment, the employees qualications, previous training and experiencethe employees post-accident earning capacity is much less than that which would be reected in his loss of physical capacity measured in the usual way according to s.9(1). In such cases, an injured worker may be entitled to a higher degree of compensation taking into account the true picture of his post-accident employment capacity.214 (iv) Temporary incapacity Compensation for temporary incapacity (total or partial). Section 10 of the ECO provides the rules governing compensation for injured workers who suffer temporary incapacity whether total or partial. Compensation is calculated at four-fths of the difference between the injured employees monthly earnings at the time of the accident, and what he is earning or capable of earning during the period of the temporary incapacity after the accident. Compensation is paid as periodical monthly payments or in a lump sum calculated accordingly, having regard to the probable duration and likely changes in the degree of the temporary incapacity.215 Medically necessary absence may be deemed total temporary incapacity. Irrespective of the outcome of the injury, a period of absence from duty certied to be necessary by a registered medical practitioner, a registered Chinese medicine practitioner, a registered dentist, an Ordinary Assessment Board or a Special Assessment Board shall be deemed to be a period of total temporary incapacity for the purposes of s.10 compensation.216

11.112

11.113

11.114

213

214

215 216

ECO s.9(1A) states: Where: (a) permanent partial incapacity results from an injury or a combination of injuries (whether or not specied in the Sch.1); and (b) the percentage of the loss of earning capacity specied or assessed in relation to that injury or combination of injuries in accordance with subs.(1) would be substantially less than the percentage of the loss of earning capacity permanently caused by the injury or injuries in the special circumstances of the employee, including, without limiting the generality of the foregoing: (i) the nature of the injury or injuries in relation to the nature of his former usual employment; and (ii) his qualications, previous training and experience, the amount of compensation shall be such percentage of the compensation which would have been payable in the case of permanent total incapacity as is proportionate to the loss of earning capacity permanently caused by the injury or injuries in any employment which, having regard to those special circumstances, the employee was capable of undertaking at that time. See e.g. Mohammed Amjad v John M Pickavant & Co (unrep., DCEC 1789/2006, [2009] HKEC 746); Leung Wai Pong v Tang Hon Kong (fn 190 above); and Lee Kwok Sing v Reliance Security Ltd (fn 207 above). The Hong Kong Paper Mills formula is sometimes applied to s.9(1A) cases: see e.g. Lui Shun Yee v Golden Sea Harbour Restaurant Ltd (unrep., DCEC 1473/2004, [2009] HKEC 298). Indeed, the wording of s.9(1A) is similar to that of s.9(1)(b). In Leung Wai Pong v Tang Hon Kong (fn 190 above), Judge Lok explained the application of s.9(1A) and the Paper Mills formula as follows: To a great extent, whether s.9(1A) and the Paper Mills formula are to be applied will depend on the courts nding of the earnings of the injured worker at the time of the accident and the earnings of the alternative employment that the worker was able to take up in view of his injuries. If the difference in percentage is substantially more than the percentage assessed by the Board or that prescribed in Sch.1 of the ECO, the court would probably apply s.9(1A) and the Paper Mills formula in assessing the loss of earning capacity. ECO s.10(1). ECO s.10(2). Whether this presumption is rebuttable remains controversial: see e.g. Sin Fu Yau v Wong Po Kee Ltd [2007] 1 HKLRD. 159 (irrebuttable); and Chan Kam Sau v Yee Hing Construction Transportation Co Ltd (fn 27 above) (rebuttable).

482

HEALTH AND SAFETY AT WORK III

11.115

Periodical payments due on regular pay days. Section 10(3) of the ECO stipulates that periodical payments for temporary incapacity are payable on the same days as wages would have been payable to the employee if he had continued to be employed under the contract of service or apprenticeship under which he was employed at the time of the accident,217 or at shorter intervals by agreement between the parties or by order of the court.218 In any event, the interval between periodical payments cannot exceed one month.219 Failure to pay within seven days punishable by ne. Under s.10(10) of the ECO, an employer who without reasonable excuse fails to pay compensation for temporary incapacity within seven days of the established due date commits an offence punishable by ne.220 Moreover, under s.10(11), if the period of temporary incapacity does not exceed three days and the employer fails to pay compensation within seven days, the amount of compensation due can be recovered by the employee from the employer as a civil debt in the Small Claims Tribunal, or, where the amount claimed exceeds the jurisdiction of the Small Claims Tribunal, in the District Court.221 Temporary incapacity of 37 days may be settled by agreement of parties. Under s.16CA of the ECO, where an accident causing injury to an employee results in temporary incapacity, whether total or partial, for a period exceeding three days but not exceeding seven days, the employer may enter into an agreement with the injured employee as to the compensation payable by him under s.10(1).222 In such simple cases, periodical payments are made as in other s.10 claims,223 and any lump sum payment is due on the next regular pay day following the agreement.224 Compensation for temporary incapacity not deducted from subsequent compensation for permanent incapacity or death. Section 10(4) provides that, where temporary incapacity is followed by permanent incapacity or death, any compensation paid for temporary incapacity will not be deducted from subsequent compensation for permanent incapacity or death.225 In contrast to s.6(3), which disallows dual compensation for both permanent incapacity and subsequent death, this provision allows compensation for both temporary incapacity and subsequent permanent incapacity or death.226

11.116

11.117

11.118

217 218 219 220

221

222 223 224 225

226

ECO s.10(3). ECO s.10(3)(a). ECO s.10(3)(b). ECO s.10(10) states: Without prejudice to any other provision of this Ordinance, an employer who without reasonable excuse fails to pay to the employee or to the Court any compensation or any proportionate part thereof under this section within a period of 7 days after the date on which such compensation falls due (whether under subsection (3) or by agreement or by order of the Court), commits an offence and is liable to a ne at level 6. See also ECO s.10(12): A claim for compensation or any proportionate part thereof may be brought in the District Court under subs.(11)(b) either independently of or in conjunction with any other claim for compensation which is, under this Ordinance, to be brought in the District Court. ECO s.16CA(1). ECO s.16CA(2). See also ECO s.10(3) and para 11.115 above. ECO s.16CA(3). ECO s.10(4) states: In the event of death or permanent incapacity following a period of temporary incapacity whether total or partial, no periodical or lump sum payments paid or payable under this section shall be deducted from any amount of compensation payable under section 6, 7, 8 or 9. ECO s.6(3). See para 11.105 and fn 193 above.

EMPLOYEES COMPENSATION ORDINANCE

483

Temporary incapacity that persists may be deemed permanent. Section 10(5) of the ECO stipulates that an employee who receives periodical payments for 24 months, or for another 12 months beyond that in cases where the court has seen t to grant such an extension, shall no longer be entitled to periodical payments under this section but shall be deemed to have suffered permanent incapacity and thus be eligible for compensation under ss.7 or 9.227 This provision sets a time limit of 24 months (or 36 months where the court has granted an extension) on periodical payments for temporary incapacity after which such incapacity will no longer be considered temporary but instead permanent for ECO purposes.228 (v) Medical expenses Employer must pay medical expenses. Section 10A of the ECO provides that the employer must pay an employees medical expenses arising from a work related injury by accident, according to the amounts specied in Sch.3.229 Medical expenses must be paid in addition to any other compensation for which the injured employee is eligible under the ECO,230 but this does not extend to medical treatment received outside of Hong Kong for an accident that occurred in Hong Kong.231 Also, an employer may avoid liability for medical expenses if he provides free, adequate medical treatment to the employee.232 Section 10A also provides for a cause of action in civil court for the employee to recover medical expenses from an employer who fails to pay.233 (vi) Prosthetics and surgical devices Employer must pay for prosthetics and surgical devices. Part IIIA (ss.36A through 36O) of the ECO deals with prosthetics and surgical devices required by an injured worker. Section 36B provides that the employer, in addition to any other compensation, is liable to pay for the cost of supplying and tting to the employee a prosthesis or surgical appliance required by him as a result of his injury.234 Section 36C sets an upper limit on this liability by reference to Sch.6 which currently species a cap of HK$33,000.235 In addition, s.36I provides that the employer is also liable to pay for the probable cost of the normal repair and renewal of the prosthesis or surgical appliance during a period of 10 years after the date on which the prosthesis or surgical appliance is originally tted.236 Section 36J sets an upper limit on this liability by reference to Sch.6 which currently species a cap of HK$100,000.237

11.119

11.120

11.121

227 228 229

230 231 232 233 234 235 236 237

ECO s.10(4). LKK Trans Ltd v Wong Hoi Chung (fn 66 above). ECO ss.10A(1), 10A(3) and Sch.3. Note that Sch.3 currently limits medical expenses to either HK$200 or HK$280 per day, depending on the kind of treatment being received. ECO s.10A(2). ECO s.10A(1A). ECO s.10A(4), (5), (5A) and (5B). ECO s.10A(6), (7) and (8). ECO s.36B(1). ECO s.36C and Sch.6. ECO s.36I. ECO s.36J and Sch.6.

484

HEALTH AND SAFETY AT WORK III

(vii) Pre-existing conditions 11.122 Amount of compensation not reduced by pre-existing condition. The Court of Final Appeal decided in LKK Trans Ltd v Wong Hoi Chung238 that, where a pre-existing medical condition is exacerbated by the work-related injury, the amount of compensation will not be reduced by reference to the pre-existing medical condition.239 That is because under the ECO there is no requirement that the accident be the sole cause of the incapacity, it need only be a cause of the injury.240 There is nothing in the ECO that permits a reduction in the amount of compensation payable by the employer.241 The court referred to the spirit of the ECO, which is not concerned with apportioning liability on the basis of fault, but is a scheme whereby the community, through the cost-sharing device of compulsory insurance, permits employees so incapacitated to look to their employers for compensation having regard to the extent of the incapacity suffered, regardless of any fault on the part of the employer and regardless of the circumstances in which the work accident arose.242 ( j) Commissioners certicates under section 16A 11.123 Commissioner may assess compensation for temporary or permanent incapacity. Section 16A(1) of the ECO provides that the Commissioner may assess compensation payable under ss.7, 9 and 10 in cases of temporary incapacity and in cases of permanent incapacity, whether total or partial.243 In cases of permanent incapacity, the Commissioner may refer the case to either an Ordinary Assessment Board or a Special Assessment Board for assistance in determining the degree of incapacity, and then assess compensation based on their reports.244 Compensation cannot be assessed by the Commissioner unless the claim for compensation arises within 24 months after the happening of the accident.245 Commissioner issues certicate stating the amount of compensation. Section 16A(2) of the ECO stipulates that, once the Commissioner has assessed compensation under s.16A(1), he shall issue to the employer and the employee a certicate in such form as he may specify stating the amount of the compensation and details of the assessment, and shall retain one copy of the certicate for his records.246

11.124

238 239

240 241

242

243 244 245 246

Fn 66 above. See also Tam Shiu Wan v Shun Shing Construction & Engineering Co Ltd (unrep., DCEC 119/2005, [2008] HKEC 859) and Ying Yuk Shan v South China Morning Post Publishers Ltd (unrep., DCEC 479/2003, [2008] HKEC 157). Citing Lee Kin Kai v Ocean Tramping Co Ltd (Fn 68 above). Citing Hong Kong Paper Mills Ltd v Chan Hin Wu (fn 212 above). It has been held that the principle applies to ECO s.8 claims for care and attention. Thus, there will be no reduction in the claim for care and attention merely because the injury requiring care and attention was caused in part by the employees pre-existing condition: Lee Kwok Sing v Reliance Security Ltd (fn 207 above). Fn 66 above, per Ribeiro PJ at para 36. For a recent application of the principle see Lee Kwok Sing v Reliance Security Ltd (fn 207 above). ECO s.16A(1). For more on these boards, see ss 16D, E, and F, and para 11.131 below. ECO s.16A(1A). See also ECO s.14(1) and paras 11.09211.093 above. ECO s.16A(2).

EMPLOYEES COMPENSATION ORDINANCE

485

Concerned parties may object to amount of compensation assessed within 14 days. The employer, the employee and, in relevant cases, the Employees Compensation Assistance Fund Board (ECAFB)247 all have the right to object to the amount of compensation assessed and to request a review of the Commissioners original decision.248 An objection must be made in writing within 14 days of the issuance of the certicate,249 and state the grounds of the objection.250 The objector must notify the other party or parties concerned.251 Commissioner reviews original decision in response to objection. In response to an objection, the Commissioner will review the original decision.252 Where relevant, a copy of the objection will be sent to the Ordinary or Special Assessment Board for review.253 After reviewing the objection and any further ndings of the Ordinary or Special Assessment Board, the Commissioner will conrm, vary or cancel the assessment of compensation in the original certicate.254 At the end of the review process, the Commissioner will issue a new certicate under s.16A(5) of the ECO, either conrming the original assessment or detailing the new assessment,255 and this new certicate supersedes and cancels the original one.256 Commissioners certicates have evidential authority in court. Any certicate issued under ss.16A(2) or 16A(5) of the ECO and signed by or for the Commissioner will be admitted in evidence without further proof on its production in any court and shall be evidence of the matters stated therein.257 Moreover, s.16A(8) provides that, on application to the Court by any concerned party, the certicate can be made an order of the Court.258 Employer must pay compensation within 21 days of issuance of certicate. Section 16A(9) of the ECO stipulates that, subject to further appeal to the courts under s.18, the employer shall pay the employee the balance (if any) of the amount of compensation stated in the certicate within 21 days of the issuance of the certicate, with allowable deductions for the total sum of any periodical payments previously made to the employee, and any amount paid while the case was still pending and ordered by the Commissioner to be deducted.259

11.125

11.126

11.127

11.128

247

248 249

250 251 252 253 254 255 256 257 258

259

Where an employee is unable to recover compensation to which he is entitled from the employer, he may apply for compensation from the Employees Compensation Assistance Fund (ECAFB): see para 11.013 and fn 31 above, as well as the Employees Compensation Assistance Ordinance (Cap.365) in general. In such cases, the ECAFB gains the right to objection and review under ECO s.16A(3). ECO s.16A(3)(a). ECO s.16A(3)(b). In the case of the ECAFB, the 14 days runs from the date the employee applies for compensation from the fund, or within such further time as the Commissioner, in the circumstances of any particular case, thinks t: ECO s.16A(3)(b)(ii). ECO s.16A(3)(c). ECO s.16A(3)(d). ECO s.16A(4). ECO s.16A(4)(a). See also ECO s.16G(2) and para 11.138 below. ECO s.16A(4)(b). ECO s.16A(5). ECO s.16A(6). ECO s.16A(7). ECO s.16A(8). Where the certicate is made an order of the Court, the amount payable shall include any surcharge payable under ECO s.16A(10): see also para 11.129 below. ECO s.16A(9); see also ECO ss 10 and 13(3).

486

HEALTH AND SAFETY AT WORK III

11.129

Employer subject to surcharges for late payment and nes for non-compliance. Under s.16A(10) of the ECO, an employer who fails without reasonable excuse to comply with the payment requirements of a Commissioners certicate within 21 days of its issuance will be subject to a surcharge of either 5 per cent of the amount owing, or the gure stipulated in Sch.6 (currently HK$490), whichever is higher. At three months after the expiry of the 21-day payment period, if any of the compensation remains unpaid, an additional surcharge will apply, equivalent to either 10 per cent of the unpaid amount (including the rst surcharge), or the gure stipulated in Sch.6 (currently HK$970), whichever is higher.260 Furthermore, s.16A(12) provides that it is an offence punishable by ne for an employer to fail without reasonable excuse to comply with the payment requirements of a Commissioners certicate under s.16A(9).261 Court may cancel a Commissioners certicate. On application by the employer, the employee, the Commissioner or the ECAFB, a court may cancel a certicate issued under ss.16A(2) or 16A(5) and make such order (including an order as to any sum already paid under the certicate) as in the circumstances the Court may think just, if it is proved that (a) (b) (c) the sum paid or to be paid was or is not in accordance with the provisions of this Ordinance; or the certicate was issued in ignorance of, or under a mistake as to, the true nature or the extent of the injury; or the certicate was based upon any false or misleading information or statement given or made.262

11.130

An application for cancellation must be made within six months of the date of issuance of the certicate, or within such further time as the Court, in the circumstances of any particular case, thinks t.263 (k) Ordinary and Special Assessment Boards 11.131 Ordinary and Special Assessment Boards assist Commissioner in cases of permanent incapacity. In cases of permanent incapacity, the Commissioner may refer particular cases to either an Ordinary Assessment Board or a Special Assessment Board for expert assistance in determining the degree of incapacity suffered by the injured worker.264 Composition of an Ordinary Assessment Board (OAB). Section 16D of the ECO provides that the Commissioner shall appoint one or more boards to be known as Employees Compensation (Ordinary Assessment) Boards. An Ordinary Assessment Board (OAB) consists of three members; two of them must be registered medical

11.132

260 261 262 263 264

ECO s.16A(10) and Sch.6. ECO s.16A(12). Such an offence is punishable by ne at level 6: ibid. ECO s.16B(1). ECO s.16B(2). ECO s.16D and 16E; see also para 11.123.

EMPLOYEES COMPENSATION ORDINANCE

487

professionals and the third must be either a Senior Labour Ofcer or a Labour Ofcer.265 The Commissioner determines the terms of ofce and tenure of OAB members,266 as well as the procedures of the OAB.267 Function of an Ordinary Assessment Board. Section 16D(4) of the ECO stipulates that the Commissioner may refer a case to an Ordinary Assessment Board whenever employee compensation claims arise where such injury is likely to result in permanent total or partial incapacity.268 In cases referred to it, an OAB assesses the percentage of the loss of earning capacity permanently caused by the injury as well as the period of absence from duty necessary as a result of the injury.269 A decision of an OAB, if not unanimous, shall be that of the majority of the members.270 Section 9(1A) cases referred to a Special Assessment Board. Section 16D(6) of the ECO stipulates that, Where it appears to an Ordinary Assessment Board that a claim referred to it under subs.(4) is one to which s.9(1A) applies, it shall refer the claim to a Special Assessment Board.271 Composition of a Special Assessment Board (SAB). Section 16E of the ECO provides that the Commissioner shall appoint one or more boards to be known as Employees Compensation (Special Assessment) Boards.272 A Special Assessment Board (SAB) shall consist of: (a) one of the following, that is to say: (i) the Occupational Health Consultant; or (ii) a Senior Occupational Health Ofcer; or (iii) an Occupational Health Ofcer; (b) a Senior Labour Ofcer; and (c) a Labour Ofcer who is a member of an Ordinary Assessment Board appointed under s.16D(2).273 In addition to these three, the Commissioner may appoint up to two additional members who are, in his opinion, qualied to give expert advice on any matter relating to a claim for compensation referred to the Special Assessment Board, and may at any time revoke any such appointment.274 As with the OAB, the Commissioner determines the terms of ofce and tenure of SAB members,275 as well as the procedures of the 11.133

11.134

11.135

265 266 267 268 269 270 271 272 273 274

275

ECO s.16D(1). ECO s.16D(3). ECO s.16D(8). ECO s.16D(4). ECO s.16D(5). ECO s.16D(7). ECO s.16D(6). For more on ECO s.9(1A), see para 11.112 above. ECO s.16E(1). ECO s.16E(2). ECO s.16E(4). See also ECO s.16E(5): A member appointed under subsection (4) may at any time resign by giving notice in writing to the Commissioner. ECO s.16E(3).

488

HEALTH AND SAFETY AT WORK III

SAB.276 Unlike the three-member OAB, with the SAB, the Commissioner appoints one member to be the chairman.277 At all SAB meetings, three members form a quorum.278 11.136 Function of a Special Assessment Board. Section 16E(8) of the ECO stipulates that a Special Assessment Board (SAB) shall, in cases referred to it by an OAB under s.16D(6), assess the percentage of the loss of earning capacity permanently caused by the injury in accordance with this Ordinance.279 Where it appears to the SAB that s.9(1A) applies to the claim referred to it, the SAB shall assess the loss of earning capacity for the purposes of s.9(1A).280 Furthermore, a decision of a Special Assessment Board shall be that of the majority of the members in attendance or, if there is no majority, shall be that of the chairman thereof.281 Certicates of assessment issued by OAB and SAB. Section 16F of the ECO provides that, once an OAB or SAB has drawn its conclusions, a certicate of assessment shall be issued to the employee, the employer and the Commissioner in such form as may be specied by the Commissioner giving details of the assessment.282 Employer or employee may object to and request review of OAB and SAB assessments. Section 16G(1) of the ECO provides that the employer or employee may le an objection to an OAB or SAB assessment within 14 days after the date of issue of a s.16F certicate, or within a further time that the Commissioner, in the circumstances of any particular case, thinks t. Objections must be made in writing, stating the grounds of the objection, with a copy sent to the other party.283 The Commissioner will forward the written objection to the OAB or SAB, as the case may be, and all issued certicates and proceedings in progress under or pursuant to s.16A are void.284 The relevant Board will review its assessment and, after taking into account the objection, may conrm or vary the assessment.285 The results of the review are issued in a new certicate of assessment that supersedes and cancels the original one.286 OAB or SAB may initiate review of assessments. Section 16GA of the ECO provides that an Ordinary or Special Assessment Board may, on its own initiative, review its assessment within three months after the date of issue of a s.16F certicate, or within such further time as the OAB or SAB in the circumstances of any particular case, thinks t, if the assessment(a) was made in ignorance of, or under a mistake as to, the true nature or the extent of the injury; or (b) was based upon any false or misleading information or statement given or made.287 An OAB or SAB initiated

11.137

11.138

11.139

276 277 278 279 280 281 282 283 284 285 286

287

ECO s.16E(11). ECO s.16E(6). ECO s.16E(7). ECO s.16E(8). ECO s.16E(9). ECO s.16E(10). ECO s.16F. ECO s.16G(1). ECO s.16G(1A). ECO s.16G(2). ECO ss.16G(3) and (4). Where review of an OAB assessment leads to the conclusion that s.9(1A) should apply to the claim, the OAB must hand the case over to an SAB for proper assessment according to s.9(1A): see ECO ss 16G(5), (6) and (7). Note that similar provisions exist under the OAB/SAB initiated review procedure: see ECO ss.16GA(6), (7) and (8). ECO s.16GA(1).

EMPLOYEES COMPENSATION ORDINANCE

489

review under s.16GA may also take into account any objections raised by the employer or employee under s.16G(1).288 Before proceeding, written notication must be sent to the employer, the employee and the Commissioner, stating the grounds for the review.289 Upon completion of the review, the OAB or SAB shall issue to the parties concerned a new certicate either conrming or varying the original assessment and providing the details thereof.290 OAB or SAB certicates of assessment have evidential authority in court. Under s.16H of the ECO, any signed OAB or SAB certicate assessment will be admitted in evidence without further proof on its production in any court and shall be evidence of the matters stated therein.291 Attendance of employee for purposes of assessment. Section 16I of the ECO provides that the Commissioner, an OAB or a SAB, may require an employee to attend for the purposes of an examination or assessment at a particular time and place specied in the written notice.292 An employee who receives such a notice must as soon as possible notify his employer (if any) of the date, time and place for such attendance.293 Assuming the injured employee is not already on leave of absence from work and receiving periodical payments under s.10, the employer must grant the employee leave of absence from work for the purposes of such an attendance and pay him regular wages for that period.294 However, the employer is not obliged to pay wages for such attendance, unless he was the employer of the employee at the time of the accident.295 A claim for such wages or salary may be brought as an action for civil debt or claim for compensation in court.296 It is an offence punishable by ne for an employer to fail to meet his wage payment obligations under s.16I without reasonable excuse.297 (l) Review of periodical payments Court may review periodical payments upon application. Section 19(1) of the ECO provides that any periodical payment, payable by agreement between the parties or by an order of the Court, may be reviewed by the Court on the request of either the employer or employee. Where the application for review is based on a change in the condition of the employee, any such application shall be supported by a certicate of a registered medical practitioner, registered Chinese medicine practitioner or registered dentist.298 Upon review, any periodical payment may be continued, 11.142 11.140

11.141

288 289

290 291

292 293 294

295 296 297 298

ECO s.16GA(2). ECO s.16GA(3). Where relevant, the notication must indicate that an objection from the employer or employee under ECO s.16G(1) is also being considered at the same time. ECO s.16GA(4). The new certicate supersedes and cancels the original one: ECO s.16GA(5). ECO s.16H. Commissioners certicates under ECO ss.16A(2) or 16A(5) have similar evidential authority: see ECO s.16A(7) and para 11.127 above. ECO s.16I(1). ECO s.16I(2). ECO s.16I(3), which stipulates that, subject to 16I(4) (see text accompanying fn 295 below), the employer must pay to the employee, within seven days after the day on which wages are normally paid to the employee next following such absence from work, the wages or salary in respect of such absence from work or the wages or salary he would have earned if he had worked during such period. ECO s.16I(4). ECO s.16I(5). ECO s.16I(6). The ne payable is at level 5. ECO s.19(1).

490

HEALTH AND SAFETY AT WORK III

increased, diminished, converted to a lump sum or ended. If the accident is found to have resulted in permanent incapacity, the provisions of s.7 or 9 shall apply, as the case may be.299 In making a review under s.19(1), the Court shall have regard only to the capacity for work of the employee as affected by the accident.300 11.143 Employer may pay into Court the periodical payment pending review. Where the employer makes an application to end or diminish periodical payments based on a certicate of a registered medical professional, the employer may, in the interim, pay into Court the periodical payment, or the amount by which he contends it should be diminished, pending the review decision of the Court.301 Power of employer to end or decrease periodical payments limited. In general, an employer may not end or diminish periodical payments without pursuing an order of the Court or a Commissioners certicate under s.16A to that effect. However, under s.20 of the ECO, the employer may end periodical payments (i) where an employee resumes work and his earnings are not less than the earnings which he was obtaining before the accident; or (ii) where an employee dies; and the employer may diminish periodical payments (i) where an employee in receipt of periodical payments in respect of total incapacity has actually returned to work; or (ii) where the earnings of an employee in receipt of periodical payments in respect of partial incapacity have actually been increased.302 (m) Role of the courts in ECO claims (i) Appellate jurisdiction of District Court under section 18 11.145 Appeals to District Court to be made within six months. Under s.18(1) of the ECO, any decision or assessment by the Commissioner, an Ordinary Assessment Board or a Special Assessment Board may be appealed to the District Court.303 Appeals must be initiated within six months of the decision or, in the case of an assessment, the date of issue of the relevant certicate, but the Court may, if it thinks t, extend the time within which to appeal under this section notwithstanding that the time has elapsed.304 Court has broad power to conrm or reverse decisions and vary assessments. On an appeal under s.18(1), the Court has broad discretionary powers. It may conrm or reverse any decision, or conrm or vary any assessment, of the Commissioner, an Ordinary Assessment Board or a Special Assessment Board, or may substitute its own assessment. Furthermore, the Court may determine the amount of compensation payable and may make such order in respect thereof, including any order as to costs, as it thinks t.305

11.144

11.146

299 300 301 302 303 304 305

ECO s.19(2). ECO s.19(4). ECO s.19(3). ECO s.20. ECO s.18(1). ECO s.18(2). ECO s.18(3). It has been held that, where no reasons are given by the Assessment Board, the appeal court can only judge an assessment by testing the validity of its conclusions against the total available evidence: Chan Kam v Standard Chartered Bank Hong Kong Trustees Ltd (fn 200 above), applied in Lee Kwok Sing v Reliance Security Ltd (fn 207 above).

EMPLOYEES COMPENSATION ORDINANCE

491

(ii) Primary jurisdiction of District Court under section 18A District Court may hear ECO claims as a court of rst instance. In addition to its appellate jurisdiction, the District Court also has primary jurisdiction as a court of rst instance to determine all claims for compensation under the ECO, and any matter arising out of such proceedings, regardless of the amount involved, except where otherwise provided under the Ordinance.306 In hearing claims, the Court maycall upon any person to give evidence, if the Court is of the opinion that such person is, by virtue of his expert knowledge, able to assist the Court.307 Limitation on jurisdiction of the District Court as a Court of First Instance. Note, however, that s.18A of the ECO explicitly excludes from the Courts primary jurisdiction any claims or aspects of claims that have already been determined under ECO mandated agreements or certicates,308 though these remain subject to the Courts appellate jurisdiction under s.18. Employee may apply to District Court for enforcement of ECO claim. Where a compensation claim has already been settled by agreement or otherwise determined, an employee may in the prescribed form and manner, make an application for enforcing his claim for compensation to the Court provided that, in cases determined by s.16A Commissioners certicate, no application shall be made until after the expiry of the payment period of 21 days.309 Court must notify Commissioner of injury claims resulting in death. Section 18A(3) stipulates that the Court must notify the Commissioner for Labour as soon as practicable after it receives a claim for compensation where death results from the injury concerned.310 District Court has general jurisdiction under s.21. Subject to the other provisions of the ECO and any rules made under it, s.21 of the ECO gives the District Court general, comprehensive jurisdiction over ECO claims, as if the Court had by the District Court Ordinance (Cap.336) been empowered to determine all claims for compensation under this Ordinance whatever the amount involved and the law, rules and practice relating to such civil actions and to the enforcement of judgments and orders of the Court shall mutatis mutandis apply.311 11.147

11.148

11.149

11.150

11.151

306 307 308

309 310 311

ECO s.18A(1). Ibid. The rst part of ECO s.18A(1) states: Except where otherwise provided under this Ordinance, all claims for compensation, except to the extent that such claims are determined(a) by agreement under section 8; or (ab) by a Certicate of Compensation Assessment for Fatal Case or Review Certicate of Compensation Assessment for Fatal Case; or (ac) by a Certicate for Funeral and Medical Attendance Expenses or Review Certicate for Funeral and Medical Attendance Expenses; or (b) by certicate under section 16A; or (c) by agreement under section 16CA. For more on agreements under ss 8 and 16CA, see paras 11.109 and 11.117, respectively. For more on s.16A Commissioners certicates, see paras 11.123130 above. ECO s.18A(2). See also ECO s.16A(9) and para 11.128. ECO s.18A(3). ECO s.21(1).

492

HEALTH AND SAFETY AT WORK III

Accordingly, the District Court may hear and determine ECO claims notwithstanding that the amount claimed exceeds the sum mentioned in s.33 of the District Court Ordinance.312 11.152 District Court may order payment of interest. In any proceedings brought for the recovery of ECO compensation, the District Court may include in the sum for which an order for payment is made interest at such rate as it thinks t on the whole or any part of such sum for the whole or any part of the period between the date of the accident and the date of the order.313 (iii) Role of the Court of Appeal in ECO claims 11.153 Court may submit questions of law to the Court of Appeal. Section 22 of the ECO provides that the District Court may, if it thinks t, submit any question of law for the decision of the Court of Appeal.314 Appeals to the Court of Appeal and restrictions. Section 23 of the ECO provides that, in general, any order of the District Court regarding an ECO claim can be appealed to the Court of Appeal, subject to the provisions of this section and of s.13.315 Section 23 lists three restrictions on the right of appeal to the Court of Appeal. First, no appeal shall lie if the amount in dispute is less than HK$1000, unless there is some substantial question of law involved in the appeal and the Court or Court of Appeal grants leave.316 Second, no appeal shall lie where the parties have agreed to abide by the decision of the Court or where an order of the Court simply gives effect to an agreement arrived at by the parties.317 Third, no appeal shall lie after the expiration of 30 days from the date of the order of the Court, although the Court of Appeal may, if it thinks t, extend the time within which to appeal, even if that time has elapsed.318

11.154

3. PNEUMOCONIOSIS AND MESOTHELIOMA (COMPENSATION) ORDINANCE


(a) PMCO regime in general 11.155 No-fault compensation for pneumoconiosis and mesothelioma. First enacted in 1980, the Pneumoconiosis and Mesothelioma (Compensation) Ordinance319 establishes a separate statutory regime of no-fault compensation for persons who develop either

312 313 314

315

316 317 318 319

ECO s.21(2). ECO s.21(3). ECO s.22(1). See also ECO s.22(2) which adds Such submission shall be in the form of a special case in accordance with rules made under this Ordinance. ECO s.13 provides rules for the court administered distribution of compensation amounts paid into court by the employer. ECO s.13(5) states: No appeal shall lie from any order or direction of the Court or of the Commissioner made or given under this section. ECO s.23(2). ECO s.23(3). ECO s.23(4). Cap.360, hereinafter referred to as the PMCO. Note that the original 1980 Ordinance, which took effect on 1 Jan 1981, covered only pneumoconiosis; mesothelioma was added by amendment in 2008.

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or both of the work-related diseases known as pneumoconiosis and mesothelioma. Pneumoconiosis means brosis of the lungs, due either to dust of free silica (silicosis) or dust of asbestos (asbestosis).320 Mesothelioma is a cancer of the protective lining that covers most of the bodys internal organs, almost always caused by exposure to asbestos.321 Since there is often a long gestation period for these diseases, a worker may not be aware that he has one of these conditions until years after terminating the work that caused the disease. The Ordinance takes these factors into account. PMCO compensation is centrally administered by the government. The PMCO establishes the Pneumoconiosis Compensation Fund Board322 and the Pneumoconiosis Compensation Fund323 from which the Board pays compensation to affected workers.324 Contributions to the Fund are levied on employers whose workers are at particular risk of contracting pneumoconiosis and mesothelioma, namely construction contractors and quarry operators.325 Unlike the Employees Compensation Ordinance system, private insurance companies have no involvement, and, for this reason, it is generally accepted that the PMCO scheme is more efcient and cost-effective than that administered under the ECO. Claims made against the Fund not employers. Under the PMCO, claims are not made against the employer, but against the centrally administered compensation fund. In an industry in which workers often have multiple employers over the course of their careers, the establishment of a central fund against which claims can be made helps workers circumvent the technical difculties involved in ascertaining the specic employers responsible for the disease and the degree of their contribution. The applicant needs only show that he has the disease to qualify for compensation; he does not need to connect his disease with any particular employment or employer. Common law action for damages remains available. Section 13(1) of the PMCO stipulates: Nothing in this Ordinance shall diminish or extinguish any right to damages for death or disability resulting from pneumoconiosis or mesothelioma (or both).326 Thus, any common law action for damages remains available. However, s.13(7) stipulates that, in assessing damages for death or disability from pneumoconiosis or mesothelioma (or both), the court shall take into account any compensation that has been paid or is payable327 under the PMCO. In other words, dual compensation will generally not be allowed. 11.156

11.157

11.158

320

321

322

323 324 325 326 327

PMCO s.2(1) denes pneumoconiosis as: (a) brosis of the lungs due to dust of free silica or dust containing free silica, whether or not such disease is accompanied by tuberculosis of the lungs, or any other disease of the pulmonary or respiratory organs caused by exposure to such dust; or (b) brosis of the lungs due to dust of asbestos or dust containing asbestos, whether or not such disease is accompanied by tuberculosis of the lungs, or any other disease caused by exposure to such dust. Fibrosis refers to the thickening or scarring of connective tissue. PMCO s.2(1) denes mesothelioma as: a primary malignant neoplasm of the mesothelial tissue due to dust of asbestos or dust containing asbestos, whether or not such disease is accompanied by tuberculosis of the lungs or by any other disease caused by exposure to such dust. PMCO ss.25, 26 and Sch.3. As in PMCO s.2, the Pneumoconiosis Compensation Fund will be referred to as the Fund and the Pneumoconiosis Compensation Fund Board will be referred to as the Board in this section. PMCO s.27. PMCO s.28. PMCO s.35 and Sch.5. PMCO s.13(1). PMCO s.13(7).

494

HEALTH AND SAFETY AT WORK III

11.159

Employers may apply for reimbursement from the Fund for damages paid. The PMCO not only establishes a convenient no-fault compensation scheme to workers suffering from pneumonconiosis or mesothelioma (or both), but it also provides relief to defendant employers who are liable to pay common law damages in cases of death or disability from these diseases. Any person who has paid or is liable to pay such damages may apply to the Fund for reimbursement, subject to the Boards review and approval.328 (b) Qualication requirements and time limitations

11.160

Hong Kong residency required to qualify for compensation. Section 4(1) of the PMCO stipulates who qualies for compensation under the Ordinance, namely any person suffering from pneumoconiosis or mesothelioma (or both) or, when such a person has died, the family members of the deceased.329 The applicant must also have been a Hong Kong resident for ve years or more when the claim is submitted, or for less than ve years as long as he contracted pneumoconiosis or mesothelioma (or both) in Hong Kong.330 The residency requirement does not apply to family members of a deceased worker, only to the worker himself.331 24-month time limit for claiming compensation in case of death. A claim for compensation or other payment in respect of the death of a person must be made within 24 months of such death.332 Nevertheless, the Commissioner for Labour or the Pneumoconiosis Compensation Fund Board may accept claims after the expiry of the time limit if there was reasonable excuse for the failure to make a claim within such period.333 (c) Types of compensation and payment

11.161

11.162

Compensation paid under a number of heads. Compensation is payable not just for loss of faculty or disablement, but for monetary loss, including loss of earning capacity, which is calculated by reference to the workers capacity to earn wages in the open market, not necessarily his actual earnings.334 The PMCO contains specic provisions governing compensation for death;335 for total or partial incapacity;336 for incapacity

328

329 330 331

332 333 334 335 336

PMCO ss.13(2), (3), (3A) and (3B). Note also PMCO s.19 which provides that, where a government employee contracts one or both of the diseases and is paid a government pension for incapacity, the Board shall pay to the Government from the Fund a sum of money equal to the amount of money that would have been payable as compensation had that person not been disqualied to claim compensation by reason of s.4(3)(c). PMCO s.4(1). PMCO s.4(4). Note that government employees who have otherwise received government pensions or gratuities for incapacity due to pneumoconiosis and/or mesothelioma, as well as members of the armed forces, or civil servants posted outside Hong Kong, are excluded from eligibility for PMCO compensation: PMCO s.4(3). See also fn 328 above. PMCO s.18(1). PMCO s.18(2). Cheng Wai Leung v The Pneumoconiosis Compensation Fund Board [1991] HKDCLR 49. PMCO s.5 and Sch.1 Pt I. PMCO s.6 and Sch.1 Pt II.

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prior to the date of diagnosis;337 for pain, suffering and loss of amenities;338 for care and attention;339 and, in cases of death, for bereavement340 and funeral expenses.341 Furthermore, the PMCO also provides compensation for medical treatment expenses, as well as the cost of medicines and medical appliances.342 Lump sum for death and monthly payments for incapacity. Where death results, compensation is by lump sum,343 payable to the deceased workers family, and includes compensation for bereavement and funeral expenses.344 In cases of total or partial incapacity, compensation is calculated by reference to the degree of incapacity and made in the form of monthly payments, including an amount for pain, suffering and loss of amenities; such monthly payments are payable until death, since these are terminal diseases.345 When incapacity ends in death, the amount previously paid under s.6 (for incapacity) is deducted from the amount payable under s.5 (for death).346 Dual compensation is not allowed, but the deceaseds family members are entitled to compensation of at least the bereavement amount, currently set at HK$100,000.347 Lump sum compensation for the period prior to formal diagnosis. Section 10 of the PMCO provides for a separate lump sum payment covering the period prior to the date of formal medical diagnosis during which the affected worker can be said to have been suffering from pneumonconiosis or mesothelioma.348 This head of compensation recognises that these two diseases typically take a long time to emerge, and a worker may suffer from the symptoms for an extended period before he gets a formal diagnosis entitling him to PMCO compensation. Compensation under s.10 is payable for the specied period regardless of the degree of incapacity of the person during that period.349 No dual compensation for contracting both diseases. Where a worker contracts both pneumoconiosis and mesothelioma, no dual payment is allowed in respect of compensation for death, bereavement, funeral expenses, pain and suffering, and care and attention.350 This is presumably because, under these heads, the costs and consequences to the victim and his family are the same as if he had only one of the two terminal diseases. 11.163

11.164

11.165

337 338 339 340 341 342

343 344 345 346 347 348

349 350

PMCO s.10 and Sch.1 Pt III. PMCO s.6(1)(b) and Sch.1 Pt IIA. PMCO s.11 and Sch.1 Pt IV . PMCO s.5A and Sch.1 Pt V . PMCO s.5B and Sch.1 Pt VI. PMCO ss.12, 12AA, 12A, 12B and Sch.2. Note that funeral expenses, medical expenses and the cost of medical appliances are considered payments in addition to compensation; they are reimbursement entitlements separate from the compensation heads in the PMCO: ibid, s.13A. PMCO s.5(1) and Sch.1. Fnn 340 and 341 above. PMCO s.6(1). PMCO ss.5(2) and (4). PMCO s.5(2) and Sch.1 Pt V . PMCO s.10 and Sch.1 Pt III. See also s.2 and s.24(1)(a)(i), which distinguish between the date of diagnosis (formal medical diagnosis of pneumoconiosis or mesothelioma) and the earliest diagnosed date (when the worker can be said to have begun suffering from one or both of the diseases). PMCO s.10(1). PMCO s.13B. See also PMCO s.24(1A) and para 11.170.

496

HEALTH AND SAFETY AT WORK III

(d) Claims process 11.166 Roles of the Commissioner, the PMB and the Board. Compensation claims under the PMCO are handled by the Commissioner for Labour,351 the Pneumoconiosis Medical Board (PMB)352 and the Pneumoconiosis Compensation Fund Board (the Board). Claims are submitted to the Commissioner, who refers them to the PMB to make determinations of medical fact, such as whether the claimant suffers from the disease(s) and the degree of incapacity. The Commissioner determines matters of eligibility for compensation, such as, in the case of death, which family members are entitled to payments. The Board determines the actual amount of compensation to be awarded and makes payments from the Fund.353 Applicant initiates claim by notifying the Commissioner. Section 14(1) of the PMCO stipulates that a person who suffers from pneumoconiosis or mesothelioma (or both), or, when such a person has died, any member of his family, can apply for compensation under the PMCO by formally notifying the Commissioner of his claim.354 (i) PMB medical examination and certicate of determination 11.168 Commissioner requests PMB to conduct medical examination. Upon receiving a notice of claim, the Commissioner requests the PMB to examine the person making the claim for the purpose of determining the matters referred to in s.24(1)(a) of the PMCO, or, in the case of death, to make a determination under s.24(2) in respect of the deceased person.355 Employer must facilitate PMB medical examination of employee. When requested to conduct a medical examination of a person for a PMCO claim, the PMB must give notice in writing to such person requiring him to submit himself to a medical examination.356 If that person is employed, he must notify his employer as soon as possible of the date, time and place for the medical examination,357 and the employer must not only grant the necessary leave of absence from work, but also pay the person the wages or salary he would have earned if he had worked during such period.358 An employer who, without reasonable excuse, fails to comply with this requirement commits an offence and is liable to a ne of HK$10,000.359

11.167

11.169

351 352

353

354

355 356 357 358 359

In the PMCO, Commissioner refers to the Commissioner for Labour: PMCO s.3. The Pneumoconiosis Medical Board, henceforth referred to as the PMB, is appointed by the Director of Health and consists of (a) two registered medical practitioners; and (b) the Occupational Health Consultant, or a Senior Occupational Health Ofcer or an Occupational Health Ofcer: PMCO s.22. Their distinctive roles in the claims process will be discussed in further detail below. Note that, in the PMCO, the Pneumoconiosis Compensation Fund Board is referred to simply as the Board. PMCO s.14(1). Note that the person who suffers from pneumoconiosis or mesothelioma (or both) must meet the Hong Kong residency requirement stipulated in PMCO s.4(4): see para 11.160. If not, then the Commissioner will decline to act on the claim and will inform the applicant in writing of the reasons for the decision: PMCO s.14(3). PMCO s.14(2). Details of PMCO s.24(1)(a) and (2) are elaborated at paras 11.170 and 11.172. PMCO s.23(1). PMCO s.23(2). PMCO s.23(3). PMCO s.23(4).

PNEUMOCONIOSIS AND MESOTHELIOMA (COMPENSATION) ORDINANCE

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PMB determines degree of incapacity. In conducting the medical examination of a claimant, the PMB determines whether the person is suffering from pneumoconiosis or mesothelioma (or both). If so, the PMB must determine: (i) the date from which the person has been so suffering; (ii) the degree of incapacity resulting from the above disease or diseases in accordance with Sch.4; and (iii) whether the person is unable to perform the essential actions of life without the care and attention of another person.360 Suffering from both diseases cannot exceed 100 per cent incapacity. Where a person suffers from both pneumoconiosis and mesothelioma, the PMB shall, in determining the degree of incapacity of the person, take into account the effect of both diseases on the person as a whole, and in any event, the degree of incapacity determined in respect of the person shall not exceed 100 per cent.361 PMB determines medical circumstances of death. In cases of death, where no previous PMB examination has been made regarding the deceased, the PMB will determine whether he was suffering from pneumoconiosis or mesothelioma (or both) at the time of his death.362 If the deceased had been previously determined to be suffering from pneumoconiosis or mesothelioma (or both), or is found to be so suffering at the time of his death, the PMB will determine whether his death resulted from pneumoconiosis or mesothelioma (or both).363 PMB issues certicate of determination. A determination of the PMB, if not unanimous, shall be that of the majority of the members.364 Once it has reached its conclusions, the PMB issues a s.24(4) certicate of determination to the person making the claim, or in the case of the death of that person, to his family members, as well as to the Commissioner and to the Board for further action. (ii) Further medical examination under section 23A Further medical examination where condition deteriorates. Where a person has been found by the PMB to be suffering from pneumoconiosis or mesothelioma (or both) resulting in partial incapacity, and is in receipt of compensation under the PMCO, should his condition deteriorate, s.23A(1)(a) provides that he may request a further medical examination to determine whether there has been any increase in the degree of his incapacity.365 Such a request cannot be made until 21 months has elapsed since any previous PMB examination, and the PMB must conduct the further medical examination within six months of the request.366 However, if, in the opinion of

11.170

11.171

11.172

11.173

11.174

360

361

362 363 364 365 366

PMCO s.24(1)(a). Note that the degree of incapacity is typically determined by measuring the forced vital capacity of the victims lungs. A sliding scale of increasing severity considers a loss of lung function of 51% or more to be 100 % incapacity: PMCO Sch.4. PMCO s.24(1A). See also PMCO s.4A of Sch.4, which states: The degree of incapacity of a person determined in accordance with this Schedule shall not exceed 100%, even though he suffers from both pneumoconiosis and mesothelioma. PMCO s.24(2)(a). PMCO s.24(2)(b). PMCO s.24(3). PMCO s.23A(1)(a). PMCO s.23A(2).

498

HEALTH AND SAFETY AT WORK III

a registered medical doctor,367 the persons health has deteriorated to the point where total incapacity or death is likely to occur before the period of 21 months has elapsed, and if the PMB agrees that an early examination is warranted, then the PMB shall conduct the further medical examination as soon as practicable.368 11.175 Further medical examination where second disease contracted. Under s.23A(1)(b) of the PMCO, where a person previously found to be suffering from one of the two diseases contracts the second, he may request a further medical examination by the PMB to determine whether he has the second disease, and, if so, whether this has resulted in any increased incapacity.369 Such a request must be supported by the opinion of a registered medical practitioner attending the person to the effect that such person is suffering from the second disease. Receipt of such a valid request obligates the PMB to conduct a further medical examination as soon as practicable.370 PMB determinations under s.23A. In conducting a further medical examination under s.23A of the PMCO, the PMB determines, in accordance with Sch.4,371 whether the degree of incapacity has increased since the last PMB medical examination, and, if so, the extent of such increase.372 Second, the PMB may also determine whether the person has become unable to perform the essential actions of life without the care and attention of another person since his previous PMB medical examination.373 Finally, where the examination is conducted under s.23A(1)(b),374 the PMB will determine whether the person suffers from the second disease and the date from which it can be said that the person has been so suffering.375 For further medical examinations conducted under s.23A, the PMB must issue a certicate of determination to the claimant and to the Board, but not to the Commissioner.376 (iii) Commissioners certicate under section 15 11.177 Commissioners certicate under s.15. Once the Commissioner has received the PMB certicate of determination indicating that the claimant is suffering from one or both of the diseases, or, in the case of death, the person was so suffering at the time of death, if the person has not previously received compensation under the PMCO, then the Commissioner can issue a s.15(1) certicate,377 provided that the applicant

11.176

367

368 369

370

371

372 373 374 375 376

377

The opinion of either a registered medical practitioner or a Chinese medicine practitioner who is attending the person will be equally valid: PMCO s.23A(3)(a)(i) and (ii). PMCO s.23A(3). PMCO s.23A(1)(b). Note that, in such cases, s.14(1A) allows the claimant to submit his request for a further medical examination under s.23A directly to the PMB, rather than following the s.14(1) procedure of notifying the Commissioner for Labour to initiate a new claim: PMCO s.14(1A). PMCO s.23A(3A). The 21-month waiting period does not apply to such second disease cases, but the supporting opinion of a registered medical practitioner is required. Sch.4 contains detailed guidelines on how to calculate the degree of incapacity for the purpose of determining compensation under the PMCO. See also fn 360. PMCO s.24(1)(b)(i). PMCO s.24(1)(b)(ii). See para 11.175. PMCO s.24(1)(b)(iii). PMCO s.24(4), in particular subs.(b). Since further medical examinations under s.23A result from the claimant having direct access to the PMB, there is no requirement that the PMB report its determinations back to the Commissioner in such cases. PMCO s.15(1).

PNEUMOCONIOSIS AND MESOTHELIOMA (COMPENSATION) ORDINANCE

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meets the Hong Kong residency requirements of s.4(4).378 In cases of death, the Commissioner must determine the names of the members of the family to whom compensation is payable pursuant to s.17 of the PMCO, and the relationship of each such member of the family to the deceased person.379 The Commissioners certicate is then issued to the claimant or to his family members, as well as to the Board.380 (iv) Interim payments to family members of deceased Interim payments to family members of deceased under s.15A. When a claim for compensation is brought by family members of the deceased person, once the PMB has issued a certicate stating that the persons death resulted from pneumoconiosis or mesothelioma (or both), and once the Commissioner has issued a certicate stating that the deceased has met the Hong Kong residency requirements, the Board shall, pending nal determination of the claim, make interim payments from the Fund of an amount equal to the average monthly earnings as dened in Pt VII of the First Schedule.381 Interim payments are distributed among eligible family members according to the formula set out in s.17(1) of the PMCO.382 Rules governing interim payments to family members. The rst interim payment is payable within 21 days of the Boards receipt of the Commissioners certicate, and subsequent payments within 30 days of the preceding payment.383 However, interim payments cease if there is an application for review of the Commissioners determination regarding who is eligible for compensation as a family member, or in three months (the time limit for review of the Commissioners determinations in cases of death), whichever occurs rst.384 Finally, any interim payments made to family members will be deducted from the eventual compensation amount, although payments are not recoverable from any person unless such payment has been obtained by fraud or other improper means.385 (v) Determination of amount of compensation and issuance of board certicate Board determines the amount of compensation and issues certicate. Upon receipt of a Commissioners certicate in respect of a rst claim under s.14(1), or a PMB certicate in respect of a further medical examination under s.23A, the Board shall determine the amounts of compensation, if any, payable to the person or members of the family and shall issue to the claimant, and (in the case of the death of a person) to any member of the family named in the Commissioners certicate, a certicate 11.180 11.178

11.179

378 379 380 381

382 383 384 385

PMCO s.15(2)(a). See also para 11.160. PMCO s.15(2)(b). See also PMCO s.17, and paras 11.178 and 11.182. PMCO s.15(3). PMCO s.15A(1). Pt. VII of the Sch.1 denes average monthly earnings as in respect of any period, an amount equal to 26 times the overall average daily wage earned by persons or classes of persons engaged in Government building and construction works as ascertained by the Commissioner for Census and Statistics and applicable to 1 Jan of the year in which the period falls: PMCO Sch.1. This statutorily dened amount is the same for every deceased claimant. PMCO s.15A(2)(a). See also PMCO s.17(1). PMCO s.15A(2)(b). PMCO s.15A(2)(c). PMCO s.15A(3).

500

HEALTH AND SAFETY AT WORK III

showing the calculation of those amounts.386 The s.15B Board certicate must be issued within 14 days after the expiry of the time limit for requesting review of the determinations of the Commissioner or PMB, or where a review has been requested, within 14 days after the Board receives the results of such a review.387 (vi) Payment of compensation 11.181 Board pays compensation from the Fund. The Board must pay compensation from the Fund within seven days after payment is due.388 Initial payments are due on the 14th day after the Board issues a s.15B certicate.389 In the case of monthly payments for incapacity or for care and attention,390 subsequent payments are due on the last day of the month for which the payment is made.391 In the case of death, payment is typically due on the 14th day after the issuance of the Board certicate, or where a review is requested, on the 14th day after the Board issues a review certicate.392 However, if the Commissioners decision on the family members eligible for compensation is in dispute and review has been requested, payment will not be due until such review, or any appeal in respect of such matter, has been nally determined, or any time allowed for the bringing of such appeal has expired and no appeal has been commenced.393 Compensation payable to or for the benet of the person or his family members. Under s.16 of the PMCO, compensation shall be payable to or for the benet of a person, or, in the case of the death of a person, to or for the benet of the members of his family.394 In cases of death, s.17 provides detailed rules on the distribution of compensation among eligible family members of the deceased.395 Where the person is still living, the Board shall pay the person entitled to the compensation, or, if the compensation is paid under ss 6, 10 or 11, the Board may pay the Commissioner who shall invest such compensation for the benet of the person entitled to the compensation, in such manner as the Commissioner thinks t.396 Finally, where the Board makes payments pending settlement or determination, the Board may deduct those amounts from the nal compensation payable.397 Verication of person receiving compensation. Under s.19A, where the Board has reason to believe that a person receiving monthly payments for incapacity or care and

11.182

11.183

386

387 388 389 390 391

392 393

394 395 396 397

PMCO s.15B(1). Compensation is calculated following the rules and amounts stipulated in the PMCO Sch.1: see para 11.162. PMCO s.15B(2). PMCO s.15C(1). PMCO s.15C(2)(a). See ss.6 and 11, and para 11.162. PMCO s.15C(2)(b). See also PMCO s.15C(4): Where the period in respect of which the compensation pursuant to section 6 or for care and attention is payable is less than 1 month, the amount of compensation payable shall be pro rata to the period. PMCO s.15C(3)(b). PMCO s.15C(3)(a). In cases of death and disputes over which family members are eligible for compensation, interested parties have up to three months to request a review of the Commissioners original decision, at the end of that review, they have another month to appeal the review decision in Court: PMCO ss.15(4)(b) and 20(5). PMCO s.16. See PMCO ss.17(1) to (3). PMCO s.17(4). For more on ss.6, 10 and 11, see para 11.162. PMCO s.17(5). See also paras 11.177 and 11.178.

PNEUMOCONIOSIS AND MESOTHELIOMA (COMPENSATION) ORDINANCE

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attention has died, the Board may withhold payments until it has ascertained whether or not the person is still alive.398 A notice is sent by registered post requiring the person to appear before the Board in person and to furnish proof of identity. Where the person fails to comply without providing a reasonable excuse, the Board may withhold further payment of compensation until the request is complied with and verication completed.399 Excess payment of compensation. Where the Board has paid compensation in excess of the amount to which a person is entitled under the PMCO, the Board may deduct such amount of excess payment from any further compensation payable to that person for incapacity or to family members in consequence of the death of that person.400 (vii) Review of Commissioner, Board and PMB decisions Right to review of Commissioner, Board and PMB decisions. Under s.19D, any person who is dissatised with a decision of the Commissioner, the Board or the PMB, may apply for a review of that decision.401 Such an application must be made by notice in writing402 and state the grounds upon which the decision should be reviewed.403 Also, the application must be made within the period specied in the PMCO for the relevant body or authority;404 where no period is specied, it must be made within one month of receipt by the applicant of notice of such decision, or within such further period as the Commissioner may allow.405 Review decision process allows interested parties to make submissions. Upon receipt of a formal request for review, the Commissioner, the Board or the PMB, must review the original decision and, after giving the applicant and any other interested person the opportunity of making written submissions, may afrm, vary or rescind the decision and notify the applicant and other interested parties of its review decision.406 (e) Role of the courts (i) Judicial appeals of Commissioner, Board and PMB decisions Review decisions can be appealed to the District Court. In general, any decision of the Commissioner, the Board or the PMB can be appealed to the District Court, 11.187 11.185 11.184

11.186

398 399 400 401 402 403 404

405 406

PMCO s.19A(1). PMCO s.19A(2). PMCO s.19B. PMCO s.19D(1). PMCO s.19D(2)(a). PMCO s.19D(2)(b). The time period for requesting a review is specied as within 14 days after the claimants receipt of the certicate of determination for decisions of the Board and the PMB: PMCO ss.15B(3) and 24(5). As for decisions of the Commissioner, the specied period is within 14 days for cases of incapacity, but within three months in cases of death: PMCO s.15(4). In all cases, the relevant body or authority may exercise its discretion to grant reviews even after the expiry of the specied time period. PMCO s.19D(2)(c). PMCO s.19D(3). See also s.24(6) (PMB), s.15(5) (Commissioner), and s.15B(4) (Board).

502

HEALTH AND SAFETY AT WORK III

under s.20 of the PMCO,407 but only after an application for review under s.19D in respect of that decision has rst been determined.408 However, no appeal shall lie if the amount in dispute is less than HK$5,000 except with leave of the Court, which may be granted only if some substantial question of law is involved.409 In addition, appeals are not permitted in cases where an order has been made by the Court giving effect to an agreement between the parties.410 11.188 Time limit on judicial appeals. Judicial appeals must be lodged within six months of the review decision,411 except in reviews of the Commissioners decision on family members eligible for compensation in cases of death, where the time limit is only one month.412 However, the Court may, at its discretion, extend the time within which to appeal.413 Court may conrm, vary or reverse decisions. On appeal under s.20 of the PMCO, the Court may conrm, vary or reverse any decision of the Commissioner, the Board or the PMB, and may make any further order, including any order as to costs, as it thinks t.414 Also, the Court has the power to determine the amount of compensation or other moneys payable.415 Board may settle out of court to protect the Fund. Section 20(9) of the PMCO stipulates that, when facing any appeal or proposed appeal, the Board may, for the purpose of the protection of the Fund, negotiate a compromise settlement on such terms as it sees t and make payments from the Fund for that purpose.416 (ii) Actions in civil court to enforce payment by Board 11.191 Actions in Small Claims Tribunal or District Court. Section 46 provides that, where the Board fails to pay compensation or any other payment required to be paid under the PMCO, that amount is recoverable as a debt due from the Board.417 Actions for recovery for an amount that falls within the jurisdiction of the Small Claims Tribunal shall be brought in that Tribunal.418 Actions for larger amounts may be brought in the District Court, even if the amount exceeds the usual civil jurisdiction of that Court.419

11.189

11.190

407 408 409 410 411 412 413 414 415 416 417 418

419

PMCO s.20(1). PMCO s.20(3)(a). PMCO s.20(2). PMCO s.20(3)(b). PMCO s.20(4). PMCO s.20(5). PMCO s.20(6). PMCO s.20(7). PMCO s.20(8). PMCO s.20(9). PMCO s.46(1). PMCO s.46(3). See also the Schedule to the Small Claims Tribunal Ordinance (Cap.338), which currently sets the jurisdiction of the Tribunal as claims of not more than HK$50,000. PMCO s.46(2). See also ss 32 and 33 of the District Court Ordinance (Cap.336), which indicate that the usual civil jurisdiction of the District Court extends to claims of not more than HK$1,000,000.

OCCUPATIONAL DEAFNESS (COMPENSATION) ORDINANCE

503

(iii) Role of the Chief Justice in making rules and setting fees Chief Justice may make rules and set fees. The Chief Justice of the District Court may make rules regulating proceedings before and appeals to the Court under this Ordinance and for the fees payable in respect of such proceedings and appeals.420 (iv) Role of the Court of Appeal on questions of law Questions of law may be submitted to the Court of Appeal. Section 21 of the PMCO provides that the Commissioner, Board, PMB or Court may if he or it thinks t, submit any question of law for the decision of the Court of Appeal.421 (f ) False statements Punishable offence to make false statements. Section 45 of the PMCO stipulates that: Any person who (a) with intent to deceive, produces, supplies or sends for the purposes of this Ordinance or otherwise makes use for those purposes of any document or record which is false in a material particular; or in providing any information for the purposes of this Ordinance, makes any statement which he knows to be false in a material particular or recklessly makes a statement which is false in a material particular, 11.194 11.193 11.192

(b)

commits an offence and is liable to a ne of $10000 or 20 times the amount of any levy that was or was intended to be evaded by his conduct, whichever is the greater.

4. OCCUPATIONAL DEAFNESS (COMPENSATION) ORDINANCE


(a) ODCO regime in general No-fault compensation for occupational deafness. The Occupational Deafness (Compensation) Ordinance (ODCO) came into effect in stages on June 1, July 1, and October 1 of 1995, with important amendments enacted in early 2010 that came into effect on April 16, 2010.422 The ODC regime provides no-fault compensation to 11.195

420 421

422

PMCO s.46(4). PMCO s.21(1). Furthermore, PMCO s.21(2) states: Such submission shall be made in such form and in such manner as if it were a submission under section 22 of the Employees Compensation Ordinance (Cap.282), and any rules of court made under that Ordinance relating to submissions under that section shall apply, with such changes as may be necessary, to a submission under this section. See also para 11.153. Cap.469, hereinafter referred to as the ODCO. Note that, on 11 Feb 2010, the Hong Kong government enacted the Occupational Deafness (Compensation) (Amendment) Ordinance 2010, which came into operation on 16 April 2010, being the day appointed by the Secretary of Labour & Welfare by notice published in the Hong Kong Gazette. These amendments extend and improve ODCO coverage, allowing claims for employment-related, noise-induced deafness in one ear (monoaural deafness); allowing additional compensation for those who have previously received ODCO compensation, but continue to work in noisy occupations for another three years and suffer further hearing loss as a result; and substantially increasing the maximum reimbursement levels for the purchase, repair and replacement of hearing assistive devices, as well as offering a direct payment option for those who cannot afford to pay upfront and be reimbursed later.

504

HEALTH AND SAFETY AT WORK III

employees suffering from occupational deafness caused by prolonged exposure to excessive noise in the workplace. 11.196 ODC Board administers ODC Fund. The ODCO establishes the Occupational Deafness Compensation Board423 and the Occupational Deafness Compensation Fund.424 This centrally administered fund is derived from a portion of the employees compensation insurance levied on all employers in Hong Kong, with an additional amount provided by the Hong Kong government.425 The ODC Board manages and administers the ODC Fund, from which compensation claims and other costs are paid.426 (b) Requirements for compensation 11.197 Noise-induced deafness of 40 dB in one or both ears required. To qualify for compensation, a claimant must be found to suffer from noise-induced deafness dened in s.2 of the ODCO as (a) binaural hearing loss; or (b) monaural hearing loss. Binaural hearing loss means sensorineural hearing loss amounting to not less than 40dB in each ear, where such loss is due in the case of at least one ear to noise and being the average of hearing losses measured by audiometry over the 1, 2 and 3 kHz frequencies; and monaural hearing loss means sensorineural hearing loss amounting to not less than 40 dB in only one ear, where such loss is due to noise, and being the average of hearing losses measured by audiometry over the 1, 2 and 3 kHz frequencies.427 Employment in noisy occupation in Hong Kong required. Section 14(2) of the ODCO stipulates that, to qualify for compensation, a claimant must have had at least 10 years of employment in aggregate in any noisy occupation in Hong Kong.428 Schedule 3 lists 29 such noisy occupations and these are the only qualifying occupations.429 The minimum requirement is only ve years in aggregate for four of the noisy occupations.430 The claimant must also show that he was employed in a qualifying noisy occupation under a continuous contract in Hong Kong within 12 months of submitting the application for compensation.431

11.198

423 424 425 426

427

428 429

430

431

ODCO ss.4 & 5 and Sch.1. ODCO s.6. ODCO ss.6 and 7. ODCO s.8. The ODC Board manages the ODC Fund (s.9), subject to audit (s.10), and must report to the government annually (s.11). ODCO s.2. Before the 2010 amendments, only claims for binaural hearing loss were valid under the ODCO. Moreover, in Chan Chun Cheong v Occupational Deafness Compensation Board [2006] 4 HKLRD 98, the court held that the 40dB requirement for binaural hearing loss applied to each ear separately, and could not be satised by proving that the average of the hearing loss of both ears exceeded 40dB. This ruling has been superseded by the 2010 amendments to the ODCO allowing claims for hearing loss in one ear (monaural): see fn 422 above. ODCO s.14(2)(a)(i). ODCO s.2 and Sch.3. Sch.3 noisy occupations include working with power tools, chainsaws and heavy machinery, and extends to working in mahjong parlours and discotheques. The four occupations with a minimum ve-year requirement are: (c) the use of power driven grinding, chiselling, cutting or percussive tools on rocks, concrete or marble, or work wholly or mainly in the immediate vicinity of those tools while they are being so used; (j) the use of or work wholly or mainly in the immediate vicinity of, machines engaged in percussive pile or metal plank driving on construction sites; (k) work wholly or mainly in the immediate vicinity of abrasive blasting operations; and (y) work wholly or mainly in the immediate vicinity of gun-ring operation: ODCO s.14(2)(a)(ii) and Sch.3. ODCO s.14(2)(b).

OCCUPATIONAL DEAFNESS (COMPENSATION) ORDINANCE

505

Previous compensation claims. Prior to the 2010 amendments, to qualify for compensation, a claimant could not previously have been awarded compensation under the ODCO.432 However, by virtue of s.14A, the amended ordinance now allows additional compensation for further hearing loss where a claimant continues to work in a noisy occupation for another three years since the previous successful claim and suffers further work-related noise-induced hearing loss.433 As for rst-time compensation claims under s.14, where a claimant has made a previous application that was refused, he must have at least 24 months of employment in aggregate in any noisy occupation in Hong Kong since the previous failed claim before any new claim can be considered.434 (c) Claims process ODC Board assesses degree of noise-induced deafness. Claimants who qualify under s.14 (rst time claims) or s.14A (claims for additional compensation) of the ODCO, submit their applications to the Occupational Deafness Compensation Board.435 The Board assesses the degree of noise-induced deafness and permanent incapacity by arranging for a hearing test or medical examination and by inquiring into the claimants occupational history as necessary.436 Medical professionals diagnose whether a claimant suffers from noise-induced deafness, and, if so, the degree of permanent incapacity.437 These medical ndings are issued in a formal report under s.16(2). Consequences of non-cooperation with ODC Board investigations. All parties, including employers, must cooperate with ODC Board investigations. It is a punishable offence to withhold information requested by the Board without reasonable excuse.438 Similarly, all claimants must cooperate with Board investigations and undergo any hearing tests or medical examinations arranged by the Board. A claimant who fails to cooperate fully without reasonable excuse may be disqualied from his entitlement to compensation.439 Occupational Deafness Medical Committee provides expert advice. The ODCO also establishes the Occupational Deafness Medical Committee,440 which provides expert advice to the ODC Board generally on the medical, technical and professional aspects of any matter relating to the performance of the Boards functions.441 Also,

11.199

11.200

11.201

11.202

432

433

434 435 436 437 438 439 440 441

ODCO s.14(2)(c). Before April 16, 2010, only rst-time claims were allowed under s.14 of the ODCO, and no one could be compensated more than once or apply for additional compensation for further hearing loss. ODCO s.14A. As with rst-time claims under s.14 (see fn 431), claims for additional compensation under s.14A must be made within 12 months of the claimant having been at any time employed under a continuous contract in any noisy occupation in Hong Kong: ODCO s.14A(2)(b). Similarly, where a s.14A claim has been previously refused, a claimant may apply again only after having further accumulated at least 24 months of employment in aggregate in any noisy occupation in Hong Kong since the previous failed s.14A claim: ODCO s.14A(2)(c). ODCO s.14(2)(d). ODCO s.15. ODCO s.16. ODCO s.18. ODCO ss 16(4) and 16(5). ODCO s.17. ODCO s.12 and Sch.2. ODCO s.13.

506

HEALTH AND SAFETY AT WORK III

in specic cases, the Board may refer a s.16(2) report to the Medical Committee for such advice as may be conducive to the Boards determination on the relevant application for compensation.442 11.203 ODC Board determines percentage of permanent incapacity and amount of compensation. Based on the ndings of the medical professionals in the s.16(2) report, and, where appropriate, the advice of the Medical Committee, the Occupational Deafness Compensation Board determines the degree of noise-induced deafness suffered by the claimant, and, in accordance with Sch.4, will also determine the percentage of permanent incapacity, averaging the hearing loss for both the better and worse ear.443 Once the percentage of permanent incapacity (if any) has been established, the Board determines the amount of compensation to be awarded using Sch.5, using a formula that takes into consideration the claimants monthly earnings and age at the time of application.444 (d) ODC Board decisions, reviews and appeals 11.204 Notice of refusal issued where claim rejected. If the ODC Board determines that the claimant does not suffer from noise-induced deafness, or otherwise determines that the claimant is not entitled to compensation, the Board issues a notice of refusal informing the claimant of such refusal and indicating the reasons for the refusal.445 Such refusal must be accompanied by a copy of the s.16(2) medical report if one has been made.446 Claimant has right to review of refusal. The claimant has the right to request that the Board review the refusal within 14 days.447 On review, the Board may conrm, vary or reverse the decision, and must inform the claimant of the result of the review in writing.448 Certicate of determination of compensation issued where claim accepted. If the claimant is found to be suffering from occupational noise-induced deafness, after deciding the amount of compensation to be awarded, the ODC Board issues a certicate of determination of compensation (a) stating the particulars of the claimants noise-induced deafness, his percentage of permanent incapacity and the amount of compensation payable to him, as determined by the Board; and (b) asking the claimant to indicate in the specied form whether he objects to the amount of compensation payable.449 This certicate must be accompanied by a copy of the s.16(2) medical report.450

11.205

11.206

442 443 444 445 446 447

448 449 450

ODCO s.19. ODCO s.20. ODCO s.21. ODCO s.22(1). ODCO s.22(2). ODCO s.23(1). Under s.23(1A), The Board may, if it thinks t, extend the time within which a claimant may request the Board to review its decision under this section. ODCO s.23(2). ODCO s.24(1). ODCO s.24(1A).

OCCUPATIONAL DEAFNESS (COMPENSATION) ORDINANCE

507

Claimant has right to objection and review of amount of compensation awarded. If the claimant objects to the amount of compensation awarded, he has the right to request a review by the ODC Board. The review request must be submitted within 14 days and state the grounds of objection.451 The ODC Board will review the determination and either conrm the original decision or issue a revised determination that states the particulars and revised amount of compensation.452 Once the claimant has received compensation, he loses the right to objection.453 Appeal to District Court available. A claimant who is dissatised with the results of the ODC Boards review process has the right to appeal to the District Court within six months of the Boards review decision.454 On an appeal, the District Court may conrm, vary or reverse any decision or determination of the Board and may make any further order, including any order as to costs, as it thinks t.455 (e) Compensation and coverage for hearing assistive devices Payment of compensation. Once the claimant has accepted in writing the Boards compensation determination, the ODC Board must pay compensation within 21 days.456 Where the claimant dies before the compensation is paid out, the compensation amount will be paid to the claimants estate.457 In cases where the Government has paid a pension or gratuity to a person in respect of his permanent incapacity resulting from noise-induced deafness under any Ordinance, any amount of compensation under the ODCO will be paid to the government.458 Coverage for cost of hearing assistive devices. Those who are entitled to compensation under the ODCO are also entitled to coverage for the costs of hearing assistive devices. Previously, coverage was by reimbursement only, but the 2010 amendments now allow a direct payment option for those who cannot afford to pay upfront and be reimbursed later.459 Both reimbursement to the claimant and direct payment to the provider are initiated by application to the ODC Board and depend on a successful ODCO compensation claim.460 The costs of hearing assistive devices are covered up to the amounts indicated in Sch.7.461

11.207

11.208

11.209

11.210

451

452 453 454

455 456 457 458 459 460 461

ODCO s.24(2). Under s.24(2A), The Board may, if it thinks t, extend the time within which a claimant may object to the amount of compensation under this section. ODCO s.24(3). ODCO s.24(4). ODCO ss.28(1), (1A) and (2). Under s.28(3), The District Court may, if it thinks t, extend the time within which an appeal may be made under this section. ODCO s.28(4). ODCO s.25. ODCO s.26. ODCO s.27. ODCO s.27B. See also fn 422 above. For more on the application process for reimbursement and direct payment, see ODCO ss 27D27H. ODCO s.27C and Sch.7. The 2010 amendments to the ODCO increased the maximum reimbursable amounts for the purchase, repair and replacement of hearing assistive devices from HK$18,000 to HK$36,000: see ODCO Sch.7.

508

HEALTH AND SAFETY AT WORK III

(f ) Rights at common law and under other enactments 11.211 Common law rights remain, but no dual compensation. According to s.29(1) of the ODCO, Nothing in this Ordinance diminishes or extinguishes any right to damages or other compensation at common law or under any other enactment for permanent incapacity resulting from deafness.462 However, if the claimant has been awarded compensation at common law or under another enactment, his entitlements under the ODCO are extinguished, unless he can satisfy the Board that he has been unable to obtain full payment of the damages or other compensation awarded under such other proceedings.463 Dual compensation is not allowed. (g) False information 11.212 Punishable offence to provide false information. Under s.30(1), any person who provides false or unsubstantiated information in connection with an application for compensation or reimbursement under the ODCO commits an offence and is liable on conviction to imprisonment for one year and a ne at level 5.464 Furthermore, where such an offence is allegedly committed by a member of a professional body, the Board may refer the allegation to that professional body for further sanctions.465

462 463 464

465

ODCO s.29(1). ODCO ss.29(2) and (3). ODCO s.30(1) states: Any person who in connection with an application for compensation or reimbursement of expenses by himself or any other person provides any document or makes any statement or certication of facts which is false in a material particular and which(a) he knows to be false in such particular; or (b) he has no reasonable ground to believe to be true in such particular, commits an offence and is liable on conviction to imprisonment for 1 year and a ne at level 5. ODCO s.30(2).

CHAPTER 12

PERSONAL DATA PRIVACY AT WORK


Para. 1. Introduction ............................................................................................................................. 12.001 2. Personal data ........................................................................................................................... 12.002 (a) Introduction ..................................................................................................................... 12.002 (b) Denition of personal data .............................................................................................. 12.007 (c) Relating directly or indirectly to a living individual ....................................................... 12.014 (d) From which it is practicable for the identity of the individual to be directly or indirectly ascertained ...................................................................................................... 12.017 (e) In a form in which access to or processing of the data is practicable ............................. 12.018 (f) Data users ........................................................................................................................ 12.019 3. Collecting and compiling employees personal data ............................................................... 12.022 (a) Introduction ..................................................................................................................... 12.022 (b) Collection of personal data ............................................................................................. 12.023 (c) Collection of personal data by lawful and fair means .................................................... 12.028 (d) Data subject to be informed whether it is obligatory or voluntary to supply data .......... 12.029 (e) Data subject to be informed of the purpose for which data to be used and persons to which data will be transferred ....................................................................... 12.033 (f) Data subject to be informed of right to access and correct personal data ....................... 12.039 (g) Repeated collection ......................................................................................................... 12.041 (h) Personal information collection statement ...................................................................... 12.042 4. Accuracy and duration of retention of personal data ............................................................... 12.043 (a) Introduction ..................................................................................................................... 12.043 (b) Accuracy of personal data ............................................................................................... 12.045 (c) Rectication of inaccurate personal data ........................................................................ 12.048 (d) Notication to third parties of inaccurate data ................................................................ 12.050 (e) Retention of personal data .............................................................................................. 12.054 5. Use of personal data ................................................................................................................ 12.061 (a) Introduction ..................................................................................................................... 12.061 (b) Use of personal data with prescribed consent ................................................................. 12.062 (c) Data use exemption ......................................................................................................... 12.067 (d) Implications of non-compliance ..................................................................................... 12.068 6. Security of personal data ......................................................................................................... 12.069 (a) Introduction ..................................................................................................................... 12.069 (b) Duty to prevent accidental use or misuse of data ............................................................ 12.072 (c) Implications of non-compliance ..................................................................................... 12.074 (d) Policies ............................................................................................................................ 12.075 7. Information to be generally available ...................................................................................... 12.080 (a) Introduction ..................................................................................................................... 12.080 (b) Availability of information .............................................................................................. 12.081 (c) Implications of non-compliance ..................................................................................... 12.084

510

PERSONAL DATA PRIVACY AT WORK 8. Access to personal data ........................................................................................................ 12.085 (a) Introduction ................................................................................................................... 12.085 (b) Making a data holding request ...................................................................................... 12.087 (c) Making a data access request ........................................................................................ 12.088 (d) Compliance with data access request ............................................................................ 12.093 (i) Fee ......................................................................................................................... 12.093 (ii) Timing ................................................................................................................... 12.096 (iii) Content .................................................................................................................. 12.097 (iv) Language ................................................................................................................. 12.099 (v) Form ...................................................................................................................... 12.102 (e) Circumstances where a data user must refuse to comply with a data access request .... 12.105 (f) Circumstances where a data user may refuse to comply with a data access request ...... 12.109 (g) Notication of refusal to comply with data access request ............................................ 12.110 9. Data correction request ........................................................................................................ 12.112 (a) Introduction ................................................................................................................... 12.112 (b) Compliance with data correction request ...................................................................... 12.114 (c) Circumstances where a data user must refuse to comply with a data correction request ................................................................................................ 12.116 (d) Circumstances where a data user may refuse to comply with a data correction request ................................................................................................ 12.118 (e) Notication of non-compliance with data correction request ....................................... 12.119 (f) Expression of opinion .................................................................................................... 12.120 (g) Penalties relating to data access request and data correction request ............................ 12.121 (h) Log book ........................................................................................................................ 12.125 (i) Service and language of certain notices ........................................................................ 12.128 (j) Circumstances where personal data is exempted from data access requests ................. 12.129 10. Exemptions from the provisions of the PD(P)O .................................................................. 12.130 (a) Introduction ................................................................................................................... 12.130 (b) Staff planning ................................................................................................................ 12.135 (c) Evaluative process ......................................................................................................... 12.141 (d) Personal references ........................................................................................................ 12.147 (e) Legal professional privilege .......................................................................................... 12.152 11. Transfer of personal data to a place outside of Hong Kong ................................................. 12.153 (a) Introduction ................................................................................................................... 12.153 (b) Circumstances in which transfer of data outside of Hong Kong will be permitted ....... 12.154 (c) Data user has taken all reasonable precautions and exercised all due diligence ........... 12.155 12. Responsibilities of the Ofce of the Privacy Commissioner for Personal Data .................. 12.159 (a) Introduction ................................................................................................................... 12.159 (b) Inspections ..................................................................................................................... 12.160 (c) Complaints ..................................................................................................................... 12.163 (d) Investigations ................................................................................................................. 12.165 (i) Procedure for investigations .................................................................................. 12.165 (ii) Proceedings of the Privacy Commissioner ........................................................... 12.170 (e) Power of entry of premises for inspection or investigation ........................................... 12.174 (f) Obstruct or hinder inspection or investigation .............................................................. 12.176 (g) Enforcement notices ...................................................................................................... 12.177

PERSONAL DATA PRIVACY AT WORK 13. Offences and compensation ................................................................................................. 12.183 (a) Contravention of any requirement under the PD(P)O ................................................ 12.184 (b) Knowingly or recklessly supplying information ......................................................... 12.185 (c) Supply of false or misleading information .................................................................. 12.188 (d) Liability of employers and principals .......................................................................... 12.189 (e) Defence ........................................................................................................................ 12.191 (f) Individual claim for damages ...................................................................................... 12.192 14. Personal data privacy compliance and codes of practice ..................................................... 12.194 (a) Introduction ................................................................................................................. 12.194 (b) Code of Practice on Human Resource Management ................................................... 12.197 (i) Introduction ......................................................................................................... 12.197 (ii) Recruitment ......................................................................................................... 12.199 (iii) Employment ........................................................................................................ 12.208 (iv) Former employees matters ................................................................................. 12.217 (c) Code of Practice on the Identity Card Number and Other Personal Identiers .......... 12.221 15. Guidelines ............................................................................................................................ 12.229 (a) Introduction ................................................................................................................. 12.230 (b) Application of the Monitoring Guidelines .................................................................. 12.234 (c) Evaluating the need for employee monitoring and its impact on personal data privacy .....................................................................................................12.235 (d) Managing personal data obtained from employee monitoring ......................................12.237

511

1. INTRODUCTION
Overview of chapter. The collection and use of personal data in Hong Kong, including personal data collected and held by employers at various stages of the employment relationship, is governed by the Personal Data (Privacy) Ordinance (Cap.486) (PD(P)O). This chapter will explore the relevant provisions of the PD(P)O including the denition of personal data and will examine in detail the six data protection principles which reect a set of fair information practices that govern the collection, use, storage and handling of personal data. It will consider a number of the employment-related exemptions to the provisions of the PD(P)O and the possible offences and compensation which may be applied for breach. Finally, it will explore the responsibilities of the Privacy Commissioner and examine the provisions of the codes of practice and guidelines issued by Privacy Commissioner. 12.001

2. PERSONAL DATA
(a) Introduction The PDPO was enacted on 3 August 1995 and came into force on 20 December 1996. The PD(P)O applies to both the public and private sectors and regulates personal data controlled by a data user.1 If an employer wishes to collect personal data of its employees in a recorded form, it must do so in accordance with the relevant statutory provisions set out in the PD(P)O.2 The PD(P)O contains six data protection principles which are set out in Sch.1 to the PD(P)O. These reect a set of fair information practices that govern data collection (principle 1), accuracy and retention (principle 2), data use including transfer (principle 3), data security (principle 4), openness (principle 5) and data subject access and correction rights (principle 6). The effect of the data protection principles is that an individual has a degree of control over the personal data relating to him or her and the data user becomes accountable for its accuracy and use. Such control by the individual is not absolute as the rights of the individual are balanced against the demands of both government and employers who are dependent on the processing of personal data to be able to function. The Ofce of the Privacy Commissioner for Personal Data (Commissioners Ofce) is an independent statutory body established to oversee the enforcement of the PD(P)O to protect the privacy of individuals with respect to their personal data. The mission of the Commissioners Ofce is to secure the protection of privacy of individuals with respect to personal data through promotion, monitoring and supervision of compliance with the PD(P)O in a cost-effective and efcient manner. The Privacy Commissioner for 12.002

12.003

12.004

12.005

1 2

See denition of data user: PD(P)O s.2(1). PD(P)O Sch.1 para 1.

514

PERSONAL DATA PRIVACY AT WORK

Personal Data (Privacy Commissioner) is responsible for monitoring and supervising compliance with the provisions of the PD(P)O. 12.006 At the time of writing, the Constitutional and Mainland Affairs Bureau had, with the support of the Privacy Commissioner, conducted a comprehensive review of the PD(P)O to examine whether its existing provisions still afford adequate protection to personal data having regard to developments, including the advancement in technology, in the last decade. The proposals were consolidated into a consultation paper which was published in August 2009. It awaits to be seen what changes, if any, will be made to the PD(P)O as a result. (b) Denition of personal data 12.007 Meaning of data. The denition of personal data is linked back to the denition of data which is dened as any representation of information (including an expression of opinion) in any document, and includes a personal identier.3 The ordinary dictionary meaning of information has been held in New Zealand to be that which informs, instructs, tells or makes aware.4 Document is dened to include a document in writing and a disc, tape or other device in which visual images and data other than visual images are embodied so as to be capable of being reproduced.5 Personal identier means any identier that is assigned to an individual in relation to the data user, but does not include an individuals name used to identify that individual.6 Non-recorded viewing of images does not constitute data. By way of example, the real time viewing of images of employees displayed on a monitor that is an integral part of a CCTV system installed by the employer when the recording function has not been activated would not constitute data. However, if the CCTV system was switched from non-recording to recording mode such that the data of employees could be readily collected on videotape, then this may constitute data.7 Situations when photographs do not constitute data. Photographs of persons are within the denition of data; as such a photograph may constitute a pictorial representation of information about a persons physical features and appearance in a document. However, in the case of Eastweek Publisher Ltd v Privacy Commissioner for Personal Data,8 a woman whose photograph appeared in a magazine published by Eastweek complained that the photograph was taken without her knowledge or consent. The main issue before the Court of Appeal was whether the publisher had collected personal data using unfair means and whether the published photograph constituted personal data. In deciding that the publisher had not collected personal data, the Court of Appeal took into account the complainants anonymity and irrelevance of her

12.008

12.009

3 4 5 6 7

PD(P)O s.2(1). Commissioner of Police v Ombudsman [1988] 1 NZLA 385. PD(P)O s.2(1). PD(P)O s.2(1). Example taken from the Personal Data (Privacy) Ordinance Privacy Guidelines: Monitoring and Personal Data Privacy at Work issued by the Privacy Commissioner (Privacy Guidelines) for Personal Data at 5. [2000] 2 HKLRD 83 at 90, 95.

PERSONAL DATA

515

identity so far as the photographer, the reporter and the publisher were concerned and the fact that the publisher had no intention of identifying the complainant. Therefore, a data user will not be deemed to be collecting personal data (for the purposes of data protection principle 1)9 by taking and publishing a photograph of a person where the person in the photograph is anonymous from the data users perspective and where the data user does not intend or seek to identify the persons identity. Requirements for data to constitute personal data. For data to constitute personal data under the PD(P)O it must be data: (a) relating directly or indirectly to a living individual; (b) from which it is practicable for the identity of the individual to be directly or indirectly ascertained and (c) in a form in which access to or processing of the data is practicable. All three criteria must be fullled for the data to constitute personal data and to fall within the scope of the PD(P)O.10 In an employment context, personal data may include the employees address, the results of medical checks or sick leave records, or a performance review which has been carried out by an employees manager. Whether an IP address constitutes personal data. One difculty which has arisen in Hong Kong is whether an Internet Protocol address (IP address) which is a specic machine address assigned by the Web Surfers Internet Service Provider (ISP) to a users computer and is therefore unique to a specic computer would constitute personal data under the PD(P)O. This was the focus of an investigation by the Privacy Commissioner pursuant to s.38 of the PD(P)O in respect of an allegation that Yahoo! Hong Kong Limited had disclosed an email users personal data to the PRC authorities, thereby infringing the provisions of the PD(P)O.11 The Ofce of the Privacy Commissioner held that applying the rst two limbs of the denition of personal data (as set out in para 12.010), an IP address itself does not contain information that relates to an individual nor is the registered users information readily obtainable, for example, through information available in the public domain. It therefore took the view that an IP address per se did not meet the denition of personal data.12 However, if the IP address is combined with, for example, identifying particulars of an individual, then it could constitute personal data; whether or not it does so will depend on the facts of a particular case. Restrictive approach adopted by courts. When considering the limited relevant cases on the PD(P)O, it appears that the courts and other relevant authorities have adopted a rather restrictive approach in interpreting the PD(P)O. This has been subject to subsequent criticism by commentators and legal academics. For example, the decision of the Court of Appeal in Eastweek Publisher Ltd v Privacy Commission for Personal Data,13, 14 has been criticised by commentators for restricting the reach of privacy protection by imposing a judicial requirement for an intention to identify the data 12.010

12.011

12.012

12.013

9 10 11 12 13 14

See paras 12.022 to 12.042 for more information. PD(P)O s.2(1). Report Published under s.48(2) of the PD(P)O Report Number R07-3619 dated 14 Mar 2007. Ibid, para 8.11. [2000] 2 HKLRD 83. See para 12.009 for a summary of the case.

516

PERSONAL DATA PRIVACY AT WORK

subject which is not prima facie present in the PD(P)O.15 There has also been criticism that the court in Eastweek failed to examine the identiability test which covers both direct and indirect ascertainment of an individuals identity, nor did it consider the reasonable practicability of identifying the complainant from the photograph.16 (c) Relating directly or indirectly to a living individual 12.014 Data must relate to a living individual. As set out above, the rst limb of the test for personal data requires that the data relates directly or indirectly to a living individual. Whether information does relate to the individual in any particular instance depends on where it falls in a continuum of relevance or proximity to the individual as distinct from transactions or matters in which he or she may have been involved to a greater or lesser degree. Two-limb test for distinguishing protected from unprotected information. The English Court of Appeal in Durant v Financial Services Authority17 held that the mere mention of an individual in a document does not necessarily amount to data relating to the individual. In Durant, the Court of Appeal concluded that personal data was information affecting the privacy of the data subject, whether in his or her personal, business or professional capacity. It laid down a two-limb test for distinguishing protected from unprotected information, namely that the information must be biographical in a signicant sense, and that the data subject must be the focus of the information. However, commentators have expressed the view that the narrow interpretation of the term personal data by the Court in Durant misconceives the role of the denition of personal data or personal information in determining the scope of information privacy law since the basic assumption of all information privacy laws is that the privacy of the data subject is threatened by the processing of any information which identies the data subject, or is capable of identifying the data subject, regardless of the nature of the information.18 The narrow interpretation of personal data adopted by the English Court of Appeal in Durant has been followed in Smith v Lloyds TSB Plc.19 The court held that documents held by Lloyds concerning certain loans between Lloyds and a company of which Smith was the managing director and controlling shareholder were not personal data for the purposes of the Data Protection Act 1998. Although Smith was mentioned in those documents, the courts considered that this was only because he was acting on behalf of the company and hence the documents were not biographical about Smith to a signicant extent and did not signicantly affect his privacy.

12.015

12.016

15 16 17 18

19

Nye S, Internet privacyregulatory cookies and web bugs, Privacy Law and Policy Reporter [2002] PLPR 26. Berthold M and Professor Wacks R, Hong Kong Data Privacy Law (Sweet and Maxwell Asia, 2003). [2004] IP&T 814 at 825826; [2003] EWCA 1746. Lindsay D, Misunderstanding personal information: Durant v Financial Services Authority, Privacy Law and Policy Reporter [2004] PLPR 13. [2005] EWHC 246 (Ch) (England).

PERSONAL DATA

517

(d) From which it is practicable for the identity of the individual to be directly or indirectly ascertained Anonymous data not covered. The second limb of the test for personal data requires that it must be practicable for the identity of the individual to be directly or indirectly ascertained. Therefore, anonymous data is not covered. Where it is possible to identify the individual solely from the data, the ascertainment is direct. Where identication is possible only by resorting to other information held by the data user or attainable by it, it is indirect ascertainment, for example, data criticising members of a particular organisation, without singling out any specic individual. However, if the data user also holds a list of all members, then the critical data would be identiable as regards those members. (e) In a form in which access to or processing of the data is practicable Access to and processing of data needs to be practicable. The nal requirement in the test for personal data is that data is in a form in which the access to, or the processing of, the data is practicable. This will depend on a variety of factors including the sensitivity of the data and the resources available to the data user. (f ) Data users Denition of data users. The principles set out in the PD(P)O apply to data users which are dened as: A person who, either alone or jointly or in common with other persons, controls the collection, holding, processing or use of the data.20 The concept of control is fundamental as it denes the territorial scope of PD(P)O. It is not relevant where the collection or processing of the personal data occurs provided that it is controlled by a data user in Hong Kong. Denition of control. Control is not dened in the PD(P)O but has been judicially interpreted in the context of the English Data Protection Act 1984. In the case of R v Grifn,21 the English High Court held that an accountant controlled data consisting of invoices as he had the power to manipulate the data by means of a spreadsheet computer program according to his own professional judgment. The court held that this control existed even though the accountant used the data not for his own purposes but solely to produce the accounts of his client. Control is also qualied in the PD(P)O by providing that a person is not a data user in relation to any personal data which the person holds, processes or uses solely on 12.020 12.019 12.018 12.017

12.021

20 21

PD(P)O s.2(1). (unrep., The Times, 5 Mar 1993).

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PERSONAL DATA PRIVACY AT WORK

behalf of another person if that rst-mentioned person does not hold, process or use that data for any of his or her own purposes.22, 23

3. COLLECTING AND COMPILING EMPLOYEES PERSONAL DATA


(a) Introduction 12.022 Data Protection Principle 1. Data Protection Principle 1 relates to the purpose and manner of collection of personal data.24 It is important to note that the provisions of Data Protection Principle 1 apply to the collection rather than holding, processing of or use of personal data. Therefore, any data user who merely holds, processes or uses personal data will not, where such data was collected by another data user, be required to comply with Data Protection Principle 1. (b) Collection of personal data 12.023 Collection must be for a lawful purpose, necessary for that purpose and adequate but not excessive. Data Protection Principle 1 requires that data must not be collected un1ess: (1) (2) (3) 12.024 it is collected for a lawful purpose directly related to a function or activity of the data user who is to use the data; the collection of the data is necessary for or directly related to that purpose; and the data is adequate but not excessive in relation to that purpose.25

Therefore, employers are permitted to collect only personal data from applicants and employees that is directly related to a function or activity of the employer. Further, only data that is necessary may be collected, and only to the extent that it is adequate but not excessive. Denition of collection. Collection is not dened in the PD(P)O but it is suggested that it includes both the creation of personal data and acquiring pre-recorded data.26 It appears that there is a requirement that the data user is involved in the collection process so the unsolicited receipt of data should not be considered as constituting collection unless the data user subsequently takes steps to record such data. A lawful purpose. A lawful purpose is one that does not contravene a statutory provision or a relevant common law principle. For example, an employer should not

12.025

12.026

22 23

24 25 26

PD(P)O s.2(12). This provision was adopted as a result of submissions to the Legco Bill Committee from the Internet Service Providers who were concerned about being responsible for complying with the the PD(P)O in respect of emails transmitted on behalf of subscribers. PD(P)O Sch.1 para 1. PD(P)O Sch.1 para 1(1). Lexis Nexis Annotated Ordinance of the PD(P)O.

COLLECTING AND COMPILING EMPLOYEES PERSONAL DATA

519

use a job vacancy notice to solicit the submission of personal data by applicants for the purpose of unlawfully discriminating against them on grounds of gender or marital status with the intention of excluding female employees from certain positions. Adequate and not excessive. In determining what data is adequate and not excessive, an employer should consider whether the prescribed personal data is relevant to business needs. For example, when collecting personal data from applicants, an employer must consider whether the prescribed personal data is directly relevant to the purpose of identifying suitable candidates. Generally, this may include data about an applicants work experience, job skills, competencies, academic or professional qualications, good character and other attributes required for the job. While an employer may want to collect information regarding an applicants or employees age, marital status, religious beliefs, race, medical history, family background, criminal records etc. for practical reasons, employers should be aware that doing so may contravene the PD(P)O. Employers should collect such data only if the need to know can be justied (e.g. the collection is for internal monitoring or diversity purposes). (c) Collection of personal data by lawful and fair means Lawful and fair in the circumstances. Personal data must be collected by means which are lawful and fair in the circumstances.27 Whether or not the collection of personal data is fair will depend on the particular circumstances of each case. For example, an employment agency assigns agency staff to various employment placement centres operated by the Labour Department. The agency staff are asked to mingle with unemployed people seeking employment to surreptitiously take down names and contact details of applicants who are unaware that their personal data is being recorded for the agency. Using such information, the agency contacts the applicants and offers its services to them. In the absence of a data subjects implicit or explicit consent, even if the method of collecting personal data was lawful, it is unlikely to be regarded as fair.28 (d) Data subject to be informed whether it is obligatory or voluntary to supply data All reasonably practicable steps must be taken. Where the personal data is to be collected from the data subject (instead of another individual or a data user), all reasonably practicable steps must be taken to inform that individual explicitly or implicitly on or before collecting the data of: 12.029 12.028 12.027

whether it is obligatory or voluntary for him or her to supply the data; and where it is obligatory for him or her to supply the data, the consequences for the individual if he or she fails to supply the data.29

27 28 29

PD(P)O Sch.1 para 1(2). Example taken from Hong Kong Employment Law Manual s.I.5. PD(P)O Sch.1 para 1(3)(a).

520

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12.030

Exemption. However, where data is exempt from a data access request by virtue of Pt VIII of the PD(P)O,30 a data user is not required to inform a data subject whether the supply of personal data is obligatory or voluntary if compliance is likely to prejudice the purpose for which the data was collected.31 Unacceptable to construe the law to give complete freedom of choice whether or not to consent to collection. In Cathay Pacic Airways Ltd v Administrative Appeals Board,32 pursuant to the Civil Aviation Directives, Cathay Pacic, an airline operator, was under an obligation to ensure that all its cabin crew were medically t to carry out their duties. Cathay Pacic implemented an attendance monitoring programme, which required employees to disclose relevant medical records. Failure to participate in the scheme was to be treated as a disciplinary matter, potentially leading to the termination of employment.33 In deciding to quash the decisions of the Privacy Commissioner and the Administrative Appeals Board,34 the Court of First Instance held that it was unacceptable to construe the PD(P)O to give complete freedom of choice whether to consent or not to an employers collection of personal data. The data protection principles under the PD(P)O recognise that there may be circumstances in which the disclosure of data may properly be compulsory. No need to provide notice if it is obvious. From a practical perspective, an employer need not provide notice of whether it is compulsory to provide personal data if it is obvious from the circumstances that all the employment-related personal data must be provided. For example, on a staff leave application form it is not necessary for an employer to state that it is compulsory to provide personal data such as the days of intended absence in order for the application to be processed and approved. (e) Data subject to be informed of the purpose for which data to be used and persons to which data will be transferred

12.031

12.032

12.033

General. On or before the collection of personal data from a data subject, the individual must be explicitly informed of:

30 31 32 33

34

See paras 12.130 to 12.152 for further information on the exemptions. PD(P)O Sch.1 para 1(3). [2008] 5 HKLRD 539. The Privacy Commissioner had, in the previous investigation, found that the method of collection of personal data by Cathay Pacic was lawful but unfair in the circumstances (contrary to PD(P)O, Sch.1 para 2). Cathay Pacic appealed to the Administrative Appeals Board which, in a judgment dated 2 May 2008, dismissed the appeal. In late May 2008, Cathay Pacic instituted these judicial review proceedings seeking orders to bring up and quash the results of the Privacy Commissioners investigation; the enforcement notice issued by the Privacy Commissioner and the decision of the Administrative Appeals Board. In quashing the decisions of the Privacy Commissioner and the Administrative Appeals Board, the Court of First Instance took into consideration the fact that Cathay Pacics disciplinary procedures ensured not only the protection of Cathay Pacics interests but also that a member of the cabin crew staff was not in any way prejudiced in his or her employment without a full and fair investigation. In looking at the issue of fairness, the Court of First Instance said that: Fairness is a broad principle and, as to the manner in which personal data is to be collected, is capable of encompassing the form in which relevant information is conveyed as well as the substance of that information. In this regard, it may be compared with principles of procedural unfairness. Information given to data subjects that is nuanced and clearly reasoned, expressed in modest terms, may not reasonably be perceived to be threatening or oppressive while information that lacks those qualities of expression may well be perceived, and reasonably perceived, as constituting an abuse of power by a data user.

COLLECTING AND COMPILING EMPLOYEES PERSONAL DATA

521

the purpose for which the data is to be used; and the classes of persons to which the data will be transferred.35 12.034

Exemption where compliance is likely to prejudice purpose. However, where data is exempt from a data access request by virtue of Pt VIII of the PD(P)O, a data user is not required to inform a data subject of the data use, or to whom the data may be transferred, if compliance is likely to prejudice the purpose for which the data is being collected.36 Purpose can be stated in general or specic terms. In an employment context, an employer may state the purposes for which employment-related personal data is to be used in general or specic terms.37 Many of the purposes for which personal data is to be collected are common to most employers. For example, to pay employees and to make compensation benets and awards, to contact employees when absent from the ofce, to make tax returns, to assess employees training and development needs, to plan promotions, and to administer a retirement or provident fund scheme to which employees contribute and from which they may benet. Transferees. Examples of common classes of transferees include the employers insurers, bankers, medical practitioners providing medical services for employees, staff unions, provident fund managers, related or associated companies and outside parties involved in a merger, acquisition or due-diligence exercise. Government departments to which an employer is required by law to transfer relevant personal data, for example, the Inland Revenue Department, need not be included in a statement of such third parties. Further, as the transfer notication requirements only apply to transfers to third parties outside the employing organisation, there is no requirement for employers to name other internal departments or employees of the employer to whom personal data may be transferred for the purposes of employment. It is not entirely clear whether the employing organisation would include associated companies so we would recommend that these are listed in the classes of possible transferees. As a result of these provisions, employers should note that personal data may only subsequently be used for a different purpose to the one notied to employees on collection in the event of an employee voluntarily giving prescribed consent.38 (f ) Data subject to be informed of right to access and correct personal data General. Finally, where personal data is collected from a data subject, all practicable steps must be taken to ensure that on or before the rst use of the data, the data user informs the individual of:

12.035

12.036

12.037

12.038

12.039

35 36 37 38

PD(P)O Sch.1 para 1(3)(b)(i). PD(P)O Sch.1 para 1(3). PD(P)O Sch.1 para 1(3)(b)(i)(A). See paras 12.061 to 12.068.

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12.040

the individuals right to access and correct the personal data; and contact details of the data users ofcer handling access and correction requests.39

Exemption where compliance is likely to prejudice purpose. Where data is exempt from a data access request by virtue of Pt VIII of the PD(P)O, a data user is not required to inform a data subject of the data subjects access rights if compliance is likely to prejudice the purpose for which the data is being collected.40 (g) Repeated collection

12.041

General. A data user is permitted not to comply with these notication and information obligations in the case of repeated collections of personal data from the data subject. However, this is only if there is no material difference between what would be done to comply with these notication and information obligations in the subsequent collection when compared to what was done in respect of the rst collection and not more than 12 months have elapsed between the rst collection and the subsequent collection.41 (h) Personal information collection statement

12.042

Recommendation to use PICS. The Code of Practice on Human Resource Management42 recommends that as a matter of good practice, an employer should comply with the above notication requirements by means of a written Personal Information Collection Statement (PICS). This statement may, for example, be attached to, or printed as an integral part of standard employment forms used to collect data, e.g. a job application form, in recruitment advertisements where an employer requests that curriculum vitaes, or other personal data, be submitted by job applicants, or on an internet page where an employer invites job applicants to complete a form and submit it online.

4. ACCURACY AND DURATION OF RETENTION OF PERSONAL DATA


(a) Introduction 12.043 Data Protection Principle 2. Data Protection Principle 2 requires an employer to ensure the accuracy of personal data, to either rectify or erase personal data that is no longer accurate and not to keep personal data for any longer than is necessary for the fullment of the purpose or any directly related purpose.43

39 40 41 42

43

PD(P)O Sch.1 para 1(3)(b)(ii). PD(P)O Sch.1 para 1(3). PD(P)O s.35. See paras 12.197 to 12.220 for more information on the Code of Practice on Human Resource Management (HRM Code) including the consequences of non-compliance. PD(P)O Sch.1 para 2.

ACCURACY AND DURATION OF RETENTION OF PERSONAL DATA

523

Purpose at the time of collection. The purpose for which personal data is to be used includes any directly related purpose and should be determined by reference to the purpose for which the data was used at the time of collection. (b) Accuracy of personal data General. All practicable steps should be taken to ensure that personal data is accurate having regard to the purpose for which the personal data is or is to be used. 44, 45 Duty is a continuing one. The duty to ensure personal data is accurate is a continuing one so an employer needs to ensure that personal data is accurate at the time of collection and also remains accurate for the duration in which it is held by the employer.46 Further, the duty is a positive one so it will not be sufcient for an employer to update its employees personal data only when requested to do so by an employee. Reasonably practicable steps must be taken. It is important to note that the duty to ensure accuracy under this principle is not absolute but requires that all reasonably practicable steps be taken. The extent to which it is reasonably practicable to keep personal data accurate will depend on the nature of the data being held. (c) Rectication of inaccurate personal data General. Where there are reasonable grounds for believing that personal data is inaccurate, all reasonably practicable steps should be taken to ensure that the data is not used for the purpose for which it was collected unless and until the personal data is made accurate or that the personal data is erased.47 Denition of inaccurate. Inaccurate is dened as being incorrect, misleading, incomplete or obsolete.48 (d) Notication to third parties of inaccurate data General. A data user has certain obligations to third parties where it is reasonably practicable to know that personal data disclosed to a third party was materially inaccurate having regard to the purpose for which the data is to be used by the third party and it was inaccurate at the time of such disclosure to the third party. In such circumstances, the data user is required to take all reasonably practicable steps to ensure that the third party is informed that the data is inaccurate and is provided with such particulars as will enable the third party to rectify the data having regard to that purpose.49

12.044

12.045 12.046

12.047

12.048

12.049

12.050

44 45

46 47 48 49

PD(P)O Sch.1 para 2(1)(a). PD(P)O s.23 also imposes a similar duty where data is corrected in response to an access and correction request. For further details, see paras 12.080 to 12.108. PD(P)O Sch.1 para 2(1)(b). PD(P)O Sch.1 para 2(1)(b). PD(P)O s.2(1). PD(P)O Sch.1 para 2(1)(c).

524

PERSONAL DATA PRIVACY AT WORK

12.051

Denition of third party. A third party means any person other than the data subject or person acting on behalf of the data subject. It also includes any person other than a data user or a person authorised in writing by a data user to collect, hold, process or use the data under the direct control of the data user or on behalf of the data user.50 Compensation and complaint. A data subject who suffers loss as a result of personal data being inaccurate may claim compensation from any data user causing such injury.51 In addition, a complaint may be made to the Privacy Commissioner.52 Defence. In any proceedings for compensation arising out of a failure to maintain the accuracy of data, it is a defence for a data user to show that the data was accurately recorded when it was received or obtained from the data subject or a third party.53 This defence will not be available where the personal data was accurately provided but subsequently became inaccurate as a result of a data user failing to take reasonably practicable steps to rectify them. (e) Retention of personal data

12.052

12.053

12.054

Not to be kept for longer than necessary. Personal data should not be kept for longer than is necessary for the fullment of the data purpose.54 This requirement is strengthened by s.26 of the PD(P)O which provides a positive duty on a data user to erase personal data which is no longer required for the purpose (or any directly related purpose). Erasure of personal data means that the data must be permanently erased. No requirement to erase where prohibited by law or retention is in public interest. However, there is no requirement to erase personal data where erasure is prohibited under law or it is in the public interest to retain such data.55 For example, under the Employment Ordinance (EO) an employer is required to retain certain wage records for a period of six months after the employee ceases to be employed.56 Erasure must be in accordance with PD(P)O. A data user who holds personal data is required to erase personal data in accordance with the provisions set out above, notwithstanding whether any other data user controls the processing of the data (whether in whole or in part).57 Further, a data holder who erases data in accordance with the provisions set out above will not be liable in an action for damages where loss is occasioned by such erasure.58 Implementation of a written retention policy. The Code of Practice on Human Resource Management (HRM Code) recommends that an employer should implement a written data retention policy that species a retention period of:

12.055

12.056

12.057

50 51 52 53 54 55 56 57 58

PD(P)O s.2(1). PD(P)O s.66: See paras 12.192 to 12.193. PD(P)O s.37(1): See paras 12.163 to 12.164. PD(P)O s.66(3). PD(P)O Sch.1 para 2(2). PD(P)O s.26(1)(a) and (b). EO s.49A(2). PD(P)O s.26(2)(a). PD(P)O s.26(2)(b).

USE OF PERSONAL DATA

525

no longer than two years in respect of recruitment-related data held about a job applicant from the date of rejecting the applicant; and no longer than seven years in respect of employment-related data held about an employee from the date the employee leaves employment; unless, - the individual concerned has given express consent for the data to be retained for a longer period; or - there is a subsisting reason that obliges the employer to retain the data for a longer period (for example, there is ongoing litigation or where it is in the public interest for the data not to be erased).59

Relationship with other statutory provisions. The period of retention recommended by the HRM Code is linked to both the statutory limitation periods60 and the provisions of the anti-discrimination ordinances, namely the Disability Discrimination Ordinance (Cap.487) (DDO), the Family Status Discrimination Ordinance (Cap.527) (FSDO), the Race Discrimination Ordinance (Cap.602) (RDO) and the Sex Discrimination Ordinance (Cap.480) (SDO) which permit an individual to make a claim to the District Court against another person for an act of discrimination against him or her before the end of the period of two years beginning (a) when the act complained of was done; or (b) if there is a relevant report in relation to the act, the day on which the report is published or made available for inspection.61 Compensation and complaint. A data subject who suffers any damage as a result of a data user failing to erase personal data will be entitled to claim compensation for any loss occasioned by such a failure.62 A data subject would be further entitled to make a complaint to the Privacy Commissioner.63 Offence. A failure to erase personal data in accordance with the PD(P)O is an offence and is liable to a ne at level 3.64, 65

12.058

12.059

12.060

5. USE OF PERSONAL DATA


(a) Introduction Data Protection Principle 3. In summary, Data Protection Principle 3 requires that personal data must not, without the prescribed consent of the job applicant or employee, be used by an employer for any purpose other than the purpose for which the data was to be used at the time of collection.66 12.061

59 60 61 62 63 64 65 66

HRM Code para 1.3.3. As set out in the Limitation Ordinance (Cap.347). DDO s.82; FSDO s.64; SDO s.86; RDO s.80. PD(P)O s.66: See paras 12.192 to 12.193. PD(P)O s.37(1): See paras 12.163 to 12.164. A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(10). PD(P)O Sch.1 para 3.

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PERSONAL DATA PRIVACY AT WORK

(b) Use of personal data with prescribed consent 12.062 General. Personal data must not be used for any purpose other than the purposes for which the data was to be used at the time of collection or a directly related purpose unless with the prescribed consent of the data subject.67 Determining the data purpose. A data purpose is the reason for engaging in an activity and not the activity itself. For example, if a company contacts potential customers by telephone to market new products, the data purpose of marketing and telephoning is merely an activity instrumental in achieving this purpose.68 Where the data is collected from the data subject and the data subject was informed of the data purpose upon collection,69 this will provide the best indication of the purpose of collection. Where the data is collected from another data user, there may not be any indication to the data subject as to the relevant data purposes. In these circumstances, the original data user should be reasonably satised that the subsequent data user is aware of the data purposes upon transfer. Use of personal data. In this context, use of personal data will include transfer70 and therefore if personal data is transferred for a purpose other than the purpose for which the data was to be used at the time of collection, this will amount to a contravention of Data Protection Principle 3. Denition of prescribed consent. Prescribed consent is dened as the express consent of the person given voluntarily.71 Prescribed consent will not include consent which has been subsequently withdrawn by notice in writing. However, if part of the act has already been done before the consent has been withdrawn, then this provision will not apply to that part of the act which has been done. Express requires afrmative consent so it will not include implied or inferred consent. However, a single consent may relate to a series of transactions. Data subject entitled to refuse consent. A data subject is entitled to refuse to give consent for personal data being subsequently used for a purpose which differs from the original purpose.72 (c) Data use exemption 12.067 Exception for unlawful acts. The principle set out in para 12.061 will not apply to personal data where compliance with that principle would be prejudicial to the prevention, preclusion or remedying (including punishment) of unlawful conduct, dishonesty or malpractice.73

12.063

12.064

12.065

12.066

67 68 69 70 71 72 73

PD(P)O Sch.1 para 3. Example taken from Lexis Nexis Annotated Ordinance of the PD(P)O. PD(P)O Sch.1 para 1(3). PD(P)O s.2: where use is dened to include, in relation to personal data, disclosure or transfer of the data. PD(P)O s.2(2). PD(P)O Sch.1 para 3. PD(P)O s.58(2).

SECURITY OF PERSONAL DATA

527

(d) Implications of non-compliance Compensation and complaints. A data user who fails to comply with Data Protection Principle 3 will be liable to compensate a data subject for any consequential loss.74 In addition, a complaint may be made to the Privacy Commissioner.75 12.068

6. SECURITY OF PERSONAL DATA


(a) Introduction Data Protection Principle 4. Data Protection Principle 4 requires that all reasonably practicable steps must be taken to ensure that personal data is protected from unauthorised or accidental access, processing, erasure or other use.76 Broader application. The application of this principle is broader than the other provisions in the PD(P)O as it also applies to data in a form in which access to or processing of the data is not practicable. The reason for this is that unstructured data may fall into the wrong hands and then be organised thereby facilitating access to data relating to a specic individual. Qualication of meaning of data user. It is only personal data held by a data user which is included in the obligation to keep personal data secure. Section 2(12) of the PD(P)O qualies this by providing that a person is not a data user in relation to any personal data which the person holds, processes, or uses solely on behalf of another person and not for any of his or her own purposes. (b) Duty to prevent accidental use or misuse of data Reasonably practicable steps must be taken. All reasonably practicable steps must be taken to ensure that personal data held by a data user is protected against unauthorised or accidental access, processing, erasure or other use.77 The term use includes the disclosure or transfer of such data.78 Factors to be taken into account. Data Protection Principle 4 identies various factors to be taken into account in determining which protective steps are reasonably practicable to safeguard the security of personal data including: 12.072 12.069

12.070

12.071

12.073

the kind of data and the harm that could resultwhere the likelihood of harm is signicant, a data user is required to take more steps to prevent accidental or unauthorised use of such data;

74 75 76 77 78

PD(P)O s.66: See paras 12.192 to 12.193. PD(P)O s.37(1): See paras 12.163 to 12.164. PD(P)O Sch.1 para 4. PD(P)O Sch.1 para 4. PD(P)O s.2(1).

528

PERSONAL DATA PRIVACY AT WORK

the physical location where the data is storedwhere personal data is stored in a physical location which allows unrestricted access, a data user will be under a stricter duty to ensure that the data is adequately protected from accidental or unauthorised use; any security measures incorporated (whether by automated means or otherwise) into any equipment in which the data is storedwhere a higher level of security measures are incorporated by a data user, the steps required to ensure that data is protected from authorised or accidental use will be reduced; any measures taken for ensuring the integrity, prudence and competence of persons having access to the dataa data user who restricts access to data to persons with these qualities is better able to establish that reasonable practicable steps were taken to prevent accidental or unauthorised use of personal data; and any measures taken for ensuring the secure transmission of the datawhere personal data is transmitted in such a way that allows unrestricted access at the place of transfer, the duty to ensure that data is not accidentally used or used without authority will not be regarded as complied with.79 (c) Implications of non-compliance

12.074

Compensation and complaints. A data user who fails to take reasonably practicable steps to ensure that personal data is not used accidentally, or without authority, will be liable to compensate a data subject for any consequential loss.80 In addition, a complaint may be made to the Privacy Commissioner.81 (d) Policies

12.075

Criteria that internal policies should satisfy. The HRM Code recommends that employers, in evaluating internal procedures pertaining to the security of employment-related personal data, should determine the extent to which their policies satisfy the following criteria:

the policy is systematically and regularly communicated to staff authorised to access and process the data; the employer commits to, and provides, ongoing training to staff on matters relating to personal data protection; new recruits are provided with training on personal data protection as part of their induction;

79 80 81

PD(P)O Sch.1 para 4(a) to (e). PD(P)O s.66. PD(P)O s.37(1).

SECURITY OF PERSONAL DATA

529

the employers policy manuals, training materials, and Employee Handbook are periodically reviewed to ensure that they are consistent with the requirements of the PD(P)O and any codes of practice in force; the in-house policy is to restrict access to, and processing of, personal data on a need-to-know and need-to-use basis; as a matter of protocol, staff involved in accessing and processing employment-related personal data are required to sign a secrecy or condentiality statement; appropriate investigative procedures are engaged should such protocols be breached and action taken against staff found to have violated the terms and conditions of the secrecy or condentiality statement; and random checks are made to ensure that there is compliance with established procedures.82 12.076

An automated system must be regulated by security features. In relation to employment-related personal data held internally, the HRM Code recommends that, as a matter of good practice, employers should ensure that access to personal data held on an automated system is regulated by security features. For example, such features may include the use of account names and passwords, dedicated terminals, an audit trail or installed warning feature that can deduce unsuccessful attempts to access data and automatic log-off after a timed period of inactivity. Further precautions may include a prohibition on unauthorised copies of employment-related data from being established on distributed computers, such as stand-alone PCs, that are not subject to the controls applied to authorised copies.83 Third party should be made aware of the need to apply appropriate security protection. In relation to any third party who is engaged by an employer to perform any of its human resource management functions, the HRM Code recommends that an employer should take all practicable steps to ensure that the third party is made aware of the need to apply appropriate security protection to the employment-related data.84 This is particularly so as the PD(P)O imposes legal liability on an employer in relation to any wrongful acts or practices done by a third party where the third party is engaged as an agent acting on behalf of the employer.85 For example, an employer without suitable storage or disposal facilities may arrange for large volumes of employment-related personal data to be stored or destroyed by a reputable storage or waste disposal company. The employer should include in its agreement with such a company appropriate precautions controlling the handling of the material including, in particular, conditions that ensure security and condentiality.86 As a matter of

12.077

82 83 84 85 86

HRM Code para 1.4.1. HRM Code para 1.4.2. HRM Code para 1.4.3. PD(P)O s.65(2): See para 12.190. Example taken from HRM Code para 1.4.3.

530

PERSONAL DATA PRIVACY AT WORK

prudence, such an employer should also seek to be indemnied in the event that such agreed measures are not followed and the employer is deemed liable for such breaches. 12.078 Appropriate security protection software must be installed for secure transmission of data on a public network. Where employment-related data is transmitted on a public network such as the internet, an employer should take all reasonably practicable steps to implement appropriate data protection measures to ensure the secure transmission. The HRM Code recommends that, depending on the sensitivity of the data to be transmitted, appropriate security protection software should be installed to enhance the integrity of data.87 For example, software encryption or digital signature used in email transmission would be an acceptable form of protection to safeguard data integrity and authentication. In addition, security protection measures should also be implemented on computers that are used for sending or receiving emails containing personal data. Staff should be reminded to ensure all copies of emails are held securely to prevent accidental or unauthorised access.88 Employees should be informed of written policy on use of system. Further, if an employer provides internet access facilities, including email, for the use of its employees, it should inform the employees of its written policy on the use of the system. As a matter of good practice, the HRM Code recommends that the policy should include matters such as:

12.079

whether the use of the email system by employees for sending and receiving personal email is permitted and any special arrangements that employees should adopt for segregating personal emails from work-related emails; whether the employer reserves the right to access and read emails sent and received by employees using the email system; and specic rules that apply to the distribution of incoming or outgoing emails and the erasure of unnecessary emails that contain personal data or have an attachment that includes such data.89

7. INFORMATION TO BE GENERALLY AVAILABLE


(a) Introduction 12.080 Data Protection Principle 5. Data Protection Principle 5 requires that an employer takes all reasonably practicable steps to ensure that a person can: ascertain the data users policies and practices in relation to personal data; be informed of the kind of personal data held by a data user; and be informed of the main purposes for which personal data held by a data user is or is to be used.90

87 88 89 90

HRM Code para 1.4.5. Example taken from HRM Code para 1.4.5. HRM Code para 1.4.6. PD(P)O Sch.1 para 5.

ACCESS TO PERSONAL DATA

531

(b) Availability of information All reasonably practicable steps must be taken. A data user is required to take all practicable steps to ensure that a person can ascertain the data users policies and practices in relation to personal data.91 Person must be informed of kind of personal data held. In addition, a data user must ensure that any person can be informed of the kind of personal data held by a data user; as well as the main purposes for which personal data held by a data user are or are to be used.92 This obligation therefore extends beyond a duty to data subjects and requires that anyone be able to ascertain the data users policies and procedures, the kind of data held and their main purposes. This can be achieved for example, by an appropriately worded posting on noticeboards or website statements. (c) Implications of non-compliance Compensation and complaints. A data user who fails to take reasonably practicable steps to ensure that a data users policies and practices in relation to personal data can be ascertained by another person will be liable to compensate a data subject for any consequential loss.93 In addition, a complaint may be made to the Privacy Commissioner.94 12.084 12.081

12.082

12.083

8. ACCESS TO PERSONAL DATA


(a) Introduction Data Protection Principle 6. In summary, Data Protection Principle 6 provides that a job applicant, employee or former employee is entitled to ascertain whether an employer holds personal data of which the person making the request is the data subject. Where personal data is held by the employer, the data subject is entitled to request access to the personal data within a reasonable time, in a form that is intelligible, in a reasonable manner and at a fee which is not excessive. Where access is refused, a data subject is entitled to be given reasons why the request is refused and can object to the refusal. Further, the data subject is entitled to request the correction of personal data and be given reasons in the event that a data user refuses to comply with a correction request.95 12.085

91 92 93 94 95

PD(P)O Sch.1 para 5(a). PD(P)O Sch.1 para 5(b) and (c). PD(P)O s.66: See paras 12.192 to 12.193. PD(P)O s.37(1): See paras 12.163 to 12.164. PD(P)O Sch.1 para 6.

532

PERSONAL DATA PRIVACY AT WORK

12.086

The mechanisms for compliance with Data Protection Principle 6 are set out in more detail in Pt V of the PD(P)O and its provisions prevail over the data protection principles in the case of conict.96 (b) Making a data holding request

12.087

Right to ascertain whether personal data held. The data subject has the right to ascertain whether a data user holds personal data on him or her.97 Therefore, a data holding request only entitles the data subject to be informed as to whether a data user is holding personal data in respect of the data subject making the request. (c) Making a data access request

12.088

Right to be supplied with a copy of personal data held. A data subject is entitled to request access to personal data held by the data user of which he or she is the data subject and be supplied by the data user with a copy of such data.98 Data Access Request Form. The Privacy Commissioner has gazetted a specied form for making data access requests. The Data Access Request Form (Form OPS003) took effect on 1 December 1999 and was subsequently amended on 1 April 2008. Although the use of the specied form is not mandatory, any data access request not made with the specied form may be refused by a data user.99 An explanatory booklet Exercising Your Data Access Rights can be downloaded from the Commissioners Ofces website at http://www.pcpd.org.hk. Data must be held by a data user or under the control of a data user. To be entitled to access personal data, the data must be held by a data user. Usually, a data user will hold the data it controls. However, there is a provision to cover the situation where the data is held by another company or person but remains under the control of the data user.100 In these circumstances, the data user is deemed to hold the data and must respond to the access request accordingly. If the person merely holding the data receives the data access request, then that person may refuse access to the data but must provide details of the data user retaining control.101 Relevant person. Where the access request is received from a relevant person,102 the data user must be satised of (a) the identity of the individual on whose behalf the

12.089

12.090

12.091

96 97 98 99 100 101 102

PD(P)O s.4. PD(P)O Sch.1 para 6(a) and s.18(1)(a). PD(P)O Sch.1 para 6(b) and s.18(1)(b). PD(P)O s.20(3)(e). PD(P)O s.18(4). PD(P)O s.21(1)(c). Relevant person means, in relation to an individual (howsoever the individual is described), (a) where the individual is a minor, a person who has parental responsibility for the minor; (b) where the individual is incapable of managing his own affairs, a person who has been appointed by a court to manage those affairs; (c) in any other case, a person authorised in writing by the individual to make a data access request, a data correction request, or both such requests, on behalf of the individual: PD(P)O s.2(1).

ACCESS TO PERSONAL DATA

533

requestor is purporting to act; and (b) that the requestor has the necessary relationship with the data subject.103 No right to inspect original data. The reference in the PD(P)O104 is to a copy of such data. Therefore, the data user is not necessarily entitled to inspect the original data. (d) Compliance with data access request (i) Fee Fee should not be excessive. A data user may charge a data subject or a relevant person making a data access request a fee,105 but this should not be excessive.106 No additional fee may be imposed for making a data correction request. Whether a fee is excessive will be determined by the Privacy Commissioner or a court, taking into account all circumstances of a case. If a data user provides a copy of personal data in a form other than a form requested by the data subject and the two forms attract different fees, the lower fee should be levied.107 Refusal if applicable fee not paid. A data user may refuse to comply with a data access request if the individual making such a request has not paid any fee that is applicable to the request.108 Fee to cover administrative costs. If a data subject or relevant person making a data access request asks for an additional copy of the personal data, the data user may charge a fee to cover the full administrative and other costs in supplying such an additional copy.109 (ii) Timing The 40-day time period. The data user is required to comply with the data access request not later than 40 days after receiving the request.110 If the data user is unable to comply with the request, in whole or in part, within the 40-day reply period, the data user must, before the expiration of the 40 days, inform the data subject in writing that he or she is unable to do so and give the reasons why this is so.111 The data user must also fully comply with the request as soon as reasonably practicable after the expiry of the 40-day reply period.112 It has been held that a failure to comply with a data access request within this time period is a single offence113 rather than a continuing offence.114 12.096 12.093 12.092

12.094

12.095

103 104 105 106 107 108 109 110 111 112 113 114

PD(P)O s.20(1)(ii). PD(P)O s.18(1)(b). PD(P)O s.28(2). PD(P)O s.28(3). PD(P)O s.28(4). PD(P)O s.28(5). PD(P)O s.28(6). PD(P)O s.19(1). PD(P)O s.19(2)(a). PD(P)O s.19(2)(b). Under PD(P)O s.64(10). Jiang Enzhu v Lau Wai Hing [2000] 1 HKLRD 121.

534

PERSONAL DATA PRIVACY AT WORK

(iii) Content 12.097 Data as is held at the time when the request is made. The copy of personal data to be supplied must be such personal data as is held at the time when the request is made. Any processing (including amending, augmenting, deleting or rearranging) of the data between the time the data access request is received and before the copy is supplied that would have been undertaken irrespective of the receipt of the request is not affected by this requirement.115 Therefore, there is no requirement to stop normal data processing activities because a data access request has been received. For example, an employer would be permitted to continue to collect and process data in relation to the number of hours worked by an employee in a month for the purpose of calculating the employees monthly salary. However, the employer would have no obligation to supply the additional information. Data to be supplied should be intelligible. A copy of the personal data to be supplied should be intelligible unless it is a true copy of a document that contains the data and is unintelligible on its face.116 If the personal data contains any codes used by the data user, they should be adequately explained such that they are readily comprehensible by the data subject, whether or not a true copy of a document is supplied.117 (iv) Language 12.099 Where data is held in only one language. If a data user holds the relevant personal data of a data access request in only one language and the copy to be supplied is a true copy of the document containing such data, the data user is not required to provide a copy of such data in any other language.118 This applies even if the data subject species in the data access request that he or she wishes to receive the data in another language. Where data is held in more than one language. If a data user holds the personal data sought under a data access request in more than one language and the data subject species in the data access request that he or she wishes to receive the data in one of these languages, the data user is required to provide a copy of the data in the language specied by the data subject.119 Choice of English or Chinese. Where the data user intends to supply the personal data other than in the form of a true copy of a document, he or she should provide the data in either English or Chinese. The choice of English or Chinese should be made in accordance with any specic request by the data subject for one or other. In the absence of such a request, the choice should be made in accordance with the language used in the request, where this is in either Chinese or English. If the data access request is in a language other than Chinese or English, subject access may be refused.120

12.098

12.100

12.101

115 116 117 118 119 120

PD(P)O s.19(3)(a)(i). PD(P)O s.19(3)(c)(i). PD(P)O s.19(3)(c)(ii). PD(P)O s.19(3)(c)(iii). PD(P)O s.19(3)(c)(iii)(A). PD(P)O s.19(3)(c)(iii).

ACCESS TO PERSONAL DATA

535

(v) Form Where data is held in more than one form. If a data user holds the personal data sought under a data access request in one or more forms and one of the forms is a form sought by the data subject in the data access request, the data user is required to provide a copy of the data in the form specied by the data subject.121 Where data is held in only one form. If a data user holds personal data in only one form and is unable to provide (because it is not practicable for him or her to do so) a copy of the relevant personal data of a data access request in a form sought by the data subject122 (for example, he or she holds only the personal data in paper le form, but the data subject seeks a copy in computerised form), the data user may provide a copy of such data in the form he or she is able to provide the data.123 A notice in writing must be attached informing the data subject that this is the only form in which the data can be supplied.124 Where data cannot be provided in the requested form. If a data user can provide a copy of the personal data of a data access request in one or more forms but none is the form or forms sought by a data subject, the data user must inform the data subject, by notice in writing, of the various forms in which he or she can supply the data.125 The data user must also inform the data subject that he or she may specify within 14 days in which of those forms he or she would like the copy to be supplied.126 If the data user receives such a reply from the data subject, he or she is required to supply a copy of the data in the form specied in the reply.127 If he or she does not receive any reply within 14 days, he or she may supply a copy of the data in such form as he or she thinks t.128 (e) Circumstances where a data user must refuse to comply with a data access request Insufcient information to identify data subject. An outright prohibition is imposed on compliance with a data access request from a data subject if he or she is not provided with sufcient information to identify the data subject.129 In the case of a data access request submitted by a person on behalf of a data subject (a relevant person), he or she shall refuse the request if he or she is not provided with sufcient information to identify the data subject, or the person seeking the data, or to be satised that the person seeking the data is properly authorised to do so.130 12.105 12.102

12.103

12.104

121 122 123 124 125 126 127 128 129 130

PD(P)O s.19(3)(iv). PD(P)O s.19(4). PD(P)O s.19(4)(b)(i). PD(P)O s.19(4)(b)(i). PD(P)O s.19(4)(b)(ii)(A)(I),(II). PD(P)O s.19(4)(b)(ii)(A)(III). PD(P)O s.19(4)(b)(ii)(B)(I). PD(P)O ss.19(3)(c)(iv) and (v) and 19(4)(b)(ii)(B)(II). PD(P)O s.20(1)(a)(i). PD(P)O s.20(1)(a)(ii).

536

PERSONAL DATA PRIVACY AT WORK

12.106

Consent required for disclosure of another individuals data. If the personal data sought under the data access request comprises personal data of another individual, and that data user cannot comply with the request without disclosing the personal data of that other individual, he or she shall refuse to comply with a data access request.131 This prohibition does not apply where the data user is satised that the other individual has consented to the disclosure of the data to the data subject submitting the request.132 This prohibition will also not apply to the extent that a data user can comply with a data access request without disclosing the identity of the other individual, for example by omitting the names or other identifying particulars.133 Data may comprise observations that could only be compiled by a particular individual, e.g. an employees manager or supervisor. However, the data user is precluded from withholding such data, apart from the sources identifying particulars.134 Objectives of PD(P)O observed by court. In the case of Wu Kit Ping v Administrative Appeals Board,135 Ms Wu lodged a complaint to the Department of Health complaining that her medical condition had been misdiagnosed by an Out-patient Clinic. Ms Wu requested access to the investigation report compiled by the Department of Health and also explanations and statements that were made by the medical ofcers during the course of the investigation. Ms Wu made a formal data access request under the PD(P)O. The copies of the documents provided by the Department of Health to Ms Wu were in part anonymised to conceal the identity of other individuals who had either authored the documents concerned or who had been referred to in those documents. Ms Wu lodged a complaint to the Privacy Commissioner. The Privacy Commissioner refused to undertake an investigation by reason that it regarded that the Department of Health had acted properly in concealing the identity of other individuals. Ms Wu appealed to the Administrative Appeals Board, which conrmed the decision of the Privacy Commissioner. Ms Wu made an application for judicial review of the Administrative Appeals Board refusal to uphold her appeal. After reviewing the objectives of the PD(P)O the court observed: It is not the purpose of the Ordinance to enable an individual to obtain a copy of every document upon which there is reference to the individual. It is not the purpose of the Ordinance to supplement rights of discovery in legal proceedings, nor to add any wider action for discovery for the purpose of discovering the identity of the wrongdoers under the principles established in Norwich Pharmaceutical Co v Commissioners of Customs and Excise [1974] AC 133. That conclusion is entirely in accord with the decision of Deputy Judge Muttrie in Gotland Enterprises Ltd v Kwok Chi Yau [2007] 1 HKLRD 226, at 231-2.

12.107

12.108

Wu Kit Ping v Administrative Appeals Board. The court concluded that the identity of the authors and various pronouns had been correctly anonymised in three of the

131 132 133 134 135

PD(P)O s.20(1)(b). PD(P)O s.20(1)(b). PD(P)O s.20(2). PD(P)O s.20(2)(a). [2007] 4 HKLRD 849.

ACCESS TO PERSONAL DATA

537

four documents. In respect of the fourth document, the court commented that if in a document, the maker of the document expresses an opinion about the data subject, that opinion will constitute personal data to which the data subject will be entitled to access. However, an opinion expressed in the same document, by the maker of the document, about the maker of the document himself will not constitute personal data of the data subject unless relating indirectly to the data subject. On this basis, the court held that all the sentences in the fourth document had been lawfully redacted with the exception of one sentence where the redaction could not be justied in law. This was on the basis that although the identity of the giver of the opinion could be determined by inference from Ms Wus knowledge of the surrounding circumstances, that was not a ground upon which to refuse disclosure of personal data under s.20(2)(a) of the PD(P)O. (f ) Circumstances where a data user may refuse to comply with a data access request Specied circumstances where a data user may refuse. A data user may refuse to comply with a data access request if: (1) the request is not in writing in Chinese or English: (a) (b) he or she is not provided with sufcient information to locate the personal data that is being requested; the request follows two or more similar requests made by the data subject or a relevant person on his or her behalf and it is unreasonable for the data user to comply; another data user controls the use of the personal data concerned in such a way that prohibits the data user receiving the data access request from complying with the request; the data access request is not made in a form which has been specied under s.67 of the PD(P)O if such a form has been specied; or there is an applicable exemption from subject access provided for in Pt VIII of the PD(P)O.136 12.109

(c)

(d) (e)

(g) Notication of refusal to comply with data access request Written notication of refusal required. If a data user declines to comply with a data access request for any of the reasons set out above, he or she must inform the data subject concerned by notice in writing with the reasons for refusal within 40 days of receiving the request.137 If he or she refuses to comply with a data access request because another data user controls the use of the personal data concerned in such a way that prohibits him or her from complying with the request, he or she is required, 12.110

136 137

PD(P)O s.20(3). PD(P)O s.21(1)(a) and (b).

538

PERSONAL DATA PRIVACY AT WORK

in the notice to the data subject, to provide the name and address of the other data user concerned.138 12.111 Applicable exemptions. If a data user refuses to comply with a data access request because of an applicable exemption provided for in s.57 of the PD(P)O (e.g. security in respect of Hong Kong) or s.58 of the PD(P)O (crimes), and the data is also exempt from the requirement to conrm whether or not the data user holds personal data relating to that data subject because the interest protected by that exemption would be likely to be prejudiced by such conrmation, then the data user may in the notice to the data subject adopt wording along the lines of I have no personal data the existence of which I am required to disclose to you.139 Refusals to comply with data access requests and the reasons for refusal must be entered into a log book.140

9. DATA CORRECTION REQUEST


(a) Introduction 12.112 Principles. Following the supply by a data user of a copy of personal data in compliance with a data access request, the data subject is entitled to ask for correction of the personal data concerned if he or she considers that the data is inaccurate.141 This is done by means of a data correction request to the data user. Such a request may also be made by a properly authorised relevant person. Notication to third party for correction. If a data user, following the receipt of a data correction request but before complying with the request, discloses to a third party the personal data to which the request relates, then the data user should, if it is practicable to do so, advise the third party concerned that the data is to be considered for correction.142 (b) Compliance with data correction request 12.114 The 40-day time period. If a data user is satised that personal data which is subject to a data correction request is inaccurate, he or she is required to make the necessary correction and supply the data subject with a copy of the corrected personal data within 40 days of receiving the request.143 If a data user is unable to comply with a data correction request in whole or in part within the 40-day reply period, he or she must within such period inform the data subject in writing that he or she is unable to do so and give the reasons why.144 He or she must then fully comply with the request as soon as reasonably practicable after the expiry of the 40-day reply period.145

12.113

138 139 140 141 142 143 144 145

PD(P)O s.21(1) (c). PD(P)O s.21(2). See paras 12.125 to 12.127 for further details. PD(P)O s.22(1) and Sch.1 para 6(e). PD(P)O s.22(3). PD(P)O s.23(1). PD(P)O s.23(2)(a). PD(P)O s.23(2)(b).

DATA CORRECTION REQUEST

539

Third party to be supplied with corrected data and written notice. If personal data which is the subject of a data correction request has been disclosed to a third party during the 12 months prior to the day of correction of the data, and the data user has no reason to believe that such a third party has ceased using that data, he or she should supply such a third party with a copy of the corrected personal data and a written notice of the reasons for the correction.146 (c) Circumstances where a data user must refuse to comply with a data correction request Insufcient information to identify data subject. A data user must refuse to comply with a data correction request from a data subject if he or she is not provided with sufcient information to identify the data subject.147 In the case of a data correction request submitted by a person on behalf of the data subject (a relevant person), he or she shall refuse the request if he or she is not provided with sufcient information to identify the data subject, the relevant person, or be satised that the relevant person is properly authorised to seek correction.148 Same individual submits data correction and data access request. If an individual, who submits a data correction request following a data access request, is the same individual that submitted the data access request, the data user cannot refuse to comply with such a data correction request for the reason of having insufcient information to identify the data subject, or the relevant person. However, in the case of a relevant person, the data user should still ensure that such a person has been properly authorised to make the correction.149 (d) Circumstances where a data user may refuse to comply with a data correction request Specied circumstances where data user may refuse. A data user may refuse to comply with a data correction request if: (1) (2) (3) (4) (5) the request is not in writing in Chinese or English; he or she is not satised that the personal data is inaccurate; he or she is not provided with sufcient information to ascertain that the personal data is inaccurate; he or she is not satised that the correction provided in the request is accurate; or any other data user controls the processing of the personal data concerned in such a way that prohibits the data user receiving the data correction request from complying with the request.150

12.115

12.116

12.117

12.118

146 147 148 149 150

PD(P)O s.23(1)(c). PD(P)O s.24(1)(a). PD(P)O s.24(1)(b). PD(P)O s.24(2). PD(P)O s.24(3).

540

PERSONAL DATA PRIVACY AT WORK

(e) Notication of non-compliance with data correction request 12.119 The 40-day time period. If a data user refuses to comply with a data correction request, he or she must inform the data subject concerned by notice in writing with reasons of the refusal within 40 days of receiving the request.151 If he or she refuses to comply with a data correction request because another data user controls the use of the personal data concerned in such a way that prohibits him or her from complying with the request, the notice of refusal must include the name and address of the other data user concerned.152 (f ) Expression of opinion 12.120 Obligations where request involves correction of expression of opinion or unveriable fact. If a data correction request involves the correction of personal data which is an expression of opinion or an unveriable fact and the data user is not satised that the opinion or unveriable fact is inaccurate, the data user may refuse to make the correction. In such circumstances, the data user is required to make a note of the data subjects proposed correction. This should be annexed to the data concerned in such a way that it is drawn to the attention of, or made available for inspection by, any person (including the data user or a third party) who may use such data in future. The data user must also attach a copy of the note to the notice of refusal.153 (g) Penalties relating to data access request and data correction request 12.121 False and misleading requests. Any person who knowingly or recklessly supplies any information in the course of making a data access request or data correction request which is false or misleading and which is so supplied for the purpose of having the data user comply with the request, commits an offence. A person who commits an offence is liable on conviction to a ne at level 3154 and to imprisonment for six months.155 Compensation for contravention of statutory requirement. A data user who contravenes any statutory requirement in relation to a data access or data correction request will be liable to compensate a data subject for any consequential loss.156 Contravening PD(P)O where no penalty is specied. In addition to being liable to pay compensation, any data user who, without reasonable excuse, contravenes any requirement under the PD(P)O for which no other penalty is specied, commits an offence and is liable on conviction to a ne at level 3.157, 158

12.122

12.123

151 152 153 154 155 156 157 158

PD(P)O s.25(1)(a). PD(P)O s.25(1)(b). PD(P)O s.25(2) and (3). A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(1). PD(P)O s.66. A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(10).

EXEMPTIONS FROM THE PROVISIONS OF THE PD(P)O

541

Complaints to Privacy Commissioner. A data subject may also make a complaint to the Privacy Commissioner whenever a data user engages in any act or practice that may amount to a contravention of any requirement under the PD(P)O.159 (h) Log book Principles. A data user is required to keep and maintain a log book of any refusals to comply with data access and correction requests. The log book must be kept in Chinese or English. The particulars of the log book must be kept for a minimum period of four years.160 Details to be entered into log book. The data user must enter into the log book details of reasons for refusing a data access or correction request in each case.161 Inspection of log book. A data user must allow the Privacy Commissioner or his or her authorised representative to inspect and copy the log book at any reasonable time and without charge.162 (i) Service and language of certain notices Principles. In handling a data access or correction request, a data user, when serving a notice in writing to a data subject or relevant person, must: (a) use the language in which the request is made if it is made in either Chinese or English; or (b) use either Chinese or English as he or she thinks t if the request is not made in either Chinese or English.163 ( j) Circumstances where personal data is exempted from data access requests Exemptions and durations. The PD(P)O recognises 10 situations where a data subject may be refused access to personal data held by a data user. In certain circumstances, personal data may be permanently exempt from a data access request although, more usually, an exemption applies only for a limited duration, after which access must be granted. The exemptions which apply to employment are considered in paras 12.130 to 12.152.

12.124

12.125

12.126 12.127

12.128

12.129

10. EXEMPTIONS FROM THE PROVISIONS OF THE PD(P)O


(a) Introduction Principles. Part VIII of the PD(P)O sets out various exemptions which exhaustively dene the circumstances in which the requirements of the PD(P)O may be waived. The exemptions may be broadly grouped according to whether they relate to domestic 12.130

159 160 161 162 163

PD(P)O s.37(1). PD(P)O s.27(1). PD(P)O s.27(2) and (3). PD(P)O s.27(4). PD(P)O s.29.

542

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affairs, to employment, or to specically dened public interest grounds, namely security, law enforcement and regulation, health, the media, or research. Legal professional privilege is also covered. The exemptions are not mutually exclusive and their application may overlap in some circumstances. 12.131 Limited relief. The exemptions provide only limited relief from the requirements of the PD(P)O and with the exception of s.52 of the PD(P)O regarding data held for domestic affairs, the exemptions only operate in respect of data protection principle 3 regarding use and/or data protection principle 6 and s.18(1)(b) of the PD(P)O regarding data subject access. Non-mandatory in nature. The exemptions are not mandatory. The effect of Pt VIII is that it is at the discretion of the data user whether it chooses to invoke an exemption. Burden of proof. A data user invoking an exemption should be prepared to justify his or her actions should the data subject complain to the Privacy Commissioner or institute civil proceedings. In court proceedings, the burden would rest on the person who seeks to invoke an exemption to satisfy the court that all the relevant prerequisites to the application of an exemption are met.164 To facilitate the independent review of a refusal to comply with an access request, the data user must enter the particulars in a log book165 kept for the purpose.166 Focus. For current purposes, we will focus on the employment exemptions. (b) Staff planning 12.135 Background to exemption. Changes in the business environment may necessitate consolidation or reorganisation of a data users human resources. The concern expressed by employers was that the premature release of any retrenchment or redundancy plans would demoralise staff and damage staff relations. This exemption adopts a recommendation of the Law Reform Commission designed to address this concern.167 Exemption for data relevant to staff planning purposes. Where personal data consists of information relevant to any staff planning proposal to either ll any series of positions of employment which are presently or may become vacant or cease any group of individuals employment, such data is exempt from the provisions of data protection principle 6 and s.18(1)(b) of the PD(P)O.168 Therefore, personal data consisting of information regarding any staff planning proposal to ll any positions of employment which are or are to become vacant or to cease the employment of any group of individuals is exempt from a data access request. However, the exemption will cease to apply once the positions which are the subject of

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12.136

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164 165 166 167

168

See Cinepoly Records Co Ltd v Hong Kong Broadband Network Ltd [2006] 1 HKLRD 255. See paras 12.125 to 12.127. PD(P)O s.27. The Law Reform Commission of Hong Kong, Report, Reform of the Law Relating to the Protection of Personal Data (Topic 27) dated Aug 1994 para 15.065. PD(P)O s.53.

EXEMPTIONS FROM THE PROVISIONS OF THE PD(P)O

543

a staff planning proposal are lled or have been closed down. In such circumstances, personal data which continues to be held after the staff planning exercise is over will be subject to a data access request. Exemption does not apply to single vacancy. The exemption does not apply to a single vacancy regardless of whether more than one person is involved. Exemption does not apply to a data holding request. As a copy of personal data which is the subject of a staff planning exercise cannot be requested, no data correction request may be made in respect of such data. However, the exemption does not apply to a data holding request. Therefore, the exemption does not prevent a data user from informing a data subject whether the data user is holding personal data relating to the data subject making the request.169 Denition of employment. For the purpose of a staff planning exercise, the term employment is dened widely to include employment under a contract of service or of apprenticeship or a contract personally to execute any work or labour.170 (c) Evaluative process Background to exemption. This exemption results from a recommendation of the Hong Kong Law Reform Commission to address the situation where an evaluative process could be disrupted by providing interim access.171 If the relevant process can be completed within the 40-day response period172 the data user will be able to provide access and does not need to invoke the exemption.173 Exemption for data which is the subject of a relevant process. Where personal data is the subject of a relevant process, it is exempt from the provisions of data protection principle 6 and s.18(1)(b) of the PD(P)O until completion of that process.174 Denition of relevant process. Relevant process means any process whereby personal data is considered by one or more persons for the purpose of determining: (1) the suitability, eligibility or qualications of the data subject for employment or appointment to an ofce, promotion in employment or ofce or continuance in the employment or ofce or removal from employment or ofce; or whether any disciplinary action should be taken against the data subject for breach of the terms of his or her employment or appointment to ofce.175 12.141 12.138 12.139

12.140

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(2)

169 170 171

172 173 174 175

In accordance with PD(P)O s.18(1)(b). PD(P)O s.2(1). The Law Reform Commission of Hong Kong, Report, Reform of the Law Relating to the Protection of Personal Data (Topic 27) dated Aug 1994 paras 15.063 and 15.064. PD(P)O s.19. See also the Code of Practice on Human Resources Management, paras 2.11.2 and 3.8.2. PD(P)O s.55(1). PD(P)O s.55(2)(a).

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12.144

Exclusion for processes with no right of appeal. Any processes where there is no right of appeal are excluded.176 Therefore, the types of employment-related evaluative processes which give rise to an exemption from data access and data correction requests are extremely narrow. Only decision-making processes which provide a right of appeal are regarded as employment-related evaluative process and may be exempted from data access and data correction requests. Exempted only until completion of process. Personal data, which is the subject of such an evaluative process, will be exempt from a data access request only until the completion of that process. A data access request may, however, be made as soon as the evaluative process has been completed.177 What amounts to completion of an evaluative process will depend on the circumstances of each case. Exemption does not apply to a data holding request. As the exemption only applies to the supply of a copy of the personal data to the data subject, the exemption does not exempt the data user from informing the data subject whether the data user is holding personal data relating to the data subject making the request.178 (d) Personal references

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Principles. Personal data held by a data user which consists of a personal reference given by an individual other than in the course of his or her occupation and relevant to another individuals suitability or otherwise to ll any position of employment or ofce which is, or may become, vacant, is exempt from the provisions of data protection principle 6 and s.18(1)(b) of the PD(P)O.179 Exemption only for personal references. Therefore, it is only personal references which are exempt from data subject access. A reference that is provided by a referee who is under some duty in the ordinary course of that persons occupation to do so will not be exempted from the data access provisions. This would include, for example, assessments and references provided on behalf of an organisation. Situations where exemption does not apply. The exemption does not apply if the referee has informed the data user in writing that he or she has no objection to the data subject seeing the reference.180 Further, the exemption applies only until the data subject has been informed in writing that he or she has been accepted or rejected to ll the position or ofce.181 Therefore, once an individual has been accepted or rejected for a job with an employer, it appears that the individual would be permitted to make a data access request for a copy of any personal reference relating to him or her which has been supplied to, and is held by, the employer.182

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176 177 178 179 180 181 182

PD(P)O s.55(2)(b). PD(P)O s.55(2). In accordance with PD(P)O s.18(1)(b). See further para 12.087. PD(P)O s.56. PD(P)O s.56(b)(i). PD(P)O s.56(b)(ii). This does not apply to references given before the date of commencement of this section, i.e. 20 Dec 1996.

TRANSFER OF PERSONAL DATA TO A PLACE OUTSIDE OF HONG KONG

545

Reference should be deleted when a particular position has been lled. Access to such personal data, of course, only remains an issue for as long as it is retained. The PD(P)O requires that the data user delete personal data which has served its purposes.183 If a reference is compiled in relation to a particular position, it follows that upon the position being lled the reference should be deleted. Statutory right of access will override condition that reference should not be divulged. Where a written reference has been provided by a referee on the condition that its contents are not divulged to an applicant, a data subjects statutory right of access will override any such condition on the part of the referee. In such circumstances, because an oral opinion does not amount to personal data, a referee may wish to consider giving a reference orally rather than in writing. However, as soon as an oral reference is recorded in some permanent form, such record will become personal data for the purposes of the PD(P)O. (e) Legal professional privilege Information subject to legal professional privilege is exempt. Personal data which consists of information in respect of which a claim to legal professional privilege could be maintained in law is exempt from the provisions of data protection principle 6 and s.18(1)(b) of the PD(P)O.184

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11. TRANSFER OF PERSONAL DATA TO A PLACE OUTSIDE OF HONG KONG


(a) Introduction Prohibition on transfer not yet in force. Section 33 of the PD(P)O is the only provision in the PD(P)O which has not yet been brought into force. Once it is brought into operation, it will prohibit the transfer of personal data to a place outside Hong Kong except in limited circumstances. (b) Circumstances in which transfer of data outside of Hong Kong will be permitted Principles. Transfer of data outside of Hong Kong will be permitted in the following circumstances: 12.154 12.153

the transferee is in a place outside of Hong Kong which has in force any law which is substantially similar to or serves the same purposes as the PD(P)O and the Privacy Commissioner has, by notice in the Gazette, specied that place as a place for the purposes of s.33(3) of the PD(P)O;185

183 184 185

PD(P)O s.26 and Sch.1 para 2(2). PD(P)O s.60. PD(P)O s.33(2)(a).

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the data user has reasonable grounds for believing that such laws are in force;186 the data subject has consented in writing to the transfer;187 the data user has reasonable grounds to believe that the transfer is for the avoidance or mitigation of adverse action against the data user and it is not practicable to get the data users consent (but if it was practicable the data user would give it);188 the data is exempt from Data Protection Principle 3 by virtue of an exemption under Pt VIII; or 189, 190 the data user has taken all reasonable precautions and exercised all due diligence to ensure that the data will not, in the place of transfer, be collected, held, processed or used in any manner which, if in Hong Kong, would contravene the PD(P)O.191 (c) Data user has taken all reasonable precautions and exercised all due diligence

12.155

Fact sheet issued by the Privacy Commissioner. The circumstances relating to the data user having taken all reasonable precautions enables the data user to adopt an individualised solution to achieving compliance. In May 2007, the Privacy Commissioner issued a fact sheet192 on the transfer of data out of Hong Kong which recommended that one method of achieving this individualised solution is for the parties to the transfer to enter into a contract, or other acceptable agreement applying the data protection principles to the data upon its transfer to the place outside of Hong Kong. The fact sheet also suggests that in most circumstances an agreement is unlikely to provide sufcient protection to discharge the due diligence requirement unless it is legally binding. However, it identies at least two situations where non-contractual agreements are likely to be adhered to notwithstanding their non-binding nature:

12.156

agreements between a company and an overseas afliate where identical internal procedures are applicable; and agreements between data users who are both subject to an acceptable international code of practice applying to the processing of personal data in the relevant sector.

186 187 188 189 190 191 192

PD(P)O s.33(2)(b). PD(P)O s.33(2)(c). PD(P)O s.33(2)(d). See paras 12.130 to 12.152. PD(P)O s.33(2)(e). PD(P)O s.33(2)(f). Fact Sheet No. 1 Apr 1997.

RESPONSIBILITIES OF THE OFFICE OF THE PRIVACY COMMISSIONER

547

Model contract. To assist data users adopting the contractual solution, the Privacy Commissioner has prepared a model contract.193 The clauses of the model contract have been adapted to meet the requirements of the PD(P)O. While the model contract will be adequate as regards simple point-to-point transfers between parties in different jurisdictions, it is less suitable for more sophisticated transfers passing through various intermediate data processing entities who make sub-transfers of data. In these circumstances, a vertical chain of agreements would be required. A question of fact. Whether or not the data user has exercised all due diligence is a question of fact.

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OF THE

12. RESPONSIBILITIES OF THE OFFICE PRIVACY COMMISSIONER FOR PERSONAL DATA


(a) Introduction

Responsibilities. The Privacy Commissioner is responsible for monitoring and supervising compliance with the provisions of the PD(P)O. This can be done through a variety of means including the investigations of complaints, the inspection of personal data systems, the issuing of codes of practice, the review of legislation, the approval of matching procedures, the conducting of personal data privacy surveys, publicity campaigns and international liaison. The Deputy Privacy Commissioner for Personal Data assists the Privacy Commissioner in the overall administration and strategic planning of the Commissioners Ofce and also has the responsibility for policy issues relating to personal data privacy. (b) Inspections Purpose of inspection. The Privacy Commissioner may carry out an inspection of any personal data system used by a data user or used by a data user and belonging to a class of data users. The purpose of the inspection is to ascertain information to assist the Privacy Commissioner to make recommendations to data users and to promote compliance with the PD(P)O and, in particular, the data protection principles by the relevant data user or class of data users.194 Written notice to be served prior to inspection. Before carrying out an inspection, the Privacy Commissioner must serve a written notice on the data user to inform the data user of the Privacy Commissioners intention to carry out an inspection.195 Completion of an inspection. Where the Privacy Commissioner has completed an inspection, the Privacy Commissioner shall inform the relevant data user of:

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193

194 195

The clauses of the model contract are based on an agreement prepared by the Council of Europe, the Commission of the European Communities and the International Chamber of Commerce. PD(P)O s.36. PD(P)O s.41(1).

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PERSONAL DATA PRIVACY AT WORK

the result of the inspection;196 any recommendations arising from the inspection that the Privacy Commissioner thinks t to make relating to the promotion of compliance with the provisions of the PD(P)O, in particular, the data protection principles;197 any report arising from the inspection that he or she proposes to publish under s.48 of the PD(P)O;198 and such other comments arising from the inspection as he or she thinks t to make.199 (c) Complaints

12.163

Principles. An individual may make a complaint to the Privacy Commissioner about an act or practice that:

has been done or is being done by a data user specied in the complaint; relates to personal data of which the individual is, or where the data user is relying on an exemption under Pt VIII of the PD(P)O may be, the data subject; and may be a contravention of a requirement under the PD(P)O.200

12.164

Language and contents. The complaint must be in writing in Chinese or English or in such other form as the Privacy Commissioner may accept.201 The complaint should contain the individuals name and contact details, identity of the party complained against and full particulars of the case. The Commissioners Ofce has issued a Complaint Form (Form OPS001) that can be used for complaints made under this section. This is available on the Privacy Commissioners website at: http://www.pcpd.org.hk/english/contact/les/complaint_eng.pdf. (d) Investigations (i) Procedure for investigations

12.165

Statutory duty to carry out investigation. Where the Privacy Commissioner receives a complaint, the Privacy Commissioner is under a statutory duty to carry out an investigation in relation to the relevant data user to ascertain whether the act or practice specied in the complaint is a contravention of a requirement under the PD(P)O.202

196 197 198 199 200 201 202

PD(P)O s.47(1)(a). PD(P)O s.47(1)(b). PD(P)O s.47(1)(c). PD(P)O s.47(1)(d). PD(P)O s.37(1). PD(P)O s.37(3). PD(P)O s.38.

RESPONSIBILITIES OF THE OFFICE OF THE PRIVACY COMMISSIONER

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Commence an investigation on own initiative. Additionally, if the Privacy Commissioner has reasonable grounds to believe that an act or practice relating to personal data has been done or is being done which may be in contravention of a requirement under the PD(P)O, the Privacy Commissioner may commence an investigation into the matter on his or her own initiative.203 Written notice to be served prior to investigation. Before carrying out an investigation, the Privacy Commissioner must serve a written notice on the data user to inform the data user of the Privacy Commissioners intention to carry out an investigation unless the Privacy Commissioner has reasonable grounds to believe that serving a notice may prejudice the purpose of the investigation.204, 205 Refusal to carry out investigation. The Privacy Commissioner may refuse to carry out or continue an investigation initiated by a complaint in certain circumstances. These include if: the complaint has been made anonymously;206 the complainant cannot be identied or traced;207 the complainant is not in Hong Kong at the time the act or practice was done or engaged in;208 the complaint, or a complaint of a substantially similar nature, has previously initiated an investigation as a result of which the Privacy Commissioner was of the opinion that there had been no contravention of a requirement under the PD(P)O;209 the act or practice specied in the complaint is trivial;210 or the complaint is frivolous or vexatious or is not made in good faith.211 Completion of an investigation. Where the Privacy Commissioner has completed an investigation, he or she shall inform the relevant data user of certain information including: the result of the investigation;212 any recommendations;213 any report that he or she proposes to publish;214 whether or not he or she proposes to serve an enforcement notice;215 and such other comments arising from the investigation as he or she thinks t to make.216 Where the Privacy Commissioner has completed an investigation initiated by a complaint, he or she shall also inform the complainant of this information.217 (ii) Proceedings of the Privacy Commissioner General. For the purposes of any investigation, the Privacy Commissioner has the right to be furnished with any information, document or thing, for such persons, and

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203 204 205 206 207 208 209 210 211 212 213 214 215 216 217

PD(P)O s.38(b). PD(P)O s.41(1). PD(P)O s.41(2). PD(P)O s.39(1)(b). PD(P)O s.39(1)(c). PD(P)O s.39(1)(d)(ii). PD(P)O s.39(2)(a). PD(P)O s.39(2)(b). PD(P)O s.39(1)(c). PD(P)O s.47(2)(a). PD(P)O s.47(2)(b). PD(P)O s.47(2)(c). PD(P)O s.47(2)(d). PD(P)O s.47(2)(e). PD(P)O s.47(3).

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make such inquiries, as he or she thinks t.218 Further, the Privacy Commissioner may regulate his or her procedure in such manner as he or she thinks t.219 12.171 Hearing to be carried out in public generally. Any hearing for the purposes of an investigation shall be carried out in public unless the Privacy Commissioner is of the opinion that, in all the circumstances of the case, the investigation should be carried out in private or the complainant requests in writing that the investigation be carried out in private.220 Counsel and solicitors have no rights of audience before the Privacy Commissioner at any hearing for the purposes of an investigation. However, they may appear before the Privacy Commissioner if he or she thinks t.221 Persons who may be adversely affected have a right to be heard. A person shall be given an opportunity to be heard if at any time during the course of an investigation it appears to the Privacy Commissioner that there may be sufcient grounds for him or her to make any report or recommendation that may criticise or adversely affect that person.222 Power to summon a person or require information. The Privacy Commissioner has the right, for the purpose of any investigation, to summon before him or her any person who, in the opinion of the Commissioner, is able to give any information relevant to those purposes and/or is the complainant.223 The Privacy Commissioner may also examine any such person and require him or her to provide any information, document or thing which, in the opinion of the Privacy Commissioner, is relevant to those purposes and which may be in that persons possession or under his or her control.224 Witnesses have the privilege against self-incrimination but the common law principle of public interest immunity is overridden as this could otherwise inhibit the Privacy Commissioners ability to obtain information.225 (e) Power of entry of premises for inspection or investigation 12.174 Right to enter non-domestic premises where the personal data system is situated. Subject to certain notice provisions, 226 the Privacy Commissioner has the right to enter non-domestic premises where the personal data system is situated, at any reasonable time, and carry out an inspection of the premises.227 If the personal data system is situated on domestic premises, then the Privacy Commissioner must obtain the consent of any person resident in those premises (other than a minor) before it enters the premises and carries out an inspection.228

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218 219 220 221 222 223 224 225 226 227 228

PD(P)O s.43(1)(a). PD(P)O s.43(1)(b). PD(P)O s.43(2). PD(P)O s.43(3). PD(P)O s.43(5). PD(P)O s.44(1)(a). PD(P)O s.44(1)(b). PD(P)O s.45(1). PD(P)O s.42(3), (6) and (10). PD(P)O s.42(1)(a)(i) and (b). PD(P)O s.42(1)(a)(ii) and (b).

RESPONSIBILITIES OF THE OFFICE OF THE PRIVACY COMMISSIONER

551

Further, the Privacy Commissioner may enter any premises occupied by the relevant data user or in which the personal data system is situated to carry out an investigation in the premises.229 (f ) Obstruct or hinder inspection or investigation Offence to obstruct or hinder. Any person who obstructs or hinders an inspection or investigation,230 who fails to comply with any lawful requirement of the Privacy Commissioner,231 or who makes a statement which he or she knows to be false or does not believe is true232 also commits an offence and is liable on conviction to a ne at level 3233 and to imprisonment for six months.234 (g) Enforcement notices Principles. The Privacy Commissioner may, in certain circumstances, issue an enforcement notice where it believes that the relevant data user is contravening a requirement under the PD(P)O or has contravened such a requirement.235 For an enforcement notice to be validly issued, the Privacy Commissioner must have a reasonable basis for believing either that the data user is contravening the PD(P)O or that it has done so in circumstances that make it likely that its continuance or repetition is likely. Requirements of the written enforcement notice. The written enforcement notice must:

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state that the Privacy Commissioner is of the opinion that the relevant data user is contravening a requirement under the PD(P)O or has contravened such a requirement in circumstances that make it likely that the contravention will continue or be repeated;236 specify the requirement which he or she believes has been contravened or is being contravened and the reasons why he or she is of that opinion;237 direct the data user to take such steps within a specied period as are particularised in the notice to remedy the contravention which may include reference to any approved code of practice and may afford the relevant data user a choice between different ways of remedying the contravention or matter;238 and be accompanied by a copy of s.50 of the PD(P)O.239

229 230 231 232 233 234 235 236 237 238 239

PD(P)O s.42(2). PD(P)O s.64(9)(a). PD(P)O s.64(9)(b). PD(P)O s.64(9)(c). A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(9). PD(P)O s.50(1). PD(P)O s.50(1)(b)(i). PD(P)O s.50(1)(b)(ii). PD(P)O s.50(1)(b)(iii). PD(P)O s.50(1)(b)(iv).

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12.179

Time period should be longer than 14 days for taking steps or lodging appeal. The period of time given to take the steps set out in the enforcement notice and remedy the contravention should be longer than 14 days after the notice is served to allow the relevant data user to make an appeal to the Administrative Appeals Board against any enforcement notice. If such an appeal is made, the relevant data user need not take such steps pending the determination or withdrawal of the appeal.240 Special circumstances where steps should be taken as a matter of urgency. However, if the Privacy Commissioner is of the opinion that by reason of special circumstances the steps specied in the enforcement notice should be taken as a matter of urgency, then the Privacy Commissioner may include a statement to that effect in the notice (together with reasons why he or she is of that opinion) and the relevant data user should be given at least seven days beginning with the date on which the notice was served to carry out those steps.241 Although in special circumstances an enforcement notice may be issued during an investigation,242 it will usually follow the completion of an investigation. Offence for contravening enforcement notice and possible defence. Any relevant data user who contravenes an enforcement notice served on the data user commits an offence and is liable on conviction to a ne at level 5243 and to imprisonment for two years and, in the case of a continuing offence, to a daily penalty of HK$1,000.244 It is a defence to any such charge that the data user exercised all due diligence to comply with the enforcement notice.245 Whether or not the data user has exercised all due diligence is a question of fact.

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12.181 12.182

13. OFFENCES AND COMPENSATION


12.183 General. The PD(P)O provides for a variety of offences that may be committed by a data user246 or a person.247 Person is dened in s.3 of the Interpretation and General Clauses Ordinance (Cap.1) and covers both individuals and legal persons. (a) Contravention of any requirement under the PD(P)O 12.184 Principles. A data user who, without reasonable excuse, contravenes any requirement under the PD(P)O (other than a contravention of a data protection principle) for which no other penalty is specied commits an offence and is liable on conviction to a ne at level 3.248, 249

240 241 242 243 244 245 246 247 248 249

PD(P)O s.50(4) and (7). PD(P)O s.50(5). PD(P)O s.50(8). A level 5 ne is currently set at HK$50,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(7). PD(P)O s.64(8). See para 12.019 for the denition of data user. PD(P)O s.64. A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(10).

OFFENCES AND COMPENSATION

553

(b) Knowingly or recklessly supplying information Principles. A data user who knowingly or recklessly supplies any information which is false or misleading in a material particular commits an offence and is liable on conviction to a ne at level 3250 and to imprisonment for six months.251 Knowledge. Knowledge is an essential ingredient of the offence and must be proved by the prosecution.252 Knowledge will include the state of mind of a person who shuts his eyes to the obvious.253 Further, where a person deliberately refrains from making inquiries because he or she does not want to know the result, this may constitute actual knowledge of the facts in question.254 However, mere neglect to ascertain what could have been found out by making reasonable inquiries is not tantamount to knowledge.255 Recklessly. A person is reckless if he or she does an act which in fact involves an obvious and serious risk of harmful consequences where he or she was aware of the risk and where it was, in the circumstances known to him or her, unreasonable to take the risk.256 However, if a person did not genuinely appreciate or foresee the risks involved in his or her actions as a result of his or her age or personal characteristics, then he or she cannot be regarded as culpable so as to be convicted of the offence. (c) Supply of false or misleading information Principles. A person who, in any data access request or data correction request, supplies any information which is false or misleading in a material particular and is supplied for the purposes of having the data user or the Privacy Commissioner comply with that request commits an offence and is liable on conviction to a ne at level 3257 and to imprisonment for six months.258 (d) Liability of employers and principals Employer is liable for act undertaken by its employees. An employer is liable in civil proceedings for any act relating to personal data undertaken by its employees in the course of the employees employment which is in contravention of the PD(P)O.259 It does not matter whether or not such act was done or engaged in with the employers knowledge or approval. Employer is liable for act undertaken by third party acting as its agents or on its behalf. Similarly, an employer is liable in civil proceedings for any act relating 12.189 12.188 12.185

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250 251 252 253 254

255 256 257 258 259

A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(1). See Gaumont British Distributors Ltd v Henry [1939] 2 KB 711; [1939] 2 All ER 808. See James & Son Ltd v Smee [1955] 1 QB 78 at p 91, [1954] 3 All ER 273 at 278, per Parker J. See Knox v Boyd [1941] JC 82 at 86; Taylors Central Garages (Exeter) Ltd v Roper (1951) 115 JP 445 at 449, 450, [1951] WN 383, per Devlin J. Taylors Central Garages (Exeter) Ltd v Roper (1951) 115 JP 445 at 449, 450, [1951] WN 383, per Devlin J. Sin Kam Wah v HKSAR (2005) 8 HKCFAR 192; R v G [2004] 1 AC 1034. A level 3 ne is currently set at HK$10,000: Criminal Procedure Ordinance (Cap.221) Sch.8. PD(P)O s.64(2) and (3). PD(P)O s.65(1).

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to personal data which was undertaken by a third party if the third party was acting as its agent or on its behalf.260 It does not matter whether or not such act was done or engaged in with the employers knowledge or approval. (e) Defence 12.191 Whether practicable steps were taken to prevent the wrongful acts. An employer may avoid liability where it can show that it took such steps as were practicable to prevent the wrongful acts being undertaken.261 This would appear to afford the employer a defence in circumstances where the employee acts in a prohibited manner within the course of employment. For example, if an employee disclosed employment-related personal data to a third party contrary to data protection principle 3, the employer may be able to avoid liability for the wrongful disclosure if it can prove that the employee had ignored a departmental policy that prohibited disclosure to a third party. (f ) Individual claim for damages 12.192 Right to claim compensation by civil actions. An individual who has suffered damage (including injury to feelings) by reason of a contravention of the PD(P)O by a data user has the right to claim compensation from that data user for that damage.262 This right to compensation may be enforced by the individual taking civil action for damages. The Privacy Commissioner has no power to award compensation or even to order an apology.263 There is no cap on damages which may be imposed and the amount sought will determine the appropriate court venue ranging from the Small Claims Tribunal to the High Court. Quantum of damages depends on circumstances. The quantum of damages will depend on the particular circumstances of the case. In New Zealand, in the case of L v N,264 the New Zealand Complaints Review Committee gave the highest amount ever awarded in a claim for compensation for signicant humiliation, loss of dignity or injury to feelings under the provisions of the Privacy Act 1993. The data subject was awarded NZ$20,000 (approximately HK$90,000) to compensate for the data users systematic efforts to withhold and conceal highly damaging personal data following an access request from the data subject. The Tribunal found that the defendant embarked on a course of conduct which exacerbated the effect of the failure to conrm the existence of the information sought by the plaintiff . Among aspects of the defendants conduct that were criticised by the Tribunal were the deliberate concealment of highly sensitive personal information from the plaintiff, even though it

12.193

260 261 262 263 264

PD(P)O s.65(2). PD(P)O s.65(3). PD(P)O s.66. Chan v Privacy Commissioner for Personal Data (unrep., AAB 4/1997, 10 July 1997). (unrep., New Zealand Complaints Review Tribunal, 4 Apr 1997). In this case, the complainant had supervised disabled children for the defendant organisation. He was suspended because a complaint had been made concerning an indecent assault by him on a child in his care. The complainant, however, had never been informed of the reason for his suspension, nor was he aware that the complaint had been taken to the police. He made a number of requests for his personal information, but was never given full information behind an internal inquiry into the matter, his suspension or the complaint to the police.

PERSONAL DATA PRIVACY COMPLIANCE AND CODES OF PRACTICE

555

was obvious to the plaintiff at the time that this information was being made available to others; the defendants concealment of the fact that it had destroyed the plaintiffs le and reconstructed another after the request for information had been made; the fact that the defendant had similarly misled the Privacy Commissioner during his investigation; and the obstacles which the defendant forced the plaintiff to overcome in his quest for his personal information, which caused an increasing number of people to learn of the damaging but unanswered allegation against him.

14. PERSONAL DATA PRIVACY COMPLIANCE AND CODES OF PRACTICE


(a) Introduction Minimum requirements. In order to comply with the minimum requirements of the PD(P)O as set out above, employers should at the very least: 12.194

formulate coherent and comprehensive personal data policies dealing with the collection, compiling, processing, use of, transferring, disclosing and controlling of personal data; develop consistent guidelines for ensuring that personal data is not accidentally used or used without proper authority; and monitor the manner in which personal data is handled to ensure that it is not used for purposes which differ from the purposes for which data was collected. 12.195

Codes of practices and guidelines. Further, employers should ensure that they are familiar with the codes of practice and guidelines issued by the Privacy Commissioner for the purpose of providing practical guidance in respect of any requirements under the PD(P)O.265 Failure to comply with provisions of code of practice. While the provisions of the codes of practice may explain the application of the data protection principles in specic contexts, they may not materially amend them. The failure to comply with a provision of a code does not render a data user liable to civil or criminal proceedings.266 However, such failure shifts the onus onto the defendant and non-compliance with a relevant provision of an approved code will sufce to prove the statutory breach unless the data user can produce evidence of compliance with the statutory requirement otherwise than by way of observance of that provision.267 Non-compliance with any code will also weigh against a party concerned in any case under investigation by the Privacy Commissioner.

12.196

265 266 267

PD(P)O s.12. PD(P)O s.13(1). PD(P)O s.13(2).

556

PERSONAL DATA PRIVACY AT WORK

(b) Code of Practice on Human Resource Management (i) Introduction 12.197 General. The HRM Code came into effect on 1 April 2001. It provides employers and Human Resource Management practitioners with a practical guide to the application of the provisions of the PD(P)O to employment-related personal data privacy. The HRM Code draws on the data protection principles and applies them to the management of personal data in three important areas: recruitment, current employment and former employees matters. The HRM Code also illustrates good personal data practices applied to Human Resource Management activities. (ii) Recruitment 12.199 Means for applicants to identify the employer or the employment agency. The HRM Code recommends that where an employer directly, or through its agent, advertises a job vacancy that solicits the submission of personal data by job applicants (e.g. their personal curriculum vitae), it should provide a means for the applicant to identify either the employer or the employment agency acting on the employers behalf.268 If an employer wants to use a blind advertisement (i.e. one that provides no means of identifying either the employer or the employment agency acting on its behalf), it may provide job applicants, upon request, with application forms that show the employers identity. Alternatively, it may use a recruitment agency, which should be identied in the advertisement, to receive the personal data solicited from job applicants. Data collected should be relevant. Personal data collected from job applicants should be relevant to the purpose of identifying suitable candidates for the job.269 Therefore, unless an employer can justify the need to know, collecting information regarding an applicants or employees age, marital status, religious beliefs, race, medical history, family background, criminal records etc. may contravene statutory provisions. Data about applicants family members. An employer may collect personal data about a job applicants family members but only to the extent necessary to assess whether any conict of interest might arise should the applicant be offered the job, and be adequate and not excessive in relation to this purpose.270 For example, if an employer wants to know whether a job applicants family members are currently employed by a competitor, it should only ask whether this is the case and make further enquiries in relation to family members that are so employed to satisfy itself whether the exception in s.8(4) of the Family Status Discrimination Ordinance (Cap.527) (FSDO) applies.271 As a matter of good practice, the HRM Code suggests that an employer should consider collecting the data no earlier than at the time when the applicant is considered as a potential candidate for appointment.

12.198

12.200

12.201

268 269 270 271

HRM Code para 2.3.3. HRM Code para 2.2.2. HRM Code para 2.2.5. See Chapter 8 for further details on the FSDO.

PERSONAL DATA PRIVACY COMPLIANCE AND CODES OF PRACTICE

557

Collection of copy of identify card. An employer should not collect a copy of the identity card of a job applicant during the recruitment process unless and until the individual has accepted an offer of employment.272 Use of data in a later exercise. An employer may use personal data of a job applicant whose data is collected during the course of a recruitment exercise for use in a later exercise of this nature provided that: (a) the employer has a general policy to retain the data for such a purpose; (b) the employer has a stipulated retention period of keeping such data; and (c) the applicant has not otherwise objected to the use of his or her data for such a purpose. As a matter of good practice, an employer should give unsuccessful applicants an opportunity to request the destruction of the data if the applicant does not wish it to be used for a subsequent recruitment exercise.273 Collection of supplementary information. An employer may compile information about a job applicant, for example, by means of security vetting or integrity checking, psychological tests and written skills tests, to supplement other data collected at the time of the original application. Such supplementary information should be collected for the purpose of assessing the suitability of potential candidates for the job and the data collected should be relevant to the nature of the job. Generally, it would not be excessive to collect data to increase an employers knowledge of a candidates skills, good character, competencies or abilities, provided this knowledge is relevant to the nature of the job. By way of example, if an employer is trying to nd an individual suitable for a security guards position, an employer may use a security vetting procedure to establish an applicants security credentials. However, recording the details of a candidates outside activities and interests might be excessive unless the employer can demonstrate that such detail is relevant to the inherent requirements of the job.274 References from former employers. If an employer wishes to obtain references from a potential candidates current or former employers or other sources, it must ensure that such references are provided with the consent of the candidate concerned.275 Collection of data in relation to health condition. Personal data concerning the health condition of a selected candidate may be collected by means of a pre-employment medical examination but only if the data directly relates to the inherent requirements of the job, and employment is conditional upon the fullment of the medical examination. The data should be collected only after the employer has made a conditional offer of employment to the selected candidate.276 Retention of data of unsuccessful applicants. Personal data of unsuccessful applicants should not be retained for longer than two years from the date of rejecting that applicant and should then be destroyed. The data may be retained for a longer period if there is a subsisting reason that obliges the employer to do so, or applicants have given their consent for the data to be retained beyond two years.277

12.202

12.203

12.204

12.205

12.206

12.207

272 273 274 275 276 277

HRM Code para 2.2.4. HRM Code para 2.5.1. HRM Code para 2.7.1. HRM Code para 2.8.1. HRM Code para 3.2.4. See para 12.054.

558

PERSONAL DATA PRIVACY AT WORK

(iii) Employment 12.208 Collection of supplementary information. On appointment, an employer may collect supplementary personal data from the employee and his or her family members for the purpose of employment and other human resource management functions.278 Personal information collection statement. Before personal data is collected from an employee, an employer should provide the employee with a personal information collection statement informing the employee about the purposes for which the data is to be used, the classes of persons to whom the data may be transferred and the rights of the employee to request access to, and to request correction of, the employment-related data.279 Information compiled during disciplinary investigation should only be used for purposes directly related to the process concerned. An employer who conducts a disciplinary investigation against an employee for a breach of the terms and conditions of employment, or who carries out a performance appraisal or promotion planning, should ensure that any information compiled during such processes is used only for purposes directly related to the process concerned. The information should not be disclosed to any third party unless such party has legitimate reasons for gaining access to such data.280 Data must be accurate. An employer should take all reasonably practicable steps to ensure that the employment-related data it holds about employees is accurate having regard to the purpose for which the data is used. An employer may implement a reminder system to ask employees to report changes to their personal data so that any changes in personal circumstances concerning the employees could be made. As a matter of good practice, an employer may consider providing employees with copies of employment-related data at regular intervals and inviting them to report on any changes that need to be made.281 Not to disclose data to third party without prior consent. An employer should not disclose employment-related data of employees to a third party without rst obtaining the employees consent unless the disclosure is for purposes directly related to the employment, or such disclosure is required by law or by statutory authorities. For example, an employer may wish to enter into an agreement with a credit card company to offer a credit card with special terms and conditions for its employees. In such a case, the employer should not use the employees data and pass it to the credit card company for marketing of the card without rst obtaining the prescribed consent of the employees. However, an employer may transfer documents regarding an employees medical claim to its insurer who provides employee medical cover to effect the claim. This would be a direct purpose related to the original purpose for which the claim documents are collected.282

12.209

12.210

12.211

12.212

278 279 280 281 282

HRM Code para 3.2.1. HRM Code para 3.1.4. HRM Code para 3.3. HRM Code para 3.9. HRM Code para 3.10.1.

PERSONAL DATA PRIVACY COMPLIANCE AND CODES OF PRACTICE

559

Avoid disclosure of data in excess of that necessary for the purpose. Where employment-related data is transferred or disclosed to a third party, an employer should avoid disclosure of data in excess of that necessary for the purpose of use by the third party. For example, employment-related records held on a computer should not be printed in full and passed on to an insurer without consideration of the insurers needs. Only the information reasonably required to effect the type of insurance policy being written should be transferred to the underwriter or insurance agency.283 Where human resource function is outsourced to a third party. An employer who outsources its human resource function to a third party should ensure that the third party protects the employment-related data against unauthorised or accidental access or disclosure.284 For example, an agreement may be drawn up controlling how the data is transmitted and processed and requiring the third party to take steps to ensure the integrity, prudence and competence of its staff having access to the data. Where data is transferred to an outside party involved in a merger and acquisition etc. Where an employer transfers employment-related data to an outside party involved in a merger, acquisition or due-diligence exercise, such data should be limited to that reasonably required to make a decision on the quality of personnel employed by the organisation, or other reasonable matters relating to the acquisition or merger. For example, salary, job title, length of service, promotion history, qualications, achievements and assessment of strengths and weaknesses.285 Recording of oral comments. It is important for an employer to decide whether or not to record the oral comments made at an exit interview. Unrecorded oral comments are not personal data and are not subject to a data access request. A record in the form of a note or a summary is personal data and is subject to all the provisions of the PD(P)O. In the event of an exit interview being recorded, it is important that the employee supplying the information be informed of the use of the data, as well as the classes of persons to whom it may be transferred. (iv) Former employees matters Time limit for data retention. A former employees personal data may be retained for a period of up to seven years from the date the former employee ceases employment. The data may be retained for a longer period if there is a subsisting reason that obliges the employer to do so or the former employee has given prescribed consent for the data to be retained beyond seven years.286, 287 Only relevant information of the former employee should be retained. As a matter of good practice, the employer should take practicable steps at the earliest opportunity upon the departure of the employee to ensure that only relevant information of the employee is retained to satisfy its retention requirements.

12.213

12.214

12.215

12.216

12.217

12.218

283 284 285 286 287

HRM Code para 3.10.2. HRM Code para 3.11.2. HRM Code para 3.11.7. HRM Code para 4.2.3. See paras 12.054 to 12.060.

560

PERSONAL DATA PRIVACY AT WORK

12.219

Information included in public announcement notice. If it is necessary to make a public announcement notice regarding a former employee having left employment, the notice should include only the minimum information required to identify the employee concerned.288 Consent required to give reference to third party. An employer should only give a reference on a former employee to a third party if the employer has the former employees prescribed consent.289 (c) Code of Practice on the Identity Card Number and Other Personal Identiers

12.220

12.221

Introduction. The Code of Practice on the Identity Card Number and Other Personal Identiers (ID Card Code) was gazetted on 19 December 1997. With the exemption of the requirement restricting the issue of cards with an identity card number printed on it (which took effect on 19 December 1998), the requirements of the ID Card Code took effect on 19 June 1999. The ID Card Code gives practical guidance on the requirements of the PD(P)O as applied to the collection, retention, accuracy, use and security of identity card numbers and copies of ID cards and other personal identiers. No collection of ID card number except in limited circumstances. In an employment context, the ID Card Code provides that a data user should not collect the ID card number of an individual except in limited circumstances.290 Collection pursuant to a statutory provision. These circumstances include where the data user is required to furnish or collect the identity card number pursuant to a statutory provision.291 For example, s.17K of the Immigration Ordinance292 requires that every employer shall keep at the place of employment of each of his or her employees a record of (a) the full name of the employee as shown in his or her identity card or other document by which he or she is lawfully employable; and (b) the type of document held by the employee by virtue of which he or she is lawfully employable and the number of that document. Collection prohibited where it is merely in anticipation of prospective relationship. However, it is not permitted to collect a copy of the ID card merely in anticipation of a prospective relationship.293 Therefore, where factors remain to be considered which would affect whether an offer would be made to a particular applicant, then the applicants ID card copy should not be collected until those factors have been considered.

12.222

12.223

12.224

12.225

12.226

288 289 290 291 292 293

HRM Code para 4.6.1. HRM Code para 4.5.1. ID Card Code para 2.3. ID Card Code para 2.3.1. Cap.115. ID Card Code para 3.3.2.

GUIDELINES

561

Identity card number and name of holder should not be displayed together publicly. A data user should also take all reasonably practicable steps to ensure that the identity card number and the name of the holder are not displayed together publicly.294 For example, ID card numbers should not be displayed with the names of the holders on any staff card. In a complaint investigated by the Privacy Commissioner,295 a company sent fax messages to its customers to inform them of the resignation of an employee. Included in the messages was the name of the employee as well as his identity card number. This was done without the employees knowledge or consent. The Privacy Commissioner found that the company had acted in breach of data protection principle 4 of the PD(P)O in that it had not taken reasonably practicable steps to ensure the personal data (i.e. the identity card number) of the ex-employee was protected from accidental or unauthorised use.

12.227

12.228

15. GUIDELINES
The Privacy Commissioner may issue, prepare and publish guidelines for the guidance of data users indicating the manner in which he or she proposes to perform any of his or her functions, or exercise any of his or her powers, under the PD(P)O.296 (a) Introduction General. The Privacy Guidelines: Monitoring and Personal Data Privacy at Work (Monitoring Guidelines) were issued by the Privacy Commissioner pursuant to this power. Where employee monitoring is undertaken resulting in the collection of personal data of employees, the employer should ensure that such act or practice complies with the data protection principles. The Monitoring Guidelines are issued in the context of personal data management and are indicative of the manner in which the Privacy Commissioner offers guidance to employers on the application of the provisions of the PD(P)O as they relate to the activity of employee monitoring. Purpose. The purpose of the Monitoring Guidelines is stated to be: To provide guidance to employers on the steps they can take in assessing whether employee monitoring is appropriate for their business, and where it is deemed appropriate, how they can develop compliant practices in the management of personal data obtained from employee monitoring.297 The Monitoring Guidelines are intended to offer a practical solution in terms of balancing the legitimate business interests of employers and the personal data privacy rights of employees. 12.232 12.230 12.229

12.231

294 295 296 297

ID Card Code para 2.7.1. Case No: 1997005. PD(P)O s.8(5). Monitoring Guidelines para 1.2.1.

562

PERSONAL DATA PRIVACY AT WORK

12.233

For illustration purpose only. The Monitoring Guidelines are not denitive statements of law and are merely intended to illustrate best practice. They will therefore not be taken into account in the same way as the HRM Code or ID Code referred to above. (b) Application of the Monitoring Guidelines

12.234

General. The Monitoring Guidelines apply to employee monitoring activities whereby personal data of employees is collected in a recorded form. They do not apply to activities where no personal data of employees is collected. They may apply to monitoring by employers in the following ways:

telephone monitoringmonitoring and recording telephone calls and voice mails made or received by employees on telecommunications equipment, including mobile phones, made available by the employer; email monitoringmonitoring and recording employees use of email sent and received on equipment made available to them by the employer; internet monitoringmonitoring and recording employees web browsing activities using equipment made available to them by the employer; and video monitoringmonitoring and recording employees work activities and behaviours by the use of video recording or closed circuit TV systems (CCTV), or similar equipment. (c) Evaluating the need for employee monitoring and its impact on personal data privacy

12.235

The 3As due diligence should be conducted. The Monitoring Guidelines recommend that prior to commencing any form of employee monitoring, employers should conduct due diligence by undertaking a systematic assessment process referred to as the 3As: Assessment, Alternatives and Accountability. The purpose of this assessment is to determine whether employee monitoring is the best option given the risks and activities the employer seeks to manage.298 The three components are as follows:

12.236

Assessment. Assessment of the risks that employee monitoring seeks to address and the benets to be derived from applying it to those risks, having regard to the purpose(s) that relate to the business functions or activities of the employer. For example, employers may deem it appropriate to monitor the amount of time spent on web-browsing activities by employees to prevent company resources from being substantially used for private purposes that may adversely impact upon the productivity of the organisation.

298

Monitoring Guidelines para 2.1.2.

GUIDELINES

563

Alternatively, logging of websites visited by employees may be designed to detect activities that are prohibited when accessing the internet such as downloading copyright protected materials without the licence of the copyright owner. Infringement of copyright laws is an act for which the employer may be held vicariously liable. Employers should then assess the likely adverse impact that monitoring may have on the personal data privacy of employees and determine whether the undertaking of employee monitoring can be justied as reasonable and fair in the circumstances. Alternatives. Alternatives to employee monitoring and a consideration of the range of options open to the employer that may be equally cost effective and practical in their application, yet less privacy intrusive. For example, to prevent unauthorised access to websites containing prohibited material, or downloading other unacceptable content from the internet, an employer may consider the installation of lter software. This may achieve the same result yet be considerably less intrusive than the employer logging all websites visited by employees. The Monitoring Guidelines recommend that employee monitoring should be conducted in an overt manner and that covert monitoring should not be adopted unless it is justied by the existence of relevant special circumstances (for example, if there are reasonable grounds to believe that an unlawful activity is about to be committed or is being committed and covert monitoring is required to detect or collect evidence of that unlawful activity). Accountability. Accountability of the employer in those circumstances in which employee monitoring results in the collection of personal data of employees. It is the responsibility of the employer to implement privacy compliant data management practices in the handling of personal data obtained from employee monitoring and to ensure that a privacy policy relating to employee monitoring is developed and brought to the notice of the employees before monitoring is introduced. (d) Managing personal data obtained from employee monitoring The 3Cs process should be followed. In designing monitoring policies and data management procedures, the Monitoring Guidelines recommend that employers adopt a systematic process referred to as the 3Cs: Clarity, Communication and Control.299 The three components of the process are as follows: Clarity. Clarity in the development and implementation of employee monitoring policies that clearly specify the purpose(s) served by employee monitoring, the circumstances under which monitoring may take place, the kinds of personal data that may be collected in the course of monitoring and the purpose(s) for which personal data obtained from monitoring records may be used. 12.238 12.237

299

Monitoring Guidelines para 3.1.2.

564

PERSONAL DATA PRIVACY AT WORK

If CCTV monitoring is to be used, it is recommended in the Monitoring Guidelines that the employee monitoring policy also includes information on who is authorised to operate the equipment, the criteria for accessing monitoring records (e.g. whether all recordings are viewed routinely or only when an incident is reported), the retention period for the recorded information, the security measures that apply to the storage, release and disposal of recorded information and, where appropriate, the areas in which monitoring is located and the times when monitoring will be in effect.300 The Monitoring Guidelines also recommend that employees are clearly informed in the policy about the following:

the conditions that govern the use of the communications equipment for private purposes (if permitted); whether the employer reserves the right to access the contents of communications sent or received by employees; the types of content that are prohibited in email usage (e.g. sending defamatory statements about other employees, sending company information that is condential etc.); where appropriate, instructions for employees to label email messages as personal and private in the header eld so that messages of a personal nature can be clearly distinguished from work-related messages; an electronic trace of every access to the internet may be held on servers; the types of activities that are prohibited when accessing the internet; and the procedures and sanctions to be applied if an employee is found in breach of the policy.301

Communication. Communication with employees to inform them of the nature of, and reason for, the monitoring of their activities at work prior to undertaking employee monitoring. Once the Employee Monitoring Policy has been developed, employees should be notied of the policy. The Monitoring Guidelines suggest that this can be done in a number of ways, for example:

incorporating the policy into personnel training or orientation programmes; publishing the policy in the employee handbook or manual; posting the policy on noticeboards; including the policy as part of an employment contract;

300 301

Monitoring Guidelines para 3.2.3. Monitoring Guidelines para 3.2.4.

GUIDELINES

565

linking the policy to a network login screen that requires afrmative acknowledgement before being allowed access to the network.302

Control. Control over the holding, processing and use of monitoring records to safeguard the protection of employees personal data contained in them. Unless an employer obtains the prescribed consent of an employee, or unless there is an applicable exemption provided in the PD(P)O, an employees personal data collected in monitoring records may only be used for the purposes stated in the employers monitoring policy or for a directly related purpose.303 Further, personal data contained in monitoring records should not be kept any longer than is necessary for fullling the stipulated purpose, for which the records are to be used.304 The Monitoring Guidelines recommend that an employer species the retention periods of monitoring records, taking into account the nature of the information and the purpose for which the personal data was collected. It recommends a retention period of not more than six months unless the employer is obliged to retain monitoring records for a longer period, for example, if the recorded information reveals an incident of wrongdoing or seriously improper conduct by an employee and the employer uses the information to make a decision that directly affects the employee or the recorded information is required for evidentiary purposes or in legal or disciplinary proceedings.305 Employers should implement security and access control measures to safeguard and protect personal data collected in monitoring records and ensure that those personnel responsible for managing employee monitoring possess the requisite integrity, prudence and competence. Employees should also be made aware of their right to access their own personal data collected in the course of employee monitoring.306

302 303 304 305 306

Monitoring Guidelines para 3.3.1. Monitoring Guidelines para 3.4.1. Monitoring Guidelines para 3.4.3. Monitoring Guidelines para 3.4.4. Monitoring Guidelines para 3.4.5.

CHAPTER 13

CROSS-BORDER EMPLOYMENT
Para. 1. Introduction ............................................................................................................................ 13.001 2. The contractual arrangement: secondment, dual contract or direct hire? .............................. 13.002 (a) Secondment ..................................................................................................................... 13.003 (b) Dual contract ................................................................................................................... 13.007 (c) Direct hire ....................................................................................................................... 13.009 3. Immigration ........................................................................................................................... 13.012 (a) Employment visa ............................................................................................................. 13.012 (b) Liability for work-related injury sustained by illegal worker ......................................... 13.036 (c) Other immigration schemes for professionals and graduates ......................................... 13.039 (d) Unskilled and semi-skilled overseas workers ................................................................. 13.041 (e) Recruiting from Mainland China .................................................................................... 13.044 (f) Foreign domestic helpers ................................................................................................ 13.048 4. Taxation .................................................................................................................................. 13.051 (a) Hong Kong employment ................................................................................................. 13.056 (b) Non-Hong Kong employment ......................................................................................... 13.065 (c) Duties of employer and employee upon employee entering or leaving Hong Kong ....... 13.068 (d) Contributions to retirement schemes .............................................................................. 13.074 5. Dispute resolution .................................................................................................................. 13.076 (a) Governing law ................................................................................................................. 13.077 (b) Jurisdiction ...................................................................................................................... 13.092 6. Employees working outside of Hong Kong ............................................................................. 13.100 (a) Employers liability for work-related injuries to employees working outside of Hong Kong .................................................................................................................. 13.100 (b) Applicability of ECO to work-related injuries sustained outside of Hong Kong ........... 13.104 (c) The Contracts for Employment Outside Hong Kong Ordinance .................................... 13.109

1. INTRODUCTION
Overview of chapter. Hong Kong, with its status as an international nancial centre, its central location in the Asia-Pacic region, and its geographical, social and economic nexus to China, is an attractive destination for both skilled and unskilled workers. Many multinational companies have chosen to have a base in Hong Kong and with the increasingly globalised nature of the workforce, it has become commonplace in many industries for employees from overseas (particularly those who are employed within an international group of companies) to spend time working in Hong Kong. Equally, Hong Kong companies wishing to take advantage of the opportunities in Mainland China are requiring more of their locally hired employees to spend time working in China. Cross-border assignments of this nature raise a number of legal issues affecting both the employee and employer, including issues related to tax, immigration, dispute resolution and employment status. This chapter will explore some of the key issues with regard to the position of overseas nationals, both skilled and unskilled, who are engaged to work in Hong Kong, and the position of Hong Kong residents engaged to work outside of Hong Kong. 13.001

2. THE CONTRACTUAL ARRANGEMENT: SECONDMENT, DUAL CONTRACT OR DIRECT HIRE?


Choosing the nature of the contractual arrangement. The nature of the contractual arrangement under which an overseas national is engaged during an assignment in a foreign country will have signicant implications for both employer and employee. Broadly speaking, an employer wishing to retain the services of an overseas national has one of three contractual arrangements from which to choose: (1) to engage the services of the employee under a secondment agreement with his original employer (home employer) whereby the employee retains his original contract of employment with his home employer but is seconded, or on loan to an employing entity in a foreign country (host country) (secondment arrangement); (2) to employ the overseas national under a new contract of employment with an employing entity in the host country, whilst the employee also retains his original contract of employment with his home employer (dual contract arrangement); or (3) to have the employee terminate his contract of employment with his home employer in order to enter into a new employment contract with an employing entity in the host country (direct hire arrangement). The choice of which contractual arrangement to proceed with will depend upon a number of factors, including the purpose of the assignment, the length of the assignment, the location of the assignment and the local laws applicable to the place of work,1 whether or not the employee will be required to work in other jurisdictions, the nature of the work that the employee is required to undertake during the assignment, and the relationship between the two employing entities. Each of these arrangements is considered in more detail below. 13.002

For example, in the Peoples Republic of China an employee must be engaged under a contract of employment with a local China entity in order to perform services for that entity in Mainland China.

570

CROSS-BORDER EMPLOYMENT

(a) Secondment 13.003 Features of a secondment arrangement. In a secondment arrangement, the employee retains his original contract of employment with his home employer, but is sent to another host entity in order to provide services to that entity.2 The home employer will generally enter into a contract with the host entity (a secondment agreement) in order to formalise the terms of the arrangement between the two corporate entities. In addition, it is general practice, and indeed advisable for the host entity to have in place an agreement with the employee which sets out the terms of the arrangement in so far as it affects the employee. The most important term to particularise in such an agreement is the fact that the assignment is not intended to confer employee status on the employee. That is, the employee remains the employee of the home employer and is simply on loan to the host entity throughout the assignment. Such an agreement serves as evidence of the parties intentions regarding the employees rights and entitlements which may be affected by continuity of employment, such as annual leave or long service entitlements, although of course it will not necessarily be conclusive on this issue. Employee remains on home terms and conditions of employment. In a secondment arrangement, the employee typically continues to receive and accrue all benets and entitlements conferred under his original contract of employment with the overseas employer. For example, if an employee is seconded from a UK employer, the employee will be entitled to the same number of annual leave days which he would have received had he remained in the United Kingdom. Generally, an employee on secondment will continue to receive salary directly from his overseas employer.3 Secondment agreement should address issues of management of employee. In a secondment arrangement, because the original employment relationship continues to subsist, the employee is still subject to all of the implied duties he owes as an employee to his home employer. For example, the employee is bound by virtue of the continuing employment relationship to receive instructions from and to act in the best interests of his home employer. Accordingly, the secondment agreement between the home employer and the host entity will need to address key human resources issues if the host entity wishes to exercise any management or control over the employee during the secondment period. This is particularly important where the host entity is not an associated company, but is a third party with no legal connection with the home employer. From a practical perspective, it will be important for the secondment agreement to contain a term outlining the employees position and duties whilst in the host country, and a term permitting the host entity to manage the employee on a day-to-day basis for the duration of the assignment. Equally, it is important that matters such as responsibility for performance reviews, recommendations for salary

13.004

13.005

For an example of such an arrangement, see HSBC Bank Plc v Wallace [2008] 1 HKLRD 613 in which the plaintiff was employed in the UK by the parent company, a bank incorporated and based in the UK, and immediately seconded to work for the subsidiary company in Hong Kong. In many secondment arrangements, the cost of the employees salary and benets over the period of the assignment is expressed as, and will be charged to the Hong Kong entity as, a fee in consideration for the overseas entity providing the services of the employee.

THE CONTRACTUAL ARRANGEMENT

571

or bonus increases and disciplinary action are addressed in the secondment agreement since these are matters which would ordinarily reside within the strict purview of the home employer. Generally, it is preferable for the home employer to continue to retain control of these matters in order to avoid any argument that the secondment arrangement has created an employment relationship between the employee and the host entity. Termination of secondment agreement does not automatically terminate the employees employment. Once a secondment arrangement comes to an end, the assignment under which the employee is seconded is terminated, and the employee is required to return to his former position with his original employer. Problems may arise if the original employer has no position to offer the employee upon repatriation. If that is the case, then a separate process of termination of the employment must be conducted. Generally, this can only be effected in accordance with the governing laws of the contract of employment (generally the place where the home employer is located). Take the example of an employee who is originally hired under a contract of employment in France, and subsequently posted on secondment to Hong Kong for a period of two years. Upon the termination of the secondment arrangement, if the original employer is unable to offer the employee a position back in France, the employees employment cannot be terminated in the same way as a locally hired employee in Hong Kong, but (assuming that the original contract of employment is governed by the laws of France)4 should be terminated in accordance with the procedures and requirements under French employment law, which are much more onerous than the termination provisions which operate under the Employment Ordinance (EO) in Hong Kong. (b) Dual contract Features of a dual contract arrangement. Under a dual contract arrangement, the employee remains employed by the home employer but enters into a separate contract of employment with a host entity.5 This arrangement is useful when an employee splits his time between two jurisdictions and/or is expected to carry out duties for both entities. In other words, it is envisaged that the employee will be spending part of the assignment period performing services for the home employer, and part of the period performing services for the host entity. The employees salary and benets will be allocated between the two entities; the split is generally apportioned in accordance with the time spent working for each entity, and can lead to favourable tax consequences for the employee.6 This arrangement is most frequently used by companies within the same group, since in practice the employee will be spending his time performing duties which result in complementary benets to both employers. 13.007 13.006

4 5

See paras 13.077 to 13.091 for further discussion on the governing law of a contract of employment. Dual contract arrangements are recognised in Hong Kong and are permissible from an employment perspective and a taxation perspective. This will not necessarily be the case in all jurisdictions. Hong Kong salaries tax implications for an employee under a dual contract arrangement are discussed at para 13.062.

572

CROSS-BORDER EMPLOYMENT

13.008

Termination of dual contract arrangement. In light of the fact that the employee engaged under dual contracts has two employers, each will need to terminate the employees employment in accordance with the contractual arrangements provided for in the respective contracts of employment, and in accordance with the respective laws of the country governing each contract of employment, assuming these are different.7 (c) Direct hire

13.009

Direct hire. Under a direct hire arrangement, the employees employment with his home employer is terminated and he enters into a new contract of employment with a host country entity. This is clearly the most straightforward of the three arrangements since at any given time there is only one employer to whom the employee owes any duties, performs work for, and reports to. Any rights or obligations are owed by the employee to the new employing entity and the employee is generally released from any further obligations towards his previous employer. Equally, the original home employer is released from any further obligations towards the employee. Termination of employment under direct hire arrangement. In Hong Kong, there is no concept of transfer of undertakings,8 and so if a Hong Kong hired employee is to be transferred to an overseas entity under a direct hire arrangement, his employment must rst be terminated in Hong Kong in accordance with Hong Kong employment law provisions relating to termination.9 Hong Kong law does however recognise the concept of continuous service10 between associated companies11 so that an employees length of service will be deemed to be unbroken in the event of an employee transferring between group companies.12 Thus accumulated continuous service with a former employer will continue unbroken with the new employer. This is so even if the employees employment has been formally terminated. The EO does not dene company, so it is not clear whether the provisions relating to continuous service apply to a transfer to a non-Hong Kong company located overseas. If the denition of company used in the Companies Ordinance (CO) is applied, then continuous employment with a non-Hong Kong company overseas would not count as continuous service with a Hong Kong associated company for the purposes of calculating an

13.010

7 8

9 10 11

12

See paras 13.077 to 13.091 for further discussion on the governing law of a contract of employment. Compare the position in the UK under the Transfer of Undertakings (Protection of Employment) Regulations 2006 pursuant to which employees retain their right to continued employment in the event of a transfer of business from one employer to another. See generally Chapters 6 and 7. Continuous service is dened in s.3 and Sch.1 to the EO (Cap.57). See Chapter 2, paras 2.0422.044. Section 31K(5) of the EO provides: companies shall be taken to be associated companies if one is a subsidiary of the other, or both are subsidiaries of a third company, and associated company. Sections 2(4), 2(5) and 2(6) of the Companies Ordinance dene the circumstances in which a company will be considered to be a subsidiary. Section 31K(4) of the EO provides: Where an employee of a company is taken into the employment of another company which, at the time when he is taken into its employment, is an associated company of the rst-mentioned company, his period of employment at that time shall count as a period of employment with the associated company, and the change of employer shall not break the continuity of the period of employment.

IMMIGRATION

573

employees entitlements based on length of service, such as severance payments or long service payments.13 Employing entities to decide upon status of accrued contractual benets. In the event of a transfer of employment taking place between entities within an international group of companies, it is, at least in theory, open to the employee to negotiate with his new overseas employer a term in his contract of employment which recognises past years of service with the Hong Kong associated company. The respective entities are of course free to decide between themselves that they will recognise the employees accrued entitlements and carry them over to the new employing entity. This ensures that the employee does not lose out on any contractual entitlements that may be triggered by length of service such as entitlement to contractual leave based on years of service, or statutory entitlements that may be applicable in the jurisdiction to which the employee has been transferred, such as terminations payments on redundancy (which are usually calculated by reference to an employees years of service). A term of this nature can prove to be an attractive incentive for an employee. 13.011

3. IMMIGRATION
(a) Employment visa Employment visa required in absence of right of abode or right to land in Hong Kong. Regardless of the contractual arrangement under which a foreign national has agreed to work in Hong Kong, any person without the right of abode in Hong Kong (i.e. a permanent resident of Hong Kong) must obtain an employment visa before 13.012

13

Section 2 of the CO (Cap.32) denes company as a company formed and registered under this Ordinance or an existing company. This excludes companies incorporated outside of Hong Kong. It is suggested that the CO denition is most likely to apply for a number of reasons: rst, it appears that the draftsmen of the EO chose to the use the word company rather than a word which could have been construed more broadly to include non-Hong Kong companies; compare s.1(3) of the CO which denes body corporate or corporation as including a company incorporated outside of Hong Kong. The EO refers specically to company rather than body corporate or corporation. Secondly, the benet being conferred by s.31K(4) relates to preservation of continuous service for purposes of entitlements to benets under the EO. Once an employee leaves the jurisdiction of Hong Kong and enters into a contract of employment with an overseas company, he will generally no longer be entitled to those benets. Thus from a practical perspective it may be difcult for an employee to enforce the benet conferred by s.31K(4) in a jurisdiction outside of Hong Kong, since his employment will be subject to the protections conferred by the labour laws of the country in which he has been transferred to, rather than the EO. Thirdly, a Hong Kong employer would have had to terminate the employment of the employee being transferred prior to such transfer and so any accrued statutory entitlements would have already been paid out. If the provisions are applicable to transfers to and from an overseas company, then an employees continuous service with both the non-Hong Kong company and the previous service with the Hong Kong company would count as continuous service with a Hong Kong associated company upon the employees return to Hong Kong, even if both the Hong Kong company and non-Hong Kong company had already paid out termination entitlements in relation to the previous years of service which the employee had served for each respective company. This would lead to a duplication of termination payments in respect of the same years of service, a result that the legislators could hardly have intended.

574

CROSS-BORDER EMPLOYMENT

coming to Hong Kong for the purpose of taking up employment.14 A person who does not have a right of abode or the right to land15 in Hong Kong requires permission to land from either an immigration ofcer or an immigration assistant. A person who enters Hong Kong without such permission commits an offence punishable with a ne of up to three years imprisonment,16 and may be the subject of a removal order.17 13.013 Requirement to carry a Hong Kong identity card. Any person who enters Hong Kong and is permitted to stay for a period longer than 180 days must apply to register for a Hong Kong identity card within 30 days of arrival.18 All persons resident in Hong Kong over the age of 15 years are required to carry their Hong Kong identity card with them at all times.19 Employee may enter Hong Kong under visitors visa but must not breach conditions of stay. The application for an employment visa should ideally be made prior to an individuals entry into Hong Kong.20 However applications can be made after entry under a visitors visa if necessary, even though employment may not commence until approval has been given by the Immigration Department of Hong Kong. Many overseas nationals are permitted to enter Hong Kong for purposes of pleasure or business and will be granted a visitors visa on arrival. A visitors visa permits an overseas national to remain in Hong Kong for a specied number of days. The number of days permitted under a visitors visas will vary depending upon the nationality of the visitor.21 A person given permission to enter Hong Kong as a visitor is subject to the following conditions of stay: he shall not take up any employment,

13.014

14

15 16 17

18 19 20

21

Section 2A of the Immigration Ordinance (Cap.115). Schedule 1 to the Immigration Ordinance provides that a person who falls within one of the following categories is a permanent resident of Hong Kong: (a) a Chinese citizen born in Hong Kong before or after the establishment of the Hong Kong Special Administrative Region (HKSAR); (b) a Chinese citizen who has ordinarily resided in Hong Kong for a continuous period of not less than seven years before or after the establishment of the HKSAR; (c) a person of Chinese nationality born outside Hong Kong before or after the establishment of the HKSAR to a parent who, at the time of the birth of that person, was a Chinese citizen falling within category (a) or (b); (d) a person not of Chinese nationality who has entered Hong Kong with a valid travel document, has ordinarily resided in Hong Kong for a continuous period of not less than seven years and has taken Hong Kong as his permanent place of residence before or after the establishment of the HKSAR; (e) a person under 21 years of age born in Hong Kong to a parent of a permanent resident of the HKSAR in category (d) before or after the establishment of the HKSAR if at the time of his birth, one of his parents has the right of abode in Hong Kong; (f) a person other than those residents in categories (a) to (e), who, before the establishment of the HKSAR, had the right of abode in Hong Kong only. Section 2AAA of the Immigration Ordinance confers the right to land on former permanent residents. Section 38(1)(a) of the Immigration Ordinance. The Director of Immigration has the power to make a removal order under these circumstances: s.19(1)(b)(ii) of the Immigration Ordinance. Section 3 of the Registration of Persons Ordinance (Cap.177). Section 17(c)(1) of the Immigration Ordinance. Prospective employees may submit visa applications to the nearest Chinese diplomatic and consular mission in their place of residence. Alternatively, for visa applications other than from China, applications may be sent to the Hong Kong Immigration Department directly or through the sponsor in Hong Kong. The duration of stay granted under a visitors visa varies from 7 days to 180 days. See the Department of Immigrations pamphlet Do you need a visa for the HKSAR? (Form ID 290) for a list of countries and territories from which a visitors visa can be obtained, and the respective limits of stay. For a guide to the application process see Guidebook for Entry for Visit/Entry Transit in Hong Kong (Form ID(E)1004) published on the Immigration Departments website at http://www.immd.gov.hk/ehtml/id1004.htm.

IMMIGRATION

575

whether paid or unpaid; he shall not establish or join a business; and he shall not become a student at a school, university or other educational institution.22 Employee may enter Hong Kong but is not permitted to work in Hong Kong until grant of employment visa. An overseas national is able to enter Hong Kong prior to obtaining an employment visa, but is not permitted to perform work until the employment visa has been granted. In practice, many foreign nationals arrive in Hong Kong under a visitors visa before their employment visas have been granted.23 Employers often expect such employees to commence employment whilst their employment visas are being processed. However, it is an offence for an employee to do so, since it amounts to a breach of a condition of stay.24 An employee found to be in contravention of the relevant provision in the Immigration Ordinance is liable to imprisonment for up to two years and to a ne at level 5.25 Factors taken into account by Immigration Department in granting employment visas for professionals. The decision to grant an employment visa is entirely a matter of discretion under s.11 of the Immigration Ordinance. Overseas nationals who possess special skills, knowledge or experience of value to and not readily available in Hong Kong may apply for an employment visa to work in Hong Kong under the General Employment Policy (GEP).26 Under the GEP the Immigration Department will generally have regard to three criteria: (i) the extent to which the business of the employer is likely to be benecial to the Hong Kong economy, trade and industry; (ii) the extent to which the proposed employee is indispensable to that business; and (iii) whether or not a local or resident worker could ll the position.27 In order to full these criteria, an applicant for an employment visa must submit supporting evidence to satisfy the Immigration Department of the following: that there is a genuine vacancy; that he has the requisite skills, knowledge and experience for the role; that he is in a position to make a substantial contribution to the economy of Hong Kong; and that the role cannot be lled locally. In order to satisfy the last criteria, it is usually not necessary for the employer to have 13.015

13.016

22

23

24 25 26

27

Immigration Regulations (Cap.115A). An employee who has entered Hong Kong on a visitors visa may engage in limited business-related activities such as attending short-term seminars or business meetings, submitting tenders, concluding contracts, participating in or exhibiting at trade fairs, examining or supervising the installation or packaging of goods or equipment, or settling compensation or other civil proceedings (see Form ID(E)1004 at para 12 (fn 21)). Once an employee has been granted an employment visa the practice is for the employee to leave Hong Kong (often by taking the short trip to nearby Macau) and re-enter the following day in order to activate the visa. Section 2 of the Immigration Regulations (Cap.115A). Section 41 of the Immigration Ordinance. A ne at level 5 is currently HK$50,000. These arrangements do not apply to former Chinese residents of Mainland China residing in Macau who have acquired resident status through channels other than the One-way permit scheme, or nationals from Afghanistan, Albania, Cuba, and the Democratic Republic of Korea. Nor do these arrangements apply to professionals who are Chinese residents from Mainland China, who may apply under the Admissions Scheme for Mainland Talents and Professionals. However, Chinese nationals holding PRC passports who meet the eligibility criteria for GEP may apply for an employment visa under the GEP if the applicant has permanent residence overseas, or has been residing overseas for at least one year immediately before the submission of the application, and the application is submitted from overseas. Overseas in this context means countries or territories outside Mainland China, Macau or Hong Kong. The relevant policies and general criteria for entry are published in the Guidebook for Entry for Employment as Professionals in Hong Kong (ID(E)991) (04/2009) available on the Department of Immigrations website: http:// www.immd.gov.hk/pdforms/ID(E)991.pdf.

576

CROSS-BORDER EMPLOYMENT

advertised the position in Hong Kong. However, an employer may be required to make a statement to the effect that it has taken appropriate steps to look for a local worker to ll the position. 13.017 Visa application process. An overseas employee seeking to render services in Hong Kong must have a Hong Kong sponsor to sponsor his employment visa application. In support of the application, a Hong Kong employer will need to submit a contract of employment or secondment agreement between the overseas national and the Hong Kong company evidencing the agreement for the provision of the employees services in Hong Kong.28 It normally takes between four to six weeks to process an employment visa application if it is submitted directly to the Immigration Department.29 An application will generally be considered favourably if the following conditions are satised: (a) there is no security objection or known record of serious crime in respect of the applicant; (b) the applicant has a good education (normally a rst degree in the relevant eld or good technical qualications) or proven professional abilities and/ or relevant experience or achievements; (c) there is a genuine job vacancy; (d) the applicant has a conrmed offer of employment and is employed in a job relevant to his academic qualications or working experience that cannot be readily taken up by the local workforce in Hong Kong; and (e) the remuneration package including income, accommodation, medical and other fringe benets is broadly commensurate with the prevailing market level for professionals in Hong Kong. Extension of employment visa. An employment visa is granted for a limited period of time, usually two years, or the duration of the contract of employment, whichever is the shorter. If an employees employment continues beyond the date of the expiry of his employment visa, the employee will need to apply for an extension of his stay within four weeks prior to the expiry of the employment visa. An application for an extension of an employment visa will generally be granted if the original conditions for granting the employment visa still hold true. Obligations of employer upon change of employment. Overseas employees are not permitted to change employment or take up additional or alternative employment to that for which the employment visa was originally granted without the permission of the Immigration Department.30 An employer wishing to engage an employee who is already the holder of an employment visa (i.e. someone who may not lawfully work in Hong Kong without such a visa) must therefore ensure that the employee has obtained the requisite permission of the Immigration Department before the additional or alternative employment commences. Employment visa holders may obtain dependent visas for spouse and dependent children. Once an employee has been granted an employment visa, it is generally

13.018

13.019

13.020

28

29

30

Pamphlet ID(E)991 contains a check-list of the documents which should be led in support of an employment visa application: see fn 27. The overseas national must complete and submit Form ID990A, and the Hong Kong employer must complete and submit Form ID990B, both of which are available on the Immigration Departments website: http://www.immd. gov.hk/ehtml/fprofes.htm. Regulation 2(4) of the Immigration Regulations (Cap.115A).

IMMIGRATION

577

a straightforward matter to obtain a dependent visa for the employees spouse and unmarried children under the age of 18.31 Factors taken into account by Immigration Department in granting dependent visas. In order to obtain a dependent visa, the employee must be able to submit evidence to satisfy the Immigration Department of the following: that there is a genuine relationship between the employee and the dependent (such as a marriage certicate in the case of a spouse or birth certicate in the case of a child); that there is no known record to the detriment of the employee; and that the employee is in a position to support the dependent and to provide him or her with suitable accommodation in Hong Kong. Dependents of employment visa holders who are granted dependent visas are permitted to study, start a business, or take up employment in Hong Kong. Employer can only employ lawfully employable person. An employer may only employ an employee32 who is lawfully employable within the meaning conferred by the Immigration Ordinance.33 Presumption of employment where person found at a place of employment. The reach of the s.17I provision is much broader than that suggested by the wording of the section, since there is a presumption that a person found at a place of employment is employed by the employer.34 The presumption operates unless evidence is adduced that the employee is lawfully employable.35 Employer must check that employee is lawfully employable. An employee is lawfully employable only if he holds a Hong Kong identity card or appropriate 13.021

13.022

13.023

13.024

31

32

33

34 35

The policy relating to dependents is set out in Pamphlet ID(E)991. Dependent visas are not readily obtainable for dependents not falling within these categories such as same-sex partners, de facto spouses, or ances. Partners falling into the latter two categories may however apply for a prolonged visitor visa. Dependent visas are not available to former Chinese residents of Mainland China residing in Macau who have acquired resident status through channels other than the One-way permit scheme, or nationals of Afghanistan, Albania, Cuba and the Democratic Peoples republic of Korea. Section 17(G)(1) of the Immigration Ordinance denes employee as any person who has entered into a contract of employment to be employed by any other person as an employee or apprentice and contract of employment as any agreement, whether in writing or oral, express or implied, whereby one person agrees to employ another and that other agrees to serve his employer as an employee and includes a contract of apprenticeship. Employer is dened as any person who has entered into a contract of employment to employ any other person as an employee or apprentice, and the duly authorized agent, manager or factor of such rst mentioned person. Someone who is not a Hong Kong resident and is working in Hong Kong not under a contract of employment person, but under a secondment agreement, must still hold an employment visa before being able to work in Hong Kong. The Immigration Department does not require a contract of employment with a Hong Kong employer in all cases, since it also accepts a secondment agreement as supporting evidence for an employment visa application. An employer sponsoring an employment visa for an employee entering Hong Kong to perform services for the employer under a secondment agreement is therefore likely to be considered as a duly authorised agent, manager or factor for the purposes of s.17(G)(1). Section 17G(2) of the Immigration Ordinance states: Without prejudice to any provision of this Ordinance relating to conditions of stay which may be imposed on any person, a person is lawfully employable for the purposes of this Part only if (a) he is the holder of an identity card and he has not breached any conditions of stay (if any) imposed on him under this Ordinance; (b) he is the holder of an ofcial passport; or (c) he is not required to be registered under the Registration of Persons Ordinance (Cap.177) and is the holder of (i) a valid travel document which is not endorsed with a condition of stay prohibiting him from taking employment; (iii) Vietnamese refugee card which does not prohibit him from taking employment; (iv) a certicate of exemption; or (v) any other document of a type approved by the Governor by order published in the Gazette. Section 17N of the Immigration Ordinance. See R v Rabosa (unrep., HCMA 000721/1995, [1995] HKLY 265).

578

CROSS-BORDER EMPLOYMENT

documentation permitting him to work in Hong Kong. The onus is upon an employer to carry out steps to conrm a prospective employees immigration status. As a rst step an employer must ensure that a prospective employee either holds a Hong Kong identity card or appropriate documentation permitting him to work in Hong Kong before a contract of employment is entered into.36 Failure to check that an employee has the requisite documents which prove that he has the right to work in Hong Kong is an offence. Liability on conviction exposes an employer to imprisonment for up to one year and a maximum ne of HK$150,000.37 13.025 Employer to keep records of employees employment status. An employer is required to keep a record of the full name of each of his employees as shown in their identity cards, and a record of the type of document held by each employee by virtue of which the employee is lawfully employable.38 Where an employer employs more than 10 employees at any one place of employment, the records of those employees should be kept in the form of a list of names and particulars of those employees.39 The records should be kept at the place of employment, and should be kept up to date and in a form capable of being produced for inspection.40 An employer found in contravention of these provisions commits an offence and is liable to a ne at level 5.41 Strict liability offence for employer to employ a person who is not lawfully employable. It is an offence for an employer to employ a person who is not lawfully employable.42 The offence is one of strict liability.43 In A-G v Yip Man Cheong,44 the employer had employed a shop assistant, who had produced for the employers inspection another persons identity card. It transpired that the shop assistant was an illegal immigrant from Mainland China and the employer was duly charged under s.17I of the Immigration Ordinance with employing a person who was not lawfully employable. The employer was acquitted by a magistrate on the basis that the section did not create an offence of strict liability, and guilty knowledge had not been proved. Section 17I is in fact silent on the question of strict liability and so the case was referred to the Court of Appeal on a point of law, namely whether the offence created by the section was one of strict liability. The Court of Appeal held that it was.

13.026

36

37 38 39 40 41 42

43 44

Section 17J(1) of the Immigration Ordinance requires an employer to carry out an inspection to that effect. Employers who have in their employment any employee who is a Vietnamese refugee card holder are required to carry out an inspection of the card on every occasion wages are paid to the employee: 17JA(1) of the Immigration Ordinance. Where an employee fails to produce such a card or is the holder of a Vietnamese refugee card which prohibits him from taking up employment the employer is entitled to terminate the employment without notice or payment in lieu of notice: s.17JA(2) of the Immigration Ordinance. Section 17J(2) of the Immigration Ordinance. Section 17K of the Immigration Ordinance. Section 17K(2) of the Immigration Ordinance. Section 17K(1) and (3) of the Immigration Ordinance. Currently HK$50,000: s.17 M of the Immigration Ordinance. Section 17I of the Immigration Ordinance states: Any person who is the employer of an employee who is not lawfully employable commits an offence . The responsibility imposed on an employer is a continuing one, so as to include the situation of an employer who takes over a business with its employees: R v Wong Chee Hung (unrep., HCMA 649/1991). A-G v Yip Man Cheong [1989] 2 HKLR 547. Fn 43.

IMMIGRATION

579

No defence for employer to prove he did not know employee was not lawfully employable. It is not a defence, therefore, to a charge under s.171 (1) that the defendant did not know that the person he employed was not lawfully employable. Although the Court of Appeal in Yip Man Cheong45 accepted that on occasions an employer would be deceived by documents produced by a prospective employee, it justied the imposition of strict liability as necessary to promote the objectives of the Ordinance by encouraging greater vigilance by the employer. The Court of Appeal suggested that where an employer had been deceived after taking all proper precautions, he could expect appropriate leniency from the court if prosecuted. These words offered little, if any, comfort to employers who found themselves in this position. Moreover, the approach of the Court of Appeal seemed to ignore the fact that the statute itself makes a distinction between the s.17J offence of failing to inspect that an employee is lawfully employable and the s.17I offence of employing a person who is not lawfully employable. Presumably the distinction existed to ensure that an employer who fails to check that an employee is lawfully employable is not in a better position than an employer who carries out the inspection required under the Ordinance, but is nevertheless deceived by false documents produced by an employee. To preserve no such distinction renders the s.17J offence of failing to inspect that an employee is lawfully employable otiose. Defence to strict liability offence to show all practicable steps were taken. The harshness of the application of strict liability to the s.17I offence was mitigated by the introduction in 1990 of a statutory defence. It is now a defence for an employer charged with employing a person who is not lawfully employable to show that all practicable steps were taken to determine that the employee was lawfully employable, and that it was reasonable for the employer to have concluded that the employee was lawfully employable.46 To establish the statutory defence, the employer must satisfy this test in two stages: the rst of which is to prove that all practicable steps were taken to determine whether the employee was lawfully employable. If he does not prove that those steps were taken, the second stage, namely the question of whether or not it was reasonable to conclude that the employee was lawfully employable does not arise. Meaning of all practicable steps. Whether all practicable steps have been taken by an employer to determine whether an employee was lawfully employable is a question of fact to be determined on the facts of each particular case. The test is an objective one. In R v Hui Wai Man,47 the Court of Appeal considered what would amount to all practicable steps and held that it meant taking feasible steps which were capable of being carried out within known means or resources, and that the test to be applied in making the determination was an objective one.48 The Court of Appeal expressed a reluctance to lay down any general principles as to how the test should be applied in practice. However, having at rst been at pains to emphasise that each case depended

13.027

13.028

13.029

45 46 47 48

Fn 43. Section 17I(2) of the Immigration Ordinance. [1994] 2 HKCLR 169. Per Keith J at 171 applying the test formulated by the Court of Appeal in R v Shun Shing Construction & Engineering Co Ltd [1993] 1 HKCLR 69.

580

CROSS-BORDER EMPLOYMENT

on its own facts, the Court had clear views as to the types of enquiry an employer ought to be making, citing the following example: if an employee produces what purports to be his identity card, and the employer does nothing more to check that the employee is lawfully employable, a magistrate would rarely be satised that the employer has taken all practicable steps to determine the employees status.49 In the Court of Appeals view a magistrate would want to be satised, at the very least, that the employer had questioned the employee about his domestic circumstances, his skills and his previous work experience, and had not received any answers which could have alerted the employer to the possibility that the employee might be an illegal immigrant. The Court of Appeal suggested that an employer should have regard to the prospective employees appearance, his apparent ethnic origin, and the uency, accent or dialect of his Cantonese; and invited magistrates to ask themselves the following questions: Where was the job for which the employee was applying, i.e., close to Hong Kongs border with China or not? Was the job for which he was applying skilled or unskilled? How did he come to apply for the job, i.e., was the vacancy advertised, or did the employee turn up on the off-chance that work might be available? And what did he tell his prospective employer about his previous work experience, his skills and his domestic circumstances?50 13.030 Conviction likely to lead to custodial sentence. Liability upon conviction of a s.17I offence exposes an employer to imprisonment for up to three years and a maximum ne of HK$350,000.51 For conviction of offences under s.17I of the Immigration Ordinance there had long been in place a sentencing guideline of 15 months, increasing in cases of multiple employments and where there is an element of exploitation.52 Sentencing guidelines. The sentencing guidelines for a s.17I offence were reviewed in 2004 by the Court of Appeal in Secretary for Justice v Ho Mei Wa53 where the

13.031

49

50 51

52

53

Keith J (at 171) observed that since s.17J(1) of the Ordinance requires an employer to inspect the employees identity card before employing him, the employer will, in such a case, have done no more than the minimum that the law requires him to do. This approach is in contrast to that taken in A-G v Lam Sik Cheung (unrep., HCMA 700/1991, [1991] HKLY 220) in which Duffy J held that it is reasonable for a magistrate to conclude that the employer had satised the statutory defence where the employer had done no more than inspect the prospective employees identity card in circumstances where he had no reasonable grounds for doubting its authenticity, or for doubting that it was the prospective employees card. Per Keith J at 172. Section 17I(1) of the Immigration Ordinance. Note, that it is not a defence in proceedings for an offence under s.17I(1) that the employee entered the employment of the employer before the appointed day: s.171(3). The 15 month guideline was said to be the starting point in cases where only one employee is involved, where there are no circumstances of exploitation and where the employer was aware that he was employing an illegal immigrant or had acted recklessly in doing so: R v Wong Mok Din [1994] 2 HKCLR 96 and A-G v Lau Chung Ming [1993] 2 HKCLR 11. [2004] 3 HKLRD 270.

IMMIGRATION

581

Chief Judge explained that public policy54 required that a deterrent sentence be imposed even for a strict liability and not truly criminal offence such as s.17I. An immediate custodial sentence is accordingly called for in many cases. In accordance with the guidelines, in the factual situation of a single employee, full knowledge55 or recklessness as to the employment of a prohibited person, with no aggravated56 or mitigating57 features present and employment on a casual basis,58 an immediate three-month sentence (after trial) would be appropriate for a rst-time offender in circumstances where there was an immediate custodial sentence, and not a suspended one, and the relevant employment is one in relation to the employers commercial or business interests, for example, employment in a restaurant or shop or construction site. Employer put on enquiry in case of casual workers. It is clear from the Hui Wai-Man case that an employer who recruits casual labour in areas close to Mainland China will need to do more than simply inspect Hong Kong identity cards. In that case the magistrate had found as a fact that the employer did not know that the employees were illegal immigrants, i.e. not lawfully employable. However, he took the view that there were a sufcient number of suspicious features about their recruitment to put a reasonable employer on enquiry as to their status, and that in the circumstances 13.032

54

55

56

57

58

Chief Judge Geoffrey Ma described the public policy in the following terms: the offence is very much one that reects a social concern and the immigration policy in Hong Kong. One facet of the public policy behind this offence is that workers from abroad (and this includes especially the Mainland) should not be permitted to take away employment opportunities that should belong to available and willing workers who are permanent residents of Hong Kong or who are otherwise permitted to work and live here. Another facet, just as important, is the discouragement of persons entering Hong Kong to seek employment when they are not entitled to work here. It matters not whether such persons enter or stay in Hong Kong illegally or do so in breach of their conditions of stay (fn 53 at p 272 of the judgment). This policy is strictly enforced. A Labour Department press release dated 29 Sept. 2009 announced that in the preceding week 24 suspected illegal workers and 13 employers/persons-in-charge were arrested in a series of anti-illegal employment operations jointly conducted by the Labour Department, the Police and the Immigration Department. The press release announced that all of the suspected illegal workers came from the Mainland and two of them had over-stayed in Hong Kong. A total of 13 employers/persons-in-charge of the workplaces where suspected illegal workers were detected were taken to police stations for investigation. A spokesman for the Labour Department issued the following warning: The Government is committed to protecting the employment opportunities of local workers by combating illegal employment. Since January this year, the Labour Department has conducted 155 joint operations with other enforcement departments to combat illegal employment. We will continue with vigorous action to deter these illegal activities. Employing illegal workers is a serious offence. Even a rst-time offender will be sentenced to three months imprisonment. Employers should not breach the law. As to knowledge, given that all employers of workers in Hong Kong should by now realize the need to see identication documents before a person is hired as an employee, short of deception, it is perhaps difcult to see how an employer who is found guilty or pleads guilty to the offence will be able to say that he did not have the requisite knowledge or was not reckless, per Hon Ma CJHC (fn 53 at para 30). The Chief Judge suggested aggravating features include an element of exploitation, multiple employment or that the offence is a repeat one, the presence of which would in most cases substantially increase the guideline sentence. On the question of mitigation, the Chief Judge was more content to allow magistrates to exercise their discretion with regard to the facts of a particular case, stating: employing a relative or clansman should not of itself amount to any mitigation. It would of course be unwise to set out extensively just what might amount to mitigating (or indeed aggravating) factors. It is better to leave the identication of such factors to the wisdom and experience of magistrates who have the day-to-day conduct of such offences and therefore knowledge of the very circumstances under which they can be committed. They would therefore have the feel for the offence and its gravity in any given case (fn 53 at para 30). Employment on a casual basis was regarded as meaning a short term, temporary and one-off employment, that is, days, not weeks or months.

582

CROSS-BORDER EMPLOYMENT

it was insufcient for the employer to do no more than inspect their identity cards and ask them a few perfunctory questions about whether they were from Hong Kong. The magistrate highlighted two particular features which ought to have put the employer on notice: rst, that one of the employees had asked to sleep at the employers work premises, and secondly that the photo on the identity card produced by one of the employees was clearly of a man a few years older than the employee. In the circumstances, the practicable steps which the employer should have taken to determine their status included asking them more questions about themselves and telephoning the Immigration Departments hot-line to check the authenticity of the identity cards and the employees right to use them. On appeal, the Court of Appeal held that there is no absolute rule that an employer had in every case to either get in touch with an employees previous employers, or to contact the Immigration Department to verify the authenticity of the employees identity card. However, the Court of Appeal concluded that having regard to the facts of the case in question, namely (i) the unskilled nature of the employment offered by the appellant, (ii) the proximity of the appellants premises to the border and (iii) the particular features of the recruitment of the two illegal immigrants in this case, the trial magistrate had not erred in his decision that the employer should have been put on enquiry as to the immigration status of the employees, and had, in the circumstances, failed to take all practicable steps to determine whether the employees were lawfully employable. 13.033 Site controllers put on enquiry in case of construction workers. In light of the readily available labour pool from neighbouring Mainland China, the peripatetic nature of the construction industry, and the governments concern over the threat posed by cheap labour from Mainland China manifested in its immigration policies towards visitors from the Mainland,59 it is perhaps unsurprising that the duty to ensure that workers are lawfully employable is extended to site controllers of construction sites. A construction site controller is dened broadly to mean a principal or main contractor and includes a subcontractor, owner, occupier or other person who has control of or is in charge of a construction site.60 Site controllers liable for mere presence of illegal worker on construction site. By virtue of s.38A(2) of the Immigration Ordinance, site controllers are liable for the mere presence of illegal immigrants on their construction site. Accordingly, if a person who is not lawfully employable is found on a construction site, an offence is committed by the construction site controller of that construction site, and the construction site controller is liable to pay a ne of HK$350,000. A separate offence is committed by a construction site controller where it is found that a person not lawfully employable

13.034

59

60

For a historical analysis of the immigration law and policies in Hong Kong, see Chan J, Evolution of Immigration Law and Policies, in Chan and Rwezaura (eds), Immigration Law in Hong Kong (Hong Kong: Sweet & Maxwell Asia, 2004). Section 38A(1) of the Immigration Ordinance. A construction site is dened in s.38A(1) as a place where construction work is undertaken and includes any area in the immediate vicinity which is used for the storage of materials or plant used or intended to be used for the purpose of the construction work. For the denition of construction work, see s.38A(1) and s.2 of the Factories and Industrial Undertakings Ordinance (Cap.59).

IMMIGRATION

583

has taken up employment on the construction site over which he has control. Liability carries a ne of HK$350,000.61 These are strict liability offences.62 Defence for site controller to prove that he took all practicable steps. It is a defence in proceedings under the s.38A(2) offence for the construction site controller to prove that he took all practicable steps to prevent illegal immigrants (i.e. persons who are not lawfully employable) from being on the construction site.63 It is a defence in proceedings under s.38A(4) for a site controller to prove that he took all practicable steps to prevent persons not lawfully employable from taking up employment on the site.64 What will amount to all practicable steps is a question of fact to be determined in accordance with the circumstances of each case.65 (b) Liability for work-related injury sustained by illegal worker Liability for work-related injury sustained by illegal worker. Where a worker who is not lawfully employable is working in Hong Kong and sustains an injury, the person or entity engaging the worker may be liable for any work-related injuries sustained by the worker, despite the fact that the worker is working under an illegal contract.66 Section 2(2) of the Employees Compensation Ordinance (ECO) grants the courts discretion to treat an employee injured while working under an illegal contract as if he was working under a valid contract of employment. Is the nature of the work being carried on lawful? In exercising its discretion under s.2(2) of the ECO, the court will examine all of the circumstances of the case, but the overriding consideration which the court will have regard to is whether the nature of the work being performed is lawful.67 If the nature of the work is, by itself, lawful, such as shing, the exercise of the discretion is likely to be in favour of the illegal worker, compared to the situation of where the nature of the work being performed 13.036 13.035

13.037

61 62 63 64 65

66

67

Section 38A(4) of the Immigration Ordinance. A-G v China State Construction Engineering Corp [1996] 1 HKC 53. Section 38A(3) of the Immigration Ordinance. Section 38A(5) of the Immigration Ordinance. In R v Shun Shing Construction & Engineering Co Ltd [1993] 1 HKCLR 69, the Court of Appeal held that the phrase all practicable steps to prevent requires the taking of steps which are feasible and capable of being carried out within known means or resources. It does not imply that which is capable of being achieved without regard to expense. The concern is whether the steps taken were possible and practicable. The duty is not absolute, but it is higher than all reasonable steps or measures. The emphasis of s.38A is upon prevention and it is that at which a construction company must aim. On the facts of the case, despite the site controller having taken preventative measures, the provision of a single security guard was not considered sufcient given the nature of the construction site. The Court of Appeal accepted the magistrates nding that although the provision of two security guards may not have made it impossible for an illegal immigrant to be on the site, at least it would have made the discovery of unauthorised persons trying to enter much more likely and would therefore have gone a long way to prevent illegal immigrants from being on the site. For example, working in Hong Kong without a work visa in contravention of the provisions of the Immigration Ordinance. Lee Mui Fong v Wong Kit Man (unrep., DCEC 455, 693/2002, [2005] HKEC 1890). See also Chan Cheuk Ting v Analogue Engineering Co Ltd [1986] HKLR 935; and Chung Man Yau v Sihon Co Ltd [1997] 1 HKLRD 1221, a personal injuries case in which Bokhary J articulated the policy consideration in the following terms: The broad question seems to be: would it be more offensive to the notions of justice held by right-thinking people generally to allow a plaintiff to recover in light of the actual illegality involved or would it be more offensive to such notions to refuse him a remedy?

584

CROSS-BORDER EMPLOYMENT

involves an illegal activity, such as smuggling. For example, if a father and his child were employed on a boat while an accident occurred, both father and child should be compensated, even though the child is not lawfully employable. The position would be different if both of them were employed to operate the boat for smuggling purposes.68 In the latter type of case, the discretion is unlikely to be exercised in favour of the illegal worker. The crucial point of distinction is whether the work for which the employee was employed to perform was lawful or unlawful, irrespective of the legality of the contract. 13.038 Assessment of damages where illegal worker receiving higher level of remuneration in Hong Kong. In Tsang Siu Hong v Kong Hoi For,69 an illegal immigrant who was injured at work was successful in his personal injuries action against his employer. In assessing damages for his loss of earnings claim, the court took into account that the employee had taken a break from his lawful employment in Mainland China to come to Hong Kong for the purpose of nding work at a higher rate than he could have earned in Mainland China, and that he was aware of the unlawful nature of the employment. In these circumstances, it was considered appropriate to ensure that the employee did not prot by the compensation awarded. The court made an award based not on his Hong Kong earnings, but calculated in accordance with what he would have earned in his lawful employment in Mainland China during the same period, as that was considered to be his real loss.70 (c) Other immigration schemes for professionals and graduates 13.039 Immigration Arrangements for Non-local Graduates Scheme. The Immigration Arrangements for Non-local Graduates Scheme (IANG Scheme) was introduced in 2008.71 Its objective is to attract outstanding students from Mainland China and overseas who have completed full-time bachelor degree or higher level studies in Hong Kong (non-local students) to stay in or re-enter Hong Kong for employment following graduation. Non-local students who submit an application within six months of graduating may be granted a 12-month stay. Non-local students who submit an application beyond six months of graduating are able to be admitted under the IANG scheme provided that they have secured an employment offer, at a level commonly taken up by degree holders and the remuneration package is set at market level. Non-local students admitted under the IANG scheme are free to take up and change employment during their permitted stay without the need to seek prior approval from the Immigration Department.72 Quality Migrant Admission Scheme. The Quality Migrant Admission Scheme (QMAS), introduced in 2006, offers another channel for securing the ability to take up

13.040

68 69 70 71

72

The example used by Judge To in Lee Mui Fong v Wong Kit Man (fn 67), at para 9. [2003] 1 HKLRD D22. For further examples of cases in which this discretion has been applied, see Chapter 11, para 11.021. The IANG scheme was implemented on 19 May 2008, replacing the Employment of Degree or above level Mainland Students Graduating from University Grants Committee (UGC) Funded Institutions in Hong Kong scheme which had been in place since 2001. For details of other conditions which are applicable to the IANG Scheme and the procedure for application please see the Immigration Departments website at: http://www.immd.gov.hk/ehtml/id991.htm#I.

IMMIGRATION

585

employment in Hong Kong. It is open to professionals from overseas73 and Mainland China whether or not they have already secured employment. The QMAS scheme is subject to a maximum of 1,000 new migrants per year. Applicants under this scheme are allocated places on a points-based system, taking into account age, academic and professional qualications, work experience, family background, language prociency in Cantonese, Putonghua and English, as well as achievement or recognition in their eld of expertise. A successful applicant is able to obtain visas for dependents upon demonstrating that he is capable of supporting them on his own without any assistance.74 (d) Unskilled and semi-skilled overseas workers Supplementary Labour Scheme. It is generally very difcult for employees without academic or professional qualications or experience to obtain permission to work in Hong Kong. The Supplementary Labour Scheme (SLS) was introduced in response to a perceived shortage of unskilled labour in certain industries. Under the SLS an employer may apply to import workers from overseas,75 who are technician level or below, if it is able to show that it has genuine difculties in nding suitable employees locally. To ensure the priority of local workers and to safeguard their salaries and benets, employers are required to accord priority to ll available job vacancies with local workers and make active efforts to train up local workers for the vacancies.76 Each application has to go through a newspaper advertising procedure, a mandatory local recruitment period at the Labour Department and the arrangement of tailor-made retraining courses by the Employees Retraining Board if appropriate. Procedure for SLS application. The SLS requires an employer to rst apply to the Labour Department for an approval in-principle. The employer must be able to demonstrate that it is nancially capable of employing the applicant, providing him with suitable accommodation and of guaranteeing his maintenance and repatriation upon termination of his contract. Employees admitted under the SLS are required to be paid at least median monthly wages of local workers in comparable positions and be accorded no less favourable treatment as that enjoyed by local workers under Hong Kong labour laws. The prospective employee must submit an entry visa application within three months from the date of the approval in-principle. The approval in-principle lapses automatically if the entry visa application is not made within the three-month time limit.77 13.041

13.042

73

74

75

76

77

The QMAS is not applicable to nationals of Afghanistan, Albania, Cambodia, Cuba, Laos, National Democratic Republic of Korea, Nepal and Vietnam. For information regarding eligibility criteria and the procedure for applying under the QMAS, see the Immigration Departments QMAS Guidance Notes published on their website at: http://www.immd.gov.hk/ pdforms/id(e)982.pdf. The SLS is not applicable to nationals of Afghanistan, Albania, Cambodia, Cuba, Laos, National Democratic Republic of Korea, Nepal and Vietnam. The SLS required employers to pay an employers retraining levy of HK$400 per month for each month of employment of an imported overseas worker. With effect from 1 Aug 2008 the levy has been suspended for a period of ve years. For details of the applicable procedures and eligibility criteria, see the Immigration Departments Guidebook for Entry for Employment as Imported Workers in Hong Kong (Form ID(E)1002) (04/2009) which can be found on the Departments website at: http://www.immd.gov.hk/pdforms/ID(E)1002.pdf.

586

CROSS-BORDER EMPLOYMENT

13.043

Restrictions on workers admitted under SLS. Overseas workers who are hired under the SLS must enter into a standard employment contract with their employer for a xed period not exceeding 24 months.78 Imported overseas workers are not allowed to bring their dependents into Hong Kong under this scheme. An employee admitted under the SLS must remain in the direct employment of the same employer for the specied job and in the specic workplace(s) stipulated in the standard employment contract. A change of employer or post is not permitted, nor can an employee admitted under the SLS be contracted out to other companies or sub-contractors. Upon completion of the xed term of employment, the employee is required to return to his place of origin, and if the contract is prematurely terminated an employee admitted under the scheme may remain in Hong Kong for only two weeks from the date of termination of the contract, or the balance of permitted stay, whichever is the shorter. (e) Recruiting from Mainland China

13.044

Recruiting from Mainland China. Despite the resumption of Chinas sovereignty over the territory, the Hong Kong government still retains strict control over the migration of migrants from Mainland China, although its policies in this regard have become less restrictive in the last decade.79 With regard to migration for employment purposes, there are schemes in place aimed at attracting graduates, skilled professionals and entrepreneurs, and skilled and semi-skilled blue-collar workers. Each of them is considered below. Admission Scheme for Mainland Talents and Professionals. The Admission Scheme for Mainland Talents and Professionals (the Scheme) was introduced in 2003.80 Its aim is to attract qualied talented and professional workers from Mainland China to work in Hong Kong. There is no sector restriction or quota on the Scheme, but a person seeking to be admitted under the Scheme must be employed in a job which is relevant to his or her qualications, skills or experience. Admitted professionals are permitted to bring their spouses, and unmarried dependent children with them, and can acquire the right of abode in Hong Kong after completing seven years continuous ordinary residence in Hong Kong. Applications need to be submitted by an employing company81 who must be able to show that the applicant can contribute to the operation of the employer with a view to enhancing Hong Kongs economic development and competitiveness in the global market. Intra-company transfer arrangement under the Scheme. The Scheme is also designed to assist companies with operations in both Mainland China and Hong Kong to effect intra-company transfers of managerial or professional employees from

13.045

13.046

78 79 80

81

Form LD294. See Chan J, Evolution of Immigration Law and Policies (fn 59). Details of the Scheme can be found at the Immigration Departments website at: http://www.immd.gov.hk/ehtml/ faq_asmtp.htm . There is no quota for this scheme. For the period 200809, there were 6,552 arrivals under this scheme see Immigration Department Annual Report, available at http://www.immd.gov.hk/a_report_08-09/ eng/appendice/appendices05.htm. The procedure and documents required in support of an application under the Scheme are similar to that required for an employment visa application under the GEP. See Form ID(E)991 at paras 29 to 38 (fn 31). The application forms, Form ID990A (employee) and ID990B (employer) are available on the Immigration Departments website: http://www.immd.gov.hk/ehtml/fprofes.htm.

IMMIGRATION

587

Mainland China to Hong Kong. Under the Scheme intra-company transfers can occur between local enterprises with factories or ofces in Mainland China, enterprises in Mainland China and branch ofces in Hong Kong, and multinational companies with branch ofces in Hong Kong and Mainland China. At the time of application, the employee must have been employed in the Mainland China enterprise or ofce for not less than one year. The application must also demonstrate that the remuneration package is broadly commensurate with the prevailing market level for professionals in that eld in Hong Kong and that the number of intra-company transferees sponsored by the company at any one time is reasonable with reference to the total number of employees and the nature of its business.82 Employee to use Exit-entry Permit under the Scheme. A successful applicant under the Scheme is issued with a self-adhesive entry-permit label, and then needs to apply for an Exit-entry Permit for travelling to and from Hong Kong and Macao (Exit-entry Permit) and a relevant exit endorsement from the Public Security Bureau ofce in the Mainland where his household registration record is kept.83 (f ) Foreign domestic helpers Employment of foreign domestic helpers. Many Hong Kong residents employ domestic helpers from overseas, a practice which has been encouraged by the Government in order to facilitate the participation of Hong Kong women in the professional workforce.84 As with each of the Schemes referred to above, the decision to grant an employment visa is entirely a matter of discretion under s.11 of the Immigration Ordinance. The Immigration Departments guidelines state that a prospective employer should be able to demonstrate that he has sufcient nancial resources85 and can accommodate a domestic helper in his own home.86 Employers are also required to pay a food allowance if no food is to be provided by the employer.87 Employers are also required to pay an employers retraining levy but, with effect from 1 August 2008, the levy has been suspended for a period of ve years. Protections afforded to foreign domestic helpers. Overseas workers who are hired as a foreign domestic helper must enter into a standard employment contract with their employer for a xed period of 24 months.88 Under the terms of the standard 13.048 13.047

13.049

82 83

84

85

86

87 88

See the Immigration Departments website at http://www.immd.gov.hk/ehtml/faq_asmtp.htm#e. The entry permit label must be afxed onto a blank endorsement page of the candidates Exit-entry Permit, rather than their PRC passport. In 200809 the number of visas granted to foreign domestic helpers was 86, 962, by far the largest number compared to employment visas issued under other schemes; the number of employment visas for foreigners issued under the GEP scheme was 22, 815, the number issued under the MTP Scheme was 6,552 and the number issued under the SLS was 1,317 in the same period. Statistics published in the Immigration Departments annual report 200809 at http://www.immd.gov.hk/a_report_08-09/eng/appendice/appendices05.htm. An employer must have a household income of not less than HK$15,000 per month or sufcient assets to meet the comparable expenses for the entire period of the contract of employment. For details of the eligibility criteria and procedures for applying for an employment visa for a foreign domestic helper, see the Immigration Departments Guidebook for the Employment of Domestic Helpers from Abroad (Form ID969) published on the Departments website at: http://www.immd.gov.hk/ehtml/ID(E)969.htm. This is currently set at HK$740 per month. Form ID407. A sample contract of employment is published on the Immigration Departments website at: http:// www.immd.gov.hk/ehtml/id407form.htm.

588

CROSS-BORDER EMPLOYMENT

employment contract, a foreign domestic helper is only required to undertake domestic duties in the home of her employer, and only those duties specied in the schedule to the employment contract.89 Foreign domestic workers are provided with free accommodation and food or a food allowance, free medical treatment and return passage upon expiry or the termination of the standard employment contract, and are the only workers in Hong Kong who have historically been protected by a minimum allowable wage.90 Foreign domestic helpers are entitled to the same protections conferred by the EO as local employees.91 13.050 Restrictions imposed upon foreign domestic helpers. Despite the protections referred to above, foreign domestic helpers are subject to conditions of stay which restrict their freedom of movement, and make the prospect of enforcement of legal rights more illusory than real. Foreign domestic helpers are required to reside in the home of their employer, and may or may not be provided with a private room. Foreign domestic helpers are not permitted to bring dependents into Hong Kong under these arrangements. Foreign domestic helpers are permitted one rest day off in every seven, but their working hours are otherwise unregulated. Upon the premature termination of the standard employment contract, a foreign domestic worker is permitted to remain in Hong Kong for not more than two weeks. Thus, if an employment contract is terminated wrongfully, unreasonably, or unlawfully, a foreign domestic helper has little time within which to pursue a claim against her employer.

4. TAXATION
13.051 Salaries tax payable on income arising in or derived from Hong Kong. Whether or not an employee is performing services under a secondment arrangement, dual contract arrangement or direct hire contract, where employment arrangements feature a cross-border element, invariably taxation issues arise. Hong Kong adopts the territoriality basis of taxation, whereby salaries tax92 is imposed only on income93 from an ofce or

89

90

91

92

93

The employer should not require or allow a foreign domestic helper to carry out any non-domestic work. Domestic duties to be performed under the employment contract exclude driving of a motor vehicle of any description for whatever purposes, whether or not the vehicle belongs to the employer, except where prior approval for the foreign domestic helper to undertake driving duties has been given by the Director of Immigration. This is currently set at HK$3,580 per month: see http://www.labour.gov.hk/eng/public/wcp/FDHguide.pdf. Livein domestic helpers are excluded from the provisions conferring a minimum wage under the Minimum Wage Ordinance (MWO) (Cap.608) (s.7(3) of the MWO). Note, however, that s.10 of the Race Discrimination Ordinance (Cap.602) expressly excludes domestic helpers, and s.3 of the Occupational Safety and Health Ordinance (Cap.509), which imposes safety obligations upon employers, does not apply to domestic premises and domestic helpers. Note that severance payments and long service payments that are required to be paid under the EO are not assessable to salaries tax, as they are not payments for services rendered but for termination of the employment. It is common in Hong Kong for employers to provide overseas employees with some form of assistance to meet the cost of housing. Taxable income includes the value of quarters provided rent-free by an employer: s.9(1)(b) of the Inland Revenue Ordinance. A place of residence is considered to have been provided rent-free if an employer has either paid or refunded all or part of the rent paid by an employee. The value of accommodation to be included in assessment is 10% (8% and 4% for not more than two bedrooms and one bedroom respectively in a hotel, hostel or boarding house) of the total income (after deductions) derived from the employer or any person associated with the employer. If an employer refunds all or part of the rent paid by an employee, the place of residence is deemed to have been provided by the employer either rent free, or for an amount equal to the difference between the rent paid and the amount refunded. A distinction is made between the provision of rent-free residence and the payment of a rent allowance, which is fully taxable under s.9(1)(a) of the Inland Revenue Ordinance.

TAXATION

589

employment or any pension arising in or derived from Hong Kong.94 Income arising in or derived from Hong Kong includes all income derived from services rendered in Hong Kong. This includes entering Hong Kong for the purposes of training, attending a conference or reporting on work progress. Meaning of arising in or derived from Hong Kong. The place where an employee performs his services is not relevant to the question of income source. It is whether or not the location of an employees employment is in Hong Kong which will determine tax liability: Commissioner of Inland Revenue v George Andrew Goepfert.95 In that case, the High Court considered the meaning of arising in or derived from Hong Kong in a cross-border secondment arrangement. The employee was an American citizen who entered into a contract of employment outside of Hong Kong with Exxon Corporation (Exxon), a company incorporated in the State of New Jersey in the United States. The employee had been seconded to work for Exxon Chemical Asia Pacic Ltd (ECAP), a subsidiary of Exxon which was registered as an overseas company in Hong Kong. Throughout the period of the secondment the employees salary was paid to him by Exxon in US dollars in the United States. The work performed by the employee during the period of the secondment entailed his physical presence in Hong Kong for much of the time but the services provided were for the benet of various afliated companies of Exxon in the Asia Pacic region outside of Hong Kong, not ECAP. The cost of the employees accommodation was partly borne by Exxon, and partly borne by the afliated companies outside of Hong Kong. ECAPs role was merely secretarial in that it assisted the employee in carrying out his functions for the various afliated companies. During the year of assessment in question the employee had rendered 41 days service outside of Hong Kong. The Commissioner assessed salaries tax on the entire salary, but the employee claimed that he should not have been charged to salaries tax for the period of time spent outside Hong Kong. The court concluded that in order to determine whether income arises in or is derived from Hong Kong the place where an employee performs his or her services is not relevant. Rather, it is the place where the source of income, the employment, is located which gives rise to tax liability.96 Reference should rst be made to the contract of employment. In determining where the source of income, or employment, is located, reference should rst be made to the contract of employment itself.97 A secondment or dual contract arrangement does 13.052

13.053

94

95 96

97

Section 8(1) of the Inland Revenue Ordinance (Cap.112), which provides that Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from Hong Kong from the following sources(a) any ofce or employment of prot; and (b) any pension. [1987] HKLR 888. Commissioner of Inland Revenue v George Andrew Goepfert [1987] HKLR 888, applying the test set out by Sir Wilfred Greene MR in Bennett v Marshall [1938] 1 KB 591, which was approved by the House of Lords in Bray v Colenbrander [1953] AC 503. The courts interpretation of s.8(1)(a) has been the subject of criticism by academic commentators: Halkyard AJ, The Source of Employment Income for Salaries Tax (1988) 18 Hong Kong Law Journal 444; Vandervolk JP, Goodbye to Goepfert: The Effect of the Hang Seng Bank Case on Hong Kong Salaries Tax (1992) 22 Hong Kong Law Journal 327. Per MacDougall J in Commissioner of Inland Revenue v George Andrew Goepfert (fn 96). See also the judgment of Deputy Judge A To in Lee Hung Kwong v Commissioner of Inland Revenue [2005] 4 HKLRD 80 (at 91A-D) in which he concluded if the employer was resident in Hong Kong and entered into a contract of employment with an employee in Hong Kong, the employer must be carrying on business in Hong Kong from which the employers prots in substance arise. The locality of the contract must therefore also be in Hong Kong.

590

CROSS-BORDER EMPLOYMENT

not necessarily change the location of employment for these purposes. Other factors which the Commissioner will take particular note of are the place where the employee was to be paid, the place where the contract was negotiated and entered into and is enforceable, and whether the employer is resident with the jurisdiction. However, none of these factors is of itself determinative, and the Commissioner is entitled to have regard to all evidence, documentary or otherwise in making the determination.98 13.054 Other factors taken into account in determining source of employment. In Lee Hung Kwong v Commissioner of Inland Revenue,99 the employee was employed by a Hong Kong based company (T) within a group of Hong Kong companies. His employer entered into a cooperation with a company based in Mainland China (C), pursuant to which the T would act as Cs business consultant, and dispatch staff with relevant expertise to work in Mainland China in order to assist with the operation of Cs business. The employee was seconded to C as part of this arrangement. In the relevant period, the employee spent half of his time in Mainland China and the other half in Hong Kong and thus sought to apportion his salary for Hong Kong tax purposes based on the time he spent in Hong Kong. He was assessed on all of his salary as income arising in Hong Kong, and appealed the decision. The employee argued that his source of income derived not in Hong Kong but in Mainland China. However, this was rejected by the court, which concluded that the sums in question, even if they were paid in Mainland China from funds in Mainland China were nevertheless income arising in or derived from Hong Kong, that is, from a Hong Kong source. The factors taken into account in reaching this conclusion are instructive and have since been incorporated into Inland Revenue Department practice:100 the contract of employment was entered into in Hong Kong; that contract was enforceable in Hong Kong; his employers were resident in Hong Kong, and he worked under their direction; and it was in the performance of the employees obligations under that contract of employment that the employee went to Mainland China and earned the sums in question. An interesting aspect of this decision is that the employee had argued that he had a separate Engagement Agreement with the Mainland China company. The court did not accept this as a nding of fact, but accepted that if such an agreement had existed, the source of the income should be regarded as an outside source.101 Cross-border contractual arrangements likely to be scrutinised. What is clear from the cases cited above is that the Inland Revenue will look beyond the external features of employment. Particular scrutiny is likely to attend contractual arrangements which involve dual contracts: one for local services, and the other governing offshore

13.055

98 99 100

101

Lee Hung Kwong v Commissioner of Inland Revenue [2005] 4 HKLRD 80. Fn 98. See the Inland Revenues revised Departmental Interpretation and Practice Notes No. 10: Charge to Salaries Tax (DIPN 10). See also Ahn Sang Gyun v Commissioner of Inland Revenue [2009] 4 HKLRD I5 in which the court of First Instance upheld the decision of the Board of Review that the employees employment was a Hong Kong employment based on the following facts: (i) the employee was employed by a company registered as an overseas company in Hong Kong; (ii) the contract of employment was signed by a representative of the company and had the address of the company in Hong Kong. The contract was sent to the employee at his address in an overseas location; and (iii) the employees remuneration was paid to him in Hong Kong while he remained a member of overseas retirement and medical schemes.

TAXATION

591

services, or offshore employment where the employee retains a key role within a Hong Kong resident company.102 (a) Hong Kong employment Hong Kong employment chargeable to salaries tax. The question which falls to be determined in any particular case is whether the income which is sought to be charged is income from a Hong Kong source. If so, it is subject to salaries tax whether the services are rendered in or outside of Hong Kong, unless it falls within the exception under s.8(1A)(b) of the Inland Revenue Ordinance.103 Exemption where income derived from services rendered overseas. Section 8(1A)(b) applies a tax exemption to employees with Hong Kong employment (other than civil servants, ship and air crew)104 who in the year of assessment render all of their services outside of Hong Kong. No account taken of services performed in Hong Kong during visits of not more than 60 days. For the purposes of the s.8(1A)(b) exemption, services rendered in Hong Kong during visits not exceeding a total of 60 days in the assessment period are ignored.105 The s.8(1A)(b) exemption is most likely to apply in the case of secondment arrangements where an employee may be posted to an overseas location for a period of time in excess of one year. By way of illustration, where an employee deriving income from a Hong Kong employment is posted to Singapore to represent his rm and in the year of assessment renders all of his services in Singapore, he will be wholly exempt from salaries tax. However, if he visits Hong Kong for 61 days or more and during the visit he renders services in Hong Kong he will be liable on the whole of his income derived in that year.106 It is the total length of an employees visit to Hong Kong which 13.056

13.057

13.058

102

103

104

105 106

See e.g. Inland Revenue Board of Review (2002) 17(1) IRBRD (D10/02) 426, and Inland Revenue Board of Review (2002) 17(1) IRBRD (D25/02) 520. The DIPN 10, para 24 cautions: If a person claims that his employment with an employer resident in Hong Kong has been changed to a related company of the employer, which is resident outside Hong Kong, and there is little apparent change in the terms of employment, the Department will look deeper than the external or supercial features of the employment. Similarly, attention will be given to cases where locally-engaged employees claim that they hold offshore contracts of employment. These examples are not meant to be exhaustive. Section 8(1A)(b) of the Inland Revenue Ordinance provides: income arising in or derived from Hong Kong from any employment excludes income derived from services rendered by a person who (i) is not employed by the Government or as master or member of the crew of a ship or as commander or member of the crew of an aircraft; and (ii) renders outside Hong Kong all the services in connection with his employment. Section 8(1A)(b)(i) of the Inland Revenue Ordinance. A separate exemption applies to ship and aircraft crew who spend time outside of Hong Kong: s.8(2)( j) of the Inland Revenue Ordinance. Pursuant to this section exemption to salaries tax arises if a ship or aircraft crew member was present in Hong Kong (including its territorial waters) for no more than 60 days in the basis period for a year of assessment and a total of 120 days falling partly within each of the basis period for two consecutive years of assessment. If a ship or aircraft crew member spends more than the 60 or 120 days in Hong Kong, then his whole employment income for that year is chargeable to salaries tax. There is no equivalent tax exemption for government employees who are posted overseas. This presumably is to ensure that they do not escape paying tax altogether, since most countries exempt employees of foreign governments from paying local taxes. Section 8(1B) of the Inland Revenue Ordinance. Example taken from the Inland Revenues DIPN 10, para 32.

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CROSS-BORDER EMPLOYMENT

determines his tax liability, not the period of time spent performing services during those visits.107 13.059 Visit to Hong Kong must be temporary in order to qualify for exemption. An employee must only be temporarily staying in Hong Kong in order to qualify for the exemption under s.8(1A)(b). An overseas employee who comes to Hong Kong on a permanent basis is not regarded as making a visit to Hong Kong. Equally, permanent Hong Kong residents are not regarded as being able to make a visit for these purposes, even if they spend much of their time overseas.108 Where an employee is not a visitor to Hong Kong and he performs services in Hong Kong during an assessment year, the whole of his income will be taxable, regardless of the number of days spent in Hong Kong, unless equivalent tax has been paid in another country. Exemption where employee has paid tax in foreign jurisdiction. Where an employee with Hong Kong employment has paid tax of substantially the same nature as Hong Kong salaries tax to a territory outside Hong Kong in respect of income relating to services rendered in that territory, that part of the income which has already been subject to foreign tax will be exempt from salaries tax.109 For example, if a person holding a Hong Kong employment derives income from rendering services in Mainland China on 190 consecutive days in a year and pays Individual Income Tax to a Mainland authority on that income, there will be no liability to salaries tax on that income in Hong Kong.110 The exemption under s.8(1A) (c) only applies where foreign tax has actually been paid, and only applies to Hong Kong employment. Given Hong Kongs comparatively low rate of salaries tax, employees normally only utilise the tax relief offered by s. 8(1A)(c) when they are unable to avoid paying foreign taxes.

13.060

107

108

109

110

Commissioner of Inland Revenue v So Chak Kwong (1989) 2 HKTC 174. In that case, the employee who had spent 108 days in Hong Kong but only 29 of which rendering services in connection with his employment, sought to argue that his income should be excluded from assessment as he had not spent more than 60 days rendering services in Hong Kong. The High Court held that the words not exceeding 60 days in s.8(1B) of the Inland Revenue Ordinance qualify the word visits and not the words services rendered, and hence an employee must not render any services during visits which exceed a total of 60 days in an assessment period to benet from the exemption in s.8(1A)(b) of the Ordinance. This interpretation can lead to draconian results. See for example, Inland Revenue Board of Review (2006) 21 IRBRD (D2/06). In that case the taxpayer was employed in Hong Kong to work for a representative ofce, a subsidiary of the employer in Mainland China. The employee ordinarily rendered her services on the Mainland but returned to Hong Kong for a total of 82 days for the year of assessment. On one occasion, she attended a meeting in Hong Kong for the representative ofce. The issue was whether because she had attended that one meeting in Hong Kong, and because she had visited Hong Kong for more than 60 days during the assessment year, she was able to take advantage of the exemption under s.8(1A). The Board held that they were bound to follow the So decision, but expressed its doubts over the correctness of this decision. They also stated that it would be appropriate for the issue to be re-considered by the Court or the legislature. See also Inland Revenue Board of Review (2001) 16 IRBRD 326 (D37/01) in which similar reservations were expressed. In that case although the Board felt bound to follow the So decision it was unable to reach what it felt would have been an absurd result, by considering that the words services rendered should be construed to mean regular work contemplated by the contract of employment and to exclude any work done on an ad hoc or an informal basis. To date, the So case remains good law. See Inland Revenue Board of Review (1984) 2 IRBRD (D11/84) 108. In that case the employee was relocated from Australia to Hong Kong on a two-year contract. Section 8(1A)(c) of the Inland Revenue Ordinance. This section was enacted in 1987 following the decision in Commissioner for Inland Revenue v George Andrew Goepfert (fn 96) to alleviate double taxation of income arising from a Hong Kong employment. Example taken from the DIPN 10, para 36. In this example, the employee may, as an alternative, apply for a tax credit under art.14 of the Arrangement between the Mainland of China and HKSAR for the Avoidance of Double Taxation on Income.

TAXATION

593

Double taxation. In light of Hong Kongs low rate of salaries tax, an assignment that is categorised as a Hong Kong employment, whether it is based on a local hire arrangement, dual contract or a secondment arrangement, is likely to be the most attractive, at least from an employees perspective.111 The attraction of Hong Kong as a low salaries tax jurisdiction is of course rendered meaningless for overseas employees who are from a jurisdiction which taxes its residents on a worldwide basis. This may expose the employee to double taxation on any income sourced in or derived from an ofce or employment or any pension arising in or derived from Hong Kong. Hong Kong has double taxation agreements with Mainland China,112 Thailand and Belgium.113 For employees from other jurisdictions who tax their residents on a worldwide basis (for example, the United States), the only other relief that can be sought is from their employer directly. In these circumstances, many employers agree to make good any loss which the overseas employee suffers as a consequence of double taxation, ensuring that the employee does not pay any more tax than they would have had to pay if they remained in their home country (often referred to as tax equalisation).114 Dual employment contracts. An employee engaged under a dual contract arrangement is likely to have to pay tax in two jurisdictions, but should only be liable to pay Hong Kong tax on that part of his income which relates to services provided in Hong Kong. However, it is important that the duties of the employee under the two contracts of employment are clearly distinguishable,115 and that the split of remuneration between the two contracts is reasonable.116 The arrangements for an overseas assignment must be commercially realistic and not articial.117 Employee moving employment overseas part way through tax year. Where an employee is posted overseas part way through a tax year, he will have rendered

13.061

13.062

13.063

111

112

113

114

115

116

117

Whether or not this is in fact the case under a secondment or dual contract arrangement will depend upon whether the jurisdiction from which the employee has come allows an exemption in respect of income relating to services rendered in Hong Kong, and on that part of the income that has already been subject to Hong Kong tax. Under art.2(2) of the Arrangement Between the Mainland of China and the Hong Kong SAR for the Avoidance of Double Taxation on Income a Hong Kong resident can stay tax-free in Mainland China for an aggregate of 183 days in a calendar year. This status assumes (a) remuneration was not paid by or on behalf of an employer resident in the Mainland, and (b) the remuneration was not borne directly or indirectly by a permanent establishment of the employer in the Mainland. There are also numerous double taxation agreements with various countries relating to aircraft and shipping operations. Note, that payment of the employees tax liabilities under a tax equalisation scheme may itself represent taxable income. See Fuge v McClelland 49 R & IT 546 where there were two separate legal entities of parent and subsidiary, and the duties of the employee to each entity were clearly separated, the offshore employment was found to be outside of the charge to salaries tax. See Inland Revenue Board of Review (1999) 14(1) IRBRD (D35/99) in which the Board of Review rejected the employees argument that he was employed pursuant to two separate employment contracts. The Board found that the employee was engaged under only one employment contract, and that there was no rational basis of apportionment of income between the two contracts. See also Inland Revenue Board of Review (2002) 17(1) IRBRD (D10/02) where the Board of Review did not recognise dual contracts, and held that the employee was under only one contract of employment. In Inland Revenue Board of Review (2002) 17(1) IRBRD (D10/02), the Commissioner held that the source and location of employment was Hong Kong even where the contract of employment stated that the employee was required to perform services outside of Hong Kong. The overseas company had no permanent ofce or address outside of Hong Kong and the employee could only be reached through the Hong Kong ofce telephone and fax numbers.

594

CROSS-BORDER EMPLOYMENT

services both in Hong Kong and overseas during that year. The employees liability to Hong Kong salaries tax will depend upon whether the employee has remained in the same Hong Kong employment or has entered into a new contract of employment or secondment arrangement with an overseas employer. Where an employee remains in Hong Kong employment, he will be liable to salaries tax on his whole income if he rendered services in Hong Kong during visits totalling more than 60 days during the year of assessment. If however the employee has entered into a new contract of employment, or a secondment which amounts to a separate contract of non-Hong Kong employment, upon taking up the new assignment overseas there will be no liability to salaries tax on the income derived from the overseas employment provided that the employee performs all of the services for the employment outside Hong Kong.118 13.064 Hong Kong employment may not cease upon entering a new contract of employment or secondment outside of Hong Kong. Liability to Hong Kong salaries tax will not necessarily cease upon an employee being given a new contract of employment or being seconded to work overseas. In order to establish that an employees employment is no longer located in Hong Kong, there must be clear evidence that the Hong Kong employment has terminated and that a new employment has commenced.119 (b) Non-Hong Kong employment 13.065 Liability to Hong Kong salaries tax where employment located outside of Hong Kong. Where an employees source of employment is considered to be located outside of Hong Kong, Hong Kong salaries tax will nonetheless be chargeable on all income derived from services rendered in Hong Kong.120 Income for these purposes includes leave pay attributable to services rendered in Hong Kong.121 An example of a non-Hong Kong employment to which Hong Kong salaries tax may not apply is a Hong Kong resident posted overseas by an employer. An example of a non-Hong Kong employment to which Hong Kong salaries tax may apply is where an overseas employee is seconded to Hong Kong but is required to travel to countries outside of Hong Kong in the performance of his duties. Apportionment of tax where employment is outside of Hong Kong. When an employee with non-Hong Kong employment renders services in Hong Kong in a year of assessment, salaries tax will be chargeable, and is normally assessed on

13.066

118

119

120 121

In such a case the employee should be able to rely upon the exemption in s.8(1A)(b)(ii) of the Inland Revenue Ordinance. See Inland Revenue Board of Review (1994) 9 IRBRD (D43/94) 278 in which the Board of Review found that the employees Hong Kong employment had continued in circumstances where there was no break between the Hong Kong and overseas employment contracts, the employees seniority and accumulation of provident fund contributions continued, where the termination payment under his provident fund was calculated by reference to his entire period of service with both companies, where neither the employers return nor the employees salaries tax return referred to any termination of employment or commencement of new employment and the employee had stated in correspondence with the assessor that there had been no cessation of employment. Section 8(1A)(a) of the Inland Revenue Ordinance. The extension applies only to employment income, and not to income from an ofce or prot.

TAXATION

595

a time in/time out basis of apportionment.122 In other words, the employee is only assessed on income attributable to services rendered in Hong Kong. In practice the way this is assessed is to look at the employees travel records to determine the number of days spent in Hong Kong. The employees total salary is then apportioned on the assumption that he rendered services to the employer during the time spent in Hong Kong. Exemption where services rendered in Hong Kong during visits of not more than 60 days. If an employee with a non-Hong Kong employment only renders services in Hong Kong during visits which do not total more than 60 days in a year of assessment, the income derived from those services is exempt from the charge to salaries tax.123 In order to qualify for the exemption, an employee must be able to be a visitor to Hong Kong.124 Where an employee is not a visitor to Hong Kong and he performs services in Hong Kong during an assessment year, his income will be taxable on an apportionment basis, regardless of the number of days spent in Hong Kong. (c) Duties of employer and employee upon employee entering or leaving Hong Kong Employers duty to notify Inland Revenue upon commencing employment in Hong Kong. An employer is under a duty to notify the Commissioner of Inland Revenue in writing in the event of a person who is or is likely to be chargeable to salaries tax commencing employment in Hong Kong.125 Notice must be given no later than three months after the date of commencement of employment and must state the full name and address of the individual, the date of the commencement and the terms of employment.126 This obligation arises irrespective of whether the employee renders services in Hong Kong or overseas. Employers duty to notify Inland Revenue upon employee ceasing employment in Hong Kong. An employer is under a duty to notify the Commissioner of Inland Revenue in writing in the event that an employee who is chargeable to salaries tax ceases employment in Hong Kong. The notice must state the name and address of the individual and the expected date of cessation and must be given not later than one 13.068 13.067

13.069

122

123 124 125 126

A different approach may be justied where the time in/time out apportionment would be inappropriate, such as where an employee can establish that the rate of remuneration for the services he renders outside of Hong Kong is substantially greater than the rate of remuneration for services rendered in Hong Kong. In such a case the apportionment can be made on the basis of the actual remuneration attributable to the services rendered in Hong Kong: DIPN 10 para 29. See Inland Revenue Board of Review (1994) 9 IRBRD (D49/94) 285 for an example of an unsuccessful challenge of the time in/time out apportionment basis. In that case, the employing company had proposed a costs allocation based on what it considered to be fair allocation amongst branches which had had the benet of the employees services. This was found to have had absolutely no relation to the services actually rendered by the employee in Hong Kong. See also Inland Revenue Board of Review (1999) 14(1) IRBRD (D35/99) (fn 116). Section 8(1B) of the Inland Revenue Ordinance. See para 13.059 above. The employer must complete and le Form I.R.56E. Section 52(4) of the Inland Revenue Ordinance.

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CROSS-BORDER EMPLOYMENT

month prior to the individual ceasing employment. The Commissioner may accept shorter notice if it is deemed reasonable.127 13.070 Employers duty to notify Inland Revenue of employee leaving Hong Kong. An employer is under a duty to notify the Commissioner of Inland Revenue in writing in the event that an employee who is chargeable to salaries tax is assigned to leave Hong Kong for a period longer than one month.128 The written notice must state the intended date of the employees departure and must be given not later than one month before the expected date of departure. The Commissioner may accept shorter notice if it is deemed reasonable. The duty to notify does not arise in the case of an individual who is required in the course of his employment to leave Hong Kong at frequent intervals. Employees duty to notify Inland Revenue of departure from Hong Kong. There is a corresponding duty owed by an employee who is chargeable to salaries tax to notify the Inland Revenue if he is going to leave Hong Kong for any period exceeding one month.129 Notice must be given in writing not later than one month before the expected date of departure, stating the expected date of departure, and if the employee intends to return to Hong Kong, the approximate date of his return. As with the case for employers the Commissioner can accept shorter notice if it is deemed reasonable, and the duty to notify does not arise in the case of an individual who is required in the course of his employment to leave Hong Kong at frequent intervals. Any outstanding tax liabilities must be settled by the employee prior to his departure from Hong Kong. Employers obligation to withhold salary. An employee is liable to pay his own income tax, and an employer is generally not permitted to withhold any income from the employee. There are, however, a limited number of exceptions to this rule, one of which is the withholding of an employees nal salary payment prior to his departure from Hong Kong. An employer is required to withhold all sums payable to the employee until the Inland Revenue issues a letter of release.130 In addition, following an employees departure from Hong Kong the employer has an obligation to inform the Inland Revenue of any additional remuneration or gains received by the employee and to withhold such sums for a period of one month from the date of ling of the requisite report. Failure to comply with reporting and withholding obligations is a criminal offence. A failure on the part of either employer or employee to comply, without a reasonable excuse, with any of the above-mentioned reporting and withholding obligations is a criminal offence. The maximum penalty for such an offence is a ne at level 3.131

13.071

13.072

13.073

127 128 129 130 131

Section 52(6) of the Inland Revenue Ordinance. The employer must complete and le Form I.R. 56F. Section 52(6) of the Inland Revenue Ordinance provides. The employer must complete and le Form I.R. 56G. Section 51(7) of the Inland Revenue Ordinance. Section 52(7) of the Inland Revenue Ordinance. Section 80(1) of the Inland Revenue Ordinance.

DISPUTE RESOLUTION

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(d) Contributions to retirement schemes Mandatory Provident Fund. Under the Mandatory Provident Fund Scheme Ordinance (the MPF Ordinance),132 employees and employers are required to make MPF contributions at the rate of 5% each on the employees relevant income, on a monthly basis, on a minimum income of HK$5,000 and subject to a maximum income of HK$20,000 per month.133 Relevant income for these purposes includes salary, bonus, allowances and perquisites. However, it does not include the value of accommodation or housing allowance. The onus is on the employer to calculate the appropriate contribution from the employee and make the necessary deduction at source, from the employees wages. Mandatory Provident Fund exemptions. Exemptions apply in two types of cases: rst, where an employee enters Hong Kong on a work visa and works in Hong Kong for less than 12 months. Secondly, where an employee enters Hong Kong on a work visa and is a participating member of a retirement scheme outside Hong Kong.134 13.074

13.075

5. DISPUTE RESOLUTION
Employment disputes. The contractual arrangement under which an international assignment is undertaken may also have an impact upon how an employmentrelated dispute is resolved. For a worker from overseas engaged under a secondment arrangement any employment-related dispute which is purely contractual in nature would ordinarily reside against his overseas home employer rather than the Hong Kong entity.135 Under a dual contract arrangement the employee can look to both employers for remedies in the case of any contractual breach on their respective parts. To the extent that it might be difcult to establish which particular employer is responsible for an alleged breach, the employee is in a prime position to forum shop, that is, to choose to proceed against the employer in the jurisdiction most favourable to his case. Whereas in a direct hire arrangement there is, in theory at least, only one employer to whom the employee may turn to for a remedy in the event of any contractual breach, namely the Hong Kong employer. The issue becomes more complex where a claim is based on substantive employment law rights conferred by statute or as a matter of common law. (a) Governing law Application of the EO to worker from overseas based in Hong Kong. There is no express conict of law provision in the EO. The Ordinance simply states that it applies 13.077 13.076

132 133

134

135

(Cap.485). See generally Chapter 4, paras 4.154 to 4.170. Accordingly, the maximum amount of an employers contribution under the MPF scheme is limited to HK$1,000 per month per employee. Note, however, that in some jurisdictions continuing participation in a retirement scheme is conditional upon continuing residency within that jurisdiction. For example, a dispute regarding the employees entitlement to a contractual bonus or commission payment would be resolved by reference to the original contract of employment in addition to the terms of the secondment agreement; the parties to both being the employee and the overseas employer.

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CROSS-BORDER EMPLOYMENT

to every employee engaged under a contract of employment, to an employer or such employee and to a contract of employment between such employer and employee.136 Accordingly, despite the very broad terms in which s.4 of the EO is drafted, the question of whether or not the EO, or Hong Kong law generally, applies to a particular employer, employee or contract of employment in Hong Kong is a question to be determined by reference to common law principles of conicts of law. 13.078 General approach to choice of law in contract. The test to be applied in cases of contract has been summarised as a three-stage test: (1) when the intention of the parties to a contract, as to the law governing the contract, is expressed in words, this expressed intention, in general determines the proper law of the contract; (2) when it is not expressed in words, the intention of the parties to the contract is to be inferred from the terms and nature of the contract, and from the general circumstances of the case; and (3) when the intention of the parties is not expressed, and cannot be inferred from the circumstances, the contract is governed by the system of law with which the transaction has its closest and most real connection.137 Express governing law clause. As a general rule parties are free to choose the governing law of the contract of employment by the insertion in the contract of employment of a governing law clause. Where an express clause of this nature has been agreed by the parties, the Hong Kong courts will generally enforce it, unless it considers that it was not made for bona de purposes, or operates as an articial device or a sham.138 Implied agreement. In the absence of an express choice of law, a court will consider whether there is a factual basis for inferring an agreement as to the choice of law.139 Closest and most real connection. In the absence of an express or implied agreement, the guiding principle is that the proper law (that is, the law by which the claim is to be adjudicated) is the system of law by which a contract was made or that with which the transaction has its closest and most real connection.140 If the governing law by virtue of the closest and most real connection principle is Hong Kong law, then the provisions of the EO will apply.141 Thus, if an employee is clearly based in Hong Kong, in the absence of an express governing law clause, the EO

13.079

13.080 13.081

136 137

138

139

140

141

Section 4(1) of the EO. Rule 180 in the 11th edn (1987) of Dicey & Morris, The Conict of Laws (the last before the case law was replaced in England by the Contracts (Applicable Law) Act 1990 which implemented the Rome Convention). For example, where all parties have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating, per Lord Diplock LJ in Snook v London & West Riding Inv Ltd [1967] 2 QB 786. See Vita Food Products Inc v Unus Shipping (in liq) [1939] AC 277, and Credit Agricole Indosuez v Shanghai Erfangji Co Ltd (unrep., HCA 14569/1999). In Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 Lord Diplock stated that the court should examine the [contract] in order to see whether the parties have, by its express terms or by necessary implication from the language used, evinced a common intention as to the system of law by reference to which their mutual rights and obligations under it are to be ascertained (at 61). Per Lord Simonds in Bonython v Commonwealth of Australia [1951] AC 201. Applied in Hong Kong by the Court of Appeal in S Megga Telecommunications Ltd v Etowaru Co Ltd (unrep., CACV 113/1995, [1995] HKEC 232). See also Dicey, Morris & Collins on the Conict of Laws (14th edn., 2006) Vol. 2 at 1661 para 33.059. Section 4(2) of the EO expressly excludes certain categories of employees.

DISPUTE RESOLUTION

599

will most likely apply.142 However, where an employee has been posted overseas on assignment and still retains a connection with his home employer applying the closest and most substantial connection principle may prove more problematic.143 In such cases, although the nature of the contractual arrangements chosen by the parties is a relevant factor in this equation, it is by no means determinative of the issue. Factors indicating closest and most real connection. In determining the closest and most real connection the courts will look at the circumstances of the particular case.144 The following factors have been found to be of importance in such a determination, but are by no means conclusive: place of the performance or intended performance of the contract,145 the place of making or negotiating the contract,146 domicile or residence of the parties,147 and express choice of forum for dispute resolution, sometimes referred to as a jurisdiction clause.148 Presumption in favour of governing law chosen by the parties. The application of these principles was recently rehearsed in HSBC Bank Plc v Steven Andrew Wallace.149 The employee was a senior executive who was recruited by HSBC in England on the understanding that he was to be immediately posted to Hong Kong. The entirety of the employees contract had been performed in Hong Kong, and thus arguably had its closest and most real connection to Hong Kong. However, his contract of employment, which was entered into with a company incorporated and based in the United Kingdom, required the employee to give six months notice and was expressly stated to be governed by the laws of England. The employee was also provided with a secondment agreement with a Hong Kong company, which was part of the same group of companies as his employer.150 Some three years into his secondment in Hong Kong the employee resigned from his employment and shortly thereafter presented a cheque to his UK employer in a sum equivalent to his wages for the remaining period of the six-month notice period. This was an option available to him only under Hong Kong law, relying on s.7 of the EO.151 By exercising his statutory right under the EO to bring his employment to an end upon the making of a payment in lieu of 13.082

13.083

142

143 144 145

146

147

148

149 150

151

It should be noted however that the relevant connection is with a system of law, not with a location: Whitworth Street Estates (Manchester) Ltd v James Miller & Partners Ltd [1970] AC 583, per Lord Reid at 604. As in the case of Tsui Chung Fai v Kwoks Fashion Co Ltd [2004] 4 HKC 211. See Re Anglo-Austrian Bank [1920] 1 Ch 69. See Bank of India v Gobindram Naraindas Sadhwani [1988] 2 HKLR 262, and First National Bank of Chicago v Carroway Enterprises Ltd [1990] 2 HKLR 10. See Bank of India v Gobindram Naraindas Sadhwani (fn 145), and Cim Co Ltd v Koo Chi Yun (unrep., HCA 14293/1999, [2002] HKEC 48). See Bank of India v Gobindram Naraindas Sadhawani (fn 145), and Hong Kong Shanghai Shipping Ltd v The Owners of the Ship or Vessel Cavalry(Panamanian Flag) [1987] HKLR 287. As in Chan Chi Keung v Delmas Hong Kong Ltd (unrep., HCCL 40/2003, [2004] HKEC 1042). Note, however, that there is no strict rule that an express choice of a place for dispute resolution is an implied choice of proper law: Compagnie dArmement Maritime SA v Comagnie Tunisienne de Navigation SA [1971] AC 572, approved in the Chan Chi Keung case. [2008] 1 HKLRD 613. It appears that in order to be a recipient of expatriate benets whilst in Hong Kong an employee had to be employed by an overseas (i.e. non-Hong Kong entity). Section 7 confers on either party to the contract of employment the right to buy out a notice period, or any part thereof, by means of payment of wages in lieu of notice. In the absence of an express term permitting payment in lieu of notice, it is not possible for an employee to terminate his employment by making a payment in lieu of notice under English law.

600

CROSS-BORDER EMPLOYMENT

notice, the employee was able to commence work immediately with a competitor of his employer (that is, before the expiry of the six-month period contemplated by his contract of employment). The employer succeeded in an action for an injunction restraining the employee from working for the competitor on the grounds that his contract of employment was governed by the laws of England, the governing law chosen by the parties, pursuant to which, an employee is not permitted to make a payment in lieu of his notice period, unless permitted to do so by an express term in the contract of employment. The employees attempt to invoke the broad language of s.4 of the EO, the fact that he had been recruited to work in Hong Kong, and the fact that he did work in Hong Kong, in support of his argument that his employment had its closest and most real connection with Hong Kong failed. Deputy Judge Gill held that parties to contracts including employment contracts are entitled to choose the governing law, and where they had done so there was a presumption that the chosen law should apply; in this case the parties had chosen English law. Thus there was a presumption that English and not Hong Kong law was to be applied in establishing the parties rights. 13.084 Presumption can be rebutted if employment has no connection to the jurisdiction or if governing law clause introduced as articial device to avoid application of EO. Deputy Judge Gill did however qualify his judgment by stating that the presumption could have been rebutted if the employee had been able to establish that the parties had no connection to England and that the invoking of English law was a device articially introduced to exclude the protection conferred by the Ordinance. On the facts of the case, Deputy Judge Gill found that there were sufcient factors connecting the employment to the United Kingdom, namely both the employee and employer were British, the employee was recruited in the United Kingdom, the employees employment in Hong Kong under a secondment arrangement was for a good reason, that is, in order to make him eligible for expatriate benets.152 Express choice of non-Hong Kong law: effective to exclude rights conferred by the EO? One of the most interesting aspects of the decision in HSBC v Wallace was the employees argument based on s.70 of the EO,153 namely that an express choice of law clause cannot be used to exclude an employees right to rely upon protections conferred by the EO (in this case s.7). This argument was rejected. Deputy Judge Gill regarded the EO as being incapable of overriding the presumption.154 The decision is perhaps surprising given what appears to be the legislative intent of s.70 of the

13.085

152

153

154

Deputy Judge Gill considered all of these factors as proving a sufcient connection with the overseas jurisdiction, and observed that it made good sense that a group of companies spread all over the world would want senior executives under one branch and governing law. Section 70 provides that Any term of a contract of employment which purports to extinguish or reduce any right, benet or protection conferred upon the employee by this Ordinance shall be void. Deputy Judge Gill reached this view by comparing the wording of s.4 of the EO with the wording contained in s.204(1) of the UK Employment Rights Act 1996 which expressly prevents parties evading the protections conferred by the Act by choosing foreign law as the governing law of the contract of employment. Section 204 provides that for the purposes of this Act it is immaterial whether the law which (apart from this Act) governs any persons employment is the law of the United Kingdom, or of a part of the United Kingdom, or not.

DISPUTE RESOLUTION

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EO if a plain meaning is to be given to the wording of the section.155 Arguably, s.70 should operate so as to prevent a choice of law clause excluding the rights, benets and entitlements conferred by the EO in circumstances where Hong Kong law has the closest connection with the contract.156 The discrimination ordinances all contain a contracting out provision similar to s.70 of the EO.157 Applicability of discrimination ordinances. The provisions of the discrimination ordinances are applicable only if the actual or prospective employment (in the case of a job applicant) is at an establishment in Hong Kong, irrespective of the governing law that is provided for in the contract of employment.158 An employee is presumed to be employed at an establishment in Hong Kong unless the employee does his work wholly or mainly outside Hong Kong.159 For these purposes employees who are employed on a ship registered in Hong Kong or on an aircraft or dynamically supported craft which is registered in Hong Kong and operated by an employer whose principal place of business or ordinary residence is Hong Kong are treated as employed at an establishment in Hong Kong unless they perform their work wholly outside Hong Kong.160 Discrimination provisions under the Race Discrimination Ordinance (RDO) do not apply to differential treatment between employees on local terms and employees in existing employment on expatriate terms of employment. The provisions relating to discrimination against employees and applicants do not apply where differences exist in the terms of employment between local and overseas employees,161 or between overseas nationals of one country and overseas nationals of another.162 This exemption permits employers to offer more generous expatriate employment packages in terms of salary and benets to its overseas employees than that offered to local employees, a commonplace arrangement in Hong Kong prior to the enactment of the RDO.163 The exemption only applies in respect of employees who 13.086

13.087

155

156

157

158 159

160

161 162 163

It is suggested that the same conclusion would be reached if s.19 of the Interpretation and General Clauses Ordinance (Cap.1) is applied; this requires a fair, large liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit. Graeme Johnston, The Conict of Laws in Hong Kong (2005) argues that any other conclusion would seem repugnant given the evident legislative intent. Johnston argues that a choice of law clause should be upheld in so far as governing purely contractual issues and other matters of applicable law which do not operate so as to extinguish or reduce any rights, benets or protections conferred upon the employee by the Ordinance (at para 5.070). The contracting out provisions are contained in s.87(3) of the Sex Discrimination Ordinance (SDO), s.83(3) of the Disability Discrimination Ordinance (DDO), s.65(3) of the Family Status Discrimination Ordinance and s.81(3) of the Race Discrimination Ordinance (RDO). Arguably the same interpretation as suggested with regard to s.70 of the EO ought to be applied to these contracting out provisions in order to give meaning to the Ordinances, namely that a governing law clause in a contract of employment should not be able to oust the protection offered by the Ordinances. Section 14(1) of the SDO, s.10 of the FSDO, s.14(1) of the DDO and s.16(1) of the RDO. Section 14(1) of the SDO, s.10 of the FSDO, s.14(1) of the DDO and s.16(1) of the RDO. Where work is not done at an establishment in Hong Kong, it is treated for the relevant purposes as done at the establishment form which it is done, or (where it is not done from any establishment) at the establishment with which it has it the closest connection: s.14(4) of the SDO, s.10(4) of the FSDO, s.14(4) of the DDO and s.16(4) of the RDO. Sections 14(2) and 14(3) of the SDO, ss.10(2) and 10(3) of the FSDO, ss.14(2) and 14(3) of the DDO and ss.16(2) and (3) of the RDO. Section 14(1)(a) of the RDO. Section 14(1)(b) of the RDO. Although it is arguable that more favourable terms are necessary in order to attract skilled professionals who would not otherwise come to Hong Kong, in practice such packages were often offered to overseas nationals who were already working in Hong Kong.

602

CROSS-BORDER EMPLOYMENT

commenced their employment with the employer prior to the commencement date of the RDO.164 Particular categories of employees, such as judicial ofcers, ICAC ofcers, public ofcers and specied native-English teachers are required to have been in existing employment for longer periods before falling within this exemption.165 13.088 Discrimination provisions of RDO do not apply to differential terms offered to overseas employees possessing skills knowledge or experience not readily available in Hong Kong. An employer may continue to offer differential terms and conditions to overseas employees who are not in existing employment, but an employer may only do so where the employment requires special skills, knowledge or experience not readily available in Hong Kong, and it is reasonable having regard to the prevailing terms of employment offered to persons with those skills, knowledge or experience outside Hong Kong and any other relevant circumstances.166 The employee must be recruited from overseas or transferred to Hong Kong from overseas. Discrimination provisions of RDO do not apply to the hiring of domestic helpers. The provisions of the RDO do not apply to the decision to hire a person as a domestic helper by reference to their race. Many domestic helpers in Hong Kong are from overseas, and so this provision operates so as to affect them more than local Hong Kong residents.167 The exemption only applies to the hiring process, so that the provisions of the RDO apply to a domestic helper upon commencement of employment. Application of EO to work performed outside Hong Kong. The EO is silent on the issue of its applicability to employment outside of Hong Kong other than those situations expressly excluded, namely employees whose employment is governed by the Contracts for Employment Outside Hong Kong Ordinance (CEOHKO),168 and persons serving under a crew agreement within the meaning of the Merchant Shipping (Seafarers) Ordinance,169 or on board a ship which is not registered in Hong Kong.170 Employees falling within the ambit of the CEOHKO are given only very limited protections.171 Governing law for work performed outside of Hong Kong. The principles referred to in paras 13.077 to 13.089 referred to above apply equally to employment contracts outside of Hong Kong so that, in the absence of an express choice of law clause, or implied intention, Hong Kong law will apply to a contract of employment if it has its closest and most real connection to Hong Kong.

13.089

13.090

13.091

164 165

166 167

168 169 170 171

10 July 2009. A list of employees who qualify as Employee in existing employment for these purposes is set out in Sch.2 to the RDO. Section 13(1) of the RDO. This provision in effect permits indirect discrimination, enabling an employer to choose which race of person they are comfortable with working in their private abode, as opposed to have working in a commercial workplace. A distinctive feature of the employment of foreign domestic helpers in Hong Kong is that they are required to reside within the home of their employer, and this appears to be the governments justication for the exemption, namely that a person is entitled to choose whom to admit into their home to live with them. Cap.78. Cap.478. Sections 4(2)(c) and (d) of the EO. See paras 13.109 to 13.120 below.

DISPUTE RESOLUTION

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(b) Jurisdiction Jurisdiction of Labour Tribunal. Even in a case where Hong Kong law applies to a contract of employment, where the work is to be performed outside of Hong Kong, the ability of a party to bring a claim before the Labour tribunal in Hong Kong may be open to challenge unless a substantial connection to Hong Kong can be shown.172 Claims for money sums arising from breach of contractpara 1(a) claims. In Matheson PFC Ltd v Jansen,173 the Court of Appeal held that the exclusive jurisdiction of the Labour Tribunal in cases involving claims for money sums by either employer or employee arising from the breach of an express or implied term in an employment contract only extends to contracts to be performed in Hong Kong,174 or to overseas contracts falling within the ambit of the CEOHKO.175 A contract of employment to be performed outside of Hong Kong will not fall within the CEOHKO nor, following the Matheson decision, within the jurisdiction of the Labour Tribunal, if the employer is a local employer, namely is in Hong Kong or is carrying on business in Hong Kong. Local worker employed by local employer to work outside of Hong Kong may not fall within jurisdiction of Labour Tribunal. The decision in Matheson is an odd one since it leads to the seemingly bizarre result that an overseas contract falling within the CEOHKO would permit a Hong Kong employee employed by a foreign employer to work wholly or partially outside Hong Kong to sue in the Labour tribunal, but not a Hong Kong employee employed by a local employer to work outside Hong Kong. An employer or employee in such a case would have to bring a claim in the Court of First Instance or the District Court. The decision clearly has ramications in connection with contracts between Hong Kong companies and employees where the company has a factory in Mainland China. The Court of Appeal made reference to such contracts, but disregarded the potential absurdity of not having those contracts falling within the jurisdiction of the Labour Tribunal on the rather imsy grounds that in any case involving difcult matters, especially of law, the tribunal might in any event decline jurisdiction.176 13.092

13.093

13.094

172

173 174 175

176

The jurisdiction of the Labour Tribunal is governed by s.7 and the Schedule to the Labour Tribunal Ordinance (LTO). Section 7(1) of the LTO provides that: The tribunal shall have jurisdiction to inquire into, hear and determine the claims specied in the Schedule. Paragraph 1(a) of the Schedule to the LTO refers to: A claim for a sum of money which arises from (a) the breach of a term, whether express or implied, of a contract of employment, whether for performance in Hong Kong or under a contract to which the Contracts for Employment Outside Hong Kong Ordinance (Cap.78) applies. Paragraph 1(b) of the Schedule to the LTO refers to: the failure of a person to comply with the provisions of the Employment Ordinance. The Labour Tribunal has exclusive jurisdiction in such cases, but has discretion to decline jurisdiction and to transfer the case to the Court of First Instance, District Court or Small Claims Tribunal: s.10 of the LTO. [1994] 2 HKC 250. Namely claims falling within para 1(a) of the Schedule to the LTO. See Au Hung Lit v Nguy Can & Fils (China) Co Ltd (unrep., HCLA 41/2004, [2005] HKEC 18) for an example of a case falling within the Contracts for Employment Outside Hong Kong Ordinance (the employment contract had been entered into in Hong Kong by a company which was not incorporated in Hong Kong, or doing business in Hong Kong, for employment in Cambodia), over which the Tribunal had jurisdiction under para 1(a) of the Schedule to the LTO. Per Liu J at para 10.

604

CROSS-BORDER EMPLOYMENT

13.095

Substantial connection to Hong Kongpara 1(b) claims. The harshness of the decision in Matheson has been mitigated by the subsequent decision of William Barry Preen v Industries Polytex Ltd177 in which the court held that the Labour Tribunal retains jurisdiction even in cases where performance of the contract of employment takes place outside of Hong Kong as long as the employer and employee remained substantially connected to Hong Kong.178 In Preen the employer had appealed a decision of the Labour Tribunal on the grounds that it had no jurisdiction to hear a claim because the performance of the contract was to be wholly or substantially in Macau, the argument being that the contract of employment ought to be governed by Macanese law.179 Although the employee had to spend most of his time in Macau, that was only one of the relevant considerations. The court was persuaded that the contract of employment was substantially connected to Hong Kong by, among others, the following factors: the employee was a Hong Kong resident and the employer a Hong Kong company; the contract of employment had been entered into in Hong Kong; the employee had been provided with a Hong Kong housing allowance; at all material times the employers management remained in Hong Kong and the employee received his instructions from Hong Kong; the contract of employment was executed in Hong Kong and the employee was paid in Hong Kong in local currency, namely Hong Kong dollars.180 Yeung J distinguished the Matheson Court of Appeal decision by relying instead upon the broader language of para 1(b) of the Labour Tribunal Ordinance (LTO), pursuant to which the Labour Tribunal has jurisdiction to adjudicate a claim for a sum of money, which arises from the failure of a person to comply with the provisions of the EO. Jurisdiction of Labour Tribunal. The approach of relying on para 1(b) of the LTO, utilised so effectively in Preen, was followed in Tsui Chung Fai v Kwoks Fashion Co Ltd.181 The Hong Kong company appealed against a decision of the Labour Tribunal on the ground that the Tribunal did not have jurisdiction to hear a claim where the performance of the contract of employment took place entirely in Shanghai. The employer had terminated the employees employment and failed to pay him the balance of outstanding sums for arrears of wages, unpaid balance of wages, end-of-year payment and annual leave pay, and had initially agreed to pay all outstanding payments to the employee by way of eight instalments. However, after only paying four of the instalments, the employer failed to pay the balance. The employer argued that it had an entitlement to withhold payment of the sum claimed on the basis that it was required by PRC law to withhold income tax on the salary, allowance and benets payable to the employee, who

13.096

177 178 179

180

181

(unrep., HCLA 171/1995, [1996] HKLY 711). Per Yeung J at para 3. The facts relied upon in support of this argument were that the employee had been employed as the assistant general manager at the employers knitting plant in Macau; that the contract had anticipated that the employee would have to travel daily between Hong Kong and Macau; that he might be required to stay overnight in Macau at certain times, and that he was provided with an apartment he could use for these purposes. See also Wong Yik Fook Johnny v Urbis (HK) Ltd [2002] 3 HKC 51. Compare the case of Ward v Harting (HK) Ltd (unrep., DCCJ 2744/2004, [2005] HKEC 2067) in which an employee who was hired to work in China by a Hong Kong employer returned to Hong Kong on a weekly basis. The court considered that there was an insufcient connection between the employment and the employees activities in Hong Kong to establish that the contract of employment was for performance in Hong Kong. [2004] 4 HKC 211.

DISPUTE RESOLUTION

605

was a foreign employee, for his services rendered in the PRC, and that the employees tax liability exceeded the sum claimed. Chu J had little difculty in nding that the Tribunal had jurisdiction to deal with the claim under para 1(b) of the Schedule to the LTO. Payment of wages, end-of-year payments and annual leave payments are all benets protected by the EO; accordingly, the employees claim for such payments was a claim for a sum of money which arose from the failure of his employer to comply with the provisions of the EO.182 It is apparent from the decisions in Preen and Kwoks Fashion that an employee employed outside Hong Kong who has a claim for unpaid wages must bring such a claim in the Labour Tribunal, rather than the Court. Stay of proceedings on forum non-conveniens grounds? In principle it is possible to seek a stay of labour tribunal or court proceedings on the grounds that Hong Kong is not the most appropriate forum;183 however, in practice, the mere fact that the employment has been performed outside of Hong Kong and that the claim involves issues of non-Hong Kong law will not lead a court to decline jurisdiction on these grounds, particularly so where the employer is located in Hong Kong. At the appeal hearing in Kwoks Fashion, the defendant sought to argue that the Shanghai court was a more appropriate forum to deal with the dispute, involving as it did, issues of PRC tax law, which the Hong Kong court was naturally less familiar with. However, the mere fact that the dispute involved examination, interpretation or application of foreign law was regarded as insufcient by itself as a ground necessitating the Hong Kong court to decline jurisdiction. Stay of proceedings by prior agreement of the parties. The parties may not exclude the jurisdiction of the labour tribunal by agreement between themselves.184 However, an agreement that no right of action shall arise, or for the postponement of the enforcement of a claim in the courts until the parties have attempted to settle by an alternative means of dispute resolution, for example mediation or arbitration, is valid and may be enforced by way of a stay of the proceedings. The labour tribunal has a statutory discretion to stay proceedings where there is an arbitration agreement between the parties.185 13.097

13.098

182

183

184

185

Chu J observed that such a construction is consistent with the observations of Liu JA in Matheson (fn 173 at 255 of the judgment) that: statutory benets and protection under the Employment Ordinance, even for a workman employed to work outside Hong Kong may be claimed in the Labour Tribunal under para 1(b), 4 and 5 of the Schedule of the Labour Tribunal Ordinance. And that: Good sense requires that a contract to be performed outside Hong Kong to be kept away from the Labour Tribunal unless the claims arising therefrom are well-dened and can be easily identied such as arrears of wages and statutory benets and protection under the Employment Ordinance. The principle of forum conveniens (appropriate forum) formulated by Lord Goff in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460 refers to the exercise of the discretion of the court in determining whether it should hear a particular case. The question to be answered in each case is which court is the most appropriate for the matter to be tried in the interests of the parties and for the ends of justice? For relevant principles governing a stay application in Hong Kong, see Pei Zheng Middle School v China Pui Ching Education Foundation Ltd (unrep., CACV 262/2005, [2006] HKEC 316). An agreement purporting to oust the jurisdiction of the courts entirely is illegal and void on grounds of public policy: Doleman & Sons v Ossett Corp [1912] 3 KB 257; Baker v Jones [1954] 1WLR 1005. Section 6(2) of the Arbitration Ordinance (Cap.341) provides that the court has a discretion to stay any proceedings where there is a written submission to a domestic arbitration and the court is satised that there is no sufcient reason why the matter should not be referred pursuant to the arbitration agreement and that the party applying for the stay was ready and willing at the time the proceedings were commenced to do all things necessary for the proper conduct of the arbitration. Section 6(2) applies to any claim or matter which is within the jurisdiction of the labour tribunal. See also Cox Adrian John v Group Employment Management Ltd [2005] 1 HKC 199.

606

CROSS-BORDER EMPLOYMENT

13.099

Proper law of the contract will not necessarily affect employees ability to bring a claim for a tort under the laws of a different jurisdiction. Regardless of the proper law of the contract, an employee may be able to bring a claim under the laws of a different jurisdiction for a tort committed in the course of employment. In Coupland v Arabian Gulf Oil Co,186 the employee was employed as a senior maintenance technician for a nationalised oil company in Libya which was registered in England. During the course of his employment he had an accident, as a result of which his leg was amputated below the knee. Having received payments under Libyan social security and labour laws and under an insurance policy taken out by his employers under the contract of employment, the employee then claimed common law damages against his employer for negligence and breach of contract in causing the accident. On preliminary issues, Hodgson J at rst instance held that Libyan law was the proper law of the contract but that since the employees claim based on a tort committed abroad was actionable both under English law and under the law of the country where the tort was committed, i.e., Libya, it was governed by English law. On appeal, the English Court of Appeal held that the contract was only relevant to the claim in tort if, on its true construction in accordance with its proper law, it had the effect of excluding or restricting the tortious claim.187

6. EMPLOYEES WORKING OUTSIDE OF HONG KONG


(a) Employers liability for work-related injuries to employees working outside of Hong Kong 13.100 Work-related injuries sustained to an employee whilst outside of Hong Kong. At common law an employer owes its employees a duty of care to its employees by virtue of the employment relationship.188 The duty is non-delegable. That is, the employer remains responsible for the performance of the duty even if it has delegated its performance. The duty has been described by the Court of Final Appeal as a single duty to take reasonable care for the safety of employees: to provide safe co-workers, safe equipment, a safe place of work, a safe system of work, proper instructions and supervision and, where called for, adequate training.189 The question then becomes: to what extent does this duty apply to employment which is being undertaken in a different jurisdiction from the one in which his employer is based? In principle, there is no reason why the common law duty of care should not extend to the activities of an employee whilst working abroad, at least insofar as the employee is engaged in activities which arise out of and in the course of his employment, or are reasonably incidental to the

186 187 188 189

[1983] 1 WLR 1136. Fn 186. See the judgment of Goff LJ at 1153 DE. Wilson & Clyde Coal Co v English [1938] AC 57. Cathay Pacic Airways Ltd v Wong Sau Lai (2006) 9 HKCFAR 371 per Bokhary PJ; Jerry Chen v Whirlpool (Hong Kong) Ltd (2007) 10 HKCFAR 619; Wilson & Clyde Coal Co v English; Latimer v AEC Ltd [1953] AC 643. For detailed consideration of the nature of the non-delegable duty, see Chapter 10, paras 10.004 to 10.010.

EMPLOYEES WORKING OUTSIDE OF HONG KONG

607

employees work.190 The issue is likely to arise most frequently where an employee has been loaned to another employing entity which is located outside of Hong Kong. In such cases it may prove difcult to pursue a claim against a foreign entity.191 Non-delegable duty extends to employment outside of Hong Kong. In McDermid v Nash Dredging & Reclamation Co Ltd,192 an English House of Lords case, the employee who was engaged as a deckhand was lent to an associated company to work on a dredging contract being carried out off the coastal waters of Sweden. The tug-master, an employee of the associated company, negligently set the tug at full speed whilst the employee was on deck with ropes, causing him to sustain injuries which led to his leg having to be amputated. The House of Lords held that his permanent employer was in breach of its non-delegable duty to provide a safe system of work. A different result was reached by the English Court of Appeal in Cook v Square D Ltd, 193 which involved an engineer who was sent by his English employer to work on an assignment in Saudi Arabia. He was injured when he slipped into a hole in the oor made by the employees of a sub-contractor, but failed in his claim against his employer. The Court of Appeal distinguished McDermid on the grounds that in that case the employers still retained some element of control over the operations, as they were joint contractors and there was only a small team. Employer must satisfy itself that contractor has adopted safe system of work. The degree of control that the employer can reasonably exercise in the circumstances appeared to have played a signicant role in the Court of Appeals decision in Cook v Square: the suggestion that the home-based employer has any responsibility for the daily events of a site in Saudi Arabia has an air of unreality.194 In Hong Kong, the courts have followed a similar approach to that in McDermid.195 In Lee Wai Man v Wah Leung Finance Limited,196 the deceased had been engaged to work on a building site in Shanghai when he fell into an unguarded hole, causing his death. The employer argued that it was not in a position to reasonably ensure safe conditions on the site in Shanghai, based as it was in Hong Kong. This argument met with little sympathy from the court which found the employer to be in breach of its non-delegable duty to take reasonable care for the employees safety by failing to take any steps to inspect the site in Shanghai and failing to satisfy itself that the Shanghai contractor in charge of the site had adopted a safe system of work.197 13.101

13.102

190 191 192 193 194

195 196

197

Davidson v Handley Page Ltd [1945] 1 All ER 235. This issue is addressed in Chapter 2 at para 2.064 to 2.071 and Chapter 10 at para 10.027 to 10.030. [1987] AC 906. [1992] ICR 262. Per Farquharson LJ at 271. Cheung JA in Jerry Chen v Whirlpool (Hong Kong) Ltd (unrep., CACV 325/2005, [2006] HKEC 1136) at para 20 advised caution: [Cook v Square] should not be taken as an authority to say that because the employee is working in a country or area outside the control of the employer, the employer would not by this fact alone be held responsible. Li Moon Chai v Leung Shu Man (unrep., HCPI 48/2007, [2008] HKEC 1517). [2004] 1 HKLRD 1023. What constitutes a safe system of work is discussed at Chapter 10, paras 10.022 to 10.024. See also Li Hoi Shuen v Man Ming Engineering Trading Co Ltd [2006] 1 HKLRD 84 in which the court found the employer to be in breach of a duty to take reasonable care in the provision of safe accommodation, a duty which appears to go beyond the non-delegable duty referred to at para 13.100 above.

608

CROSS-BORDER EMPLOYMENT

13.103

Employer may avoid liability by delegation. Where an employer can show that it has acted reasonably in its delegation of the duty, it may avoid liability. In Jerry Chen v Whirlpool (Hong Kong) Ltd,198 the employee was required by his contract of employment to provide services to an associated company of the employer based in Shanghai, and was required to travel within China and elsewhere for his work. The employee was provided with a car and driver for these purposes. He sustained injuries in the course of his employment in a car accident in Beijing caused by the negligence of the driver. The employee sought to recover damages from his Hong Kong based employer. His employer successfully argued that it was reasonable for it to have delegated the responsibility of providing a car and driver to their associate company. This company was found not to be liable since they had discharged their duty to the employee in providing a reasonably safe car and a reasonably competent driver to the employee. (b) Applicability of ECO to work-related injuries sustained outside of Hong Kong

13.104

Applicability of the ECO. The ECO199 expressly applies to work-related injuries sustained whilst an employee is outside of Hong Kong where the contract of employment was entered into in Hong Kong with an employer who is carrying on business in Hong Kong.200 The ECO also applies in cases where the employer carries on business outside of Hong Kong and the accident causing injury occurs outside of Hong Kong, where the employee was recruited or engaged in Hong Kong and the employer has submitted to the jurisdiction.201 Does submission to the jurisdiction have to be express or implied? Whether or not submission to the jurisdiction has to be express or can be implied is not certain, there being conicting authorities on the issue.202 In Yiu Hon Ming v Coastal Shipping Co Pty Ltd,203 the Court of Appeal declined to express a view on the dichotomy of judicial opinion, since in their view there was no question of an implied submission in a case where there had been a submission for the purposes of only part of the Ordinance. It is however likely that submission to the jurisdiction of the courts of Hong Kong will be assumed in a case where no objection to jurisdiction is raised at the outset of a claim. Employees on Hong Kong and non-Hong Kong ships. The ECO expressly applies to persons employed on Hong Kong ships,204 and to employees recruited or engaged in Hong Kong for employment on a non-Hong Kong ship where the employer has submitted to the jurisdiction.205

13.105

13.106

198 199 200 201 202

203 204 205

(2007) 10 HKCFAR 619. Cap.282. For a full analysis of the scope and coverage of the ECO, see Chapter 11, paras 11.002 to 11.153. Section 30B(2) of the ECO. Section 30B(5)of the ECO. See dicta of Ashworth J in Vogel v R & A Kohnstamm Ltd [1973] 1 QB 133 at 145 for the proposition that submission to the jurisdiction must be express and not implied. Compare Blohn v Desser [1962] 2 QB 116 and Sfeir & Co v National Insurance Co of New Zealand Ltd [1964] 1 Lloyds Rep 330 for the proposition that submission could be implied if necessary to do so. [1991] 2 HKLR 240. Section 29 of the ECO. Section 30 of the ECO.

EMPLOYEES WORKING OUTSIDE OF HONG KONG

609

Work-related travel outside of Hong Kong. An accident which occurs while an employee is travelling for the purposes of and in connection with his employment between Hong Kong and any place outside Hong Kong or between any place outside of Hong Kong and any other place is deemed to arise out of and in the course of an employees employment for the purposes of employees compensation.206 This provision offers protection to employees who are required to travel to a workplace outside of Hong Kong. The Court of Appeal has held that the deeming provision applies to any mode of transport, and is not limited to transport provided by an employer.207 Moreover, it is not limited to travel to and from work but expressly includes journeys from the workplace outside of Hong Kong to another location. Admissibility of evidence where witness cannot be found in Hong Kong. Where the testimony of a witness who is outside of Hong Kong is required in a case involving a work-related injury which took place outside of Hong Kong or on a Hong Kong ship, and it can be shown that the witness cannot be found in Hong Kong, a signed sworn deposition or a certied copy of it made by the witness outside of Hong Kong is admissible in evidence without further proof.208 (c) The Contracts for Employment Outside Hong Kong Ordinance The Contracts for Employment Outside Hong Kong Ordinance (CEOHKO).209 The CEOHKO210 controls the recruitment of employees in Hong Kong for work wholly or partly outside of Hong Kong. The CEOHKO only applies to contracts of employment entered into in Hong Kong by employees performing primarily manual work,211 and non-manual employees recruited in Hong Kong whose monthly earnings do not exceed a gazetted amount,212 where the employer is neither resident nor conducts business within Hong Kong.213 Contract of employment must be in writing and contain particulars dening rights and obligations of the parties. Contracts of employment governed by the CEOHKO must be in writing, be signed by both parties prior to the departure of the employee214 and set out all particulars necessary to enable the parties to dene their rights and obligations under the contract. The Ordinance lists certain details215 that must be included in the contract, including the employers name, the employees name,

13.107

13.108

13.109

13.110

206 207 208 209 210

211 212 213

214

215

Section 5(4)(g) of the ECO. As in Hsu Shu Chiao v Lung Cheong Toys Ltd [2002] 1 HKC 479, referred to at Chapter 11, para 11.066. Sections 30A and 29(1)(c) of the ECO. Cap.78. The CEOHKO does not apply to persons employed for service as members of crews of ships or aircraft, or to any persons migrating for employment on a permanent basis: ss.4(2)(a) and (c) of the CEOHKO. Manual work is not dened in the CEOHKO. Section 4(2)(d) of the CEOHKO. The monthly earning limit is currently set at HK$20,000 (as at May 2010). Section 4(1) of the Contracts for Employment Outside Hong Kong Ordinance. For an example of a contract of employment falling within the application of the Ordinance, see Au Hung Lit v Nguy Can & Fils (China) Co Ltd (unrep., HCLA 41/2004, [2005] HKEC 18). Section 5(1) of the CEOHKO. An employee who is unable to sign a contract may indicate his assent by afxing his thumb print in ink: s.5(1A) of the CEOHKO. For a full list of the particulars and undertakings that should be contained in a contract of employment governed by the CEOHKO, see s.5(2)(a)-(o) of the CEOHKO.

610

CROSS-BORDER EMPLOYMENT

the particulars of the place of engagement and the place of origin of the employee, the name of the place at which the contract is to be performed, and particulars of the nature of the employment, including duration of the employment, wages, hours of work grounds for termination and undertakings relating to repatriation and coverage of medical expenses. 13.111 Employer must undertake to pay medical expenses and compensation for work-related injuries. The contract must provide that where the employee suffers personal injury by accident or occupational disease arising out of or in the course of employment, the employer is to defray the expenses necessarily incurred by the employee on account of medical treatment, including maintenance in hospital, during the employees incapacity, and pay or arrange with the appropriate authority for payment of compensation in accordance with the law of the place of employment. If no law on compensation exists in the jurisdiction in which the employee is engaged, the employer is required to pay compensation no less favourable than that laid down in the ECO and be responsible for all expenses incurred whenever the employee is required to undergo a medical assessment for the purpose of employees compensation. In the event of illness or incapacity not attributable to the employees employment an employee is also protected since the contract must state that the employer is to provide free medical attention and maintenance in hospital to the employee while he is incapacitated, and the employer must agree to pay the employee, as a minimum, full wages for the rst month of incapacity and half wages for at least three months thereafter.216 Failure to put contract in writing. A contract of employment which is not in writing in accordance with the provisions of the CEOHKO amounts to an offence on the part of the employer,217 and is not enforceable against an employee. Moreover, where the failure to put the contract in writing is due to a deliberate omission or neglect on the part of an employer, an employee may recover any expenses reasonably incurred by him and any dependents in returning to Hong Kong in an action for damages.218 Approval of Commissioner for Labour required. Contracts of employment governed by the CEOHKO have to be approved by the Commissioner for Labour (Commissioner). In order to obtain such approval, the contract of employment must be presented to the Commissioner for attestation prior to the departure of the employee from Hong Kong.219 Commissioner has to be satised that contract freely entered into by employee. Before attesting any contract the Commissioner has to be satised that all formalities required by the CEOHKO have been complied with, that the contract and its terms

13.112

13.113

13.114

216 217

218 219

Section 5(2)(ia). An employer or agent acting on behalf of an employer who commits such an offence is liable on conviction to a ne of up to HK$50,000: s.14 of the CEOHKO. No offence is committed where it can be shown that there was a reasonable belief that the employee is migrating to a place where he would be granted admission on a permanent basis: s.16 of the CEOHKO. Section 7 of the CEOHKO. Section 6 of the CEOHKO.

EMPLOYEES WORKING OUTSIDE OF HONG KONG

611

have been freely entered into and understood by the employee,220 and that such consent was not obtained by or as a result of any threat, intimidation, bribery, deceit, undue inuence, misrepresentation or mistake.221 In addition, the Commissioner has to be satised that the employee has not declared himself bound by a previous engagement,222 and that the employee is medically t to perform the contract.223 Where the employee has been recruited through an employment agency, the Commissioner must be satised that there has been no contravention of any of the provisions of s.51 of the EO, thereby ensuring that the employee has been engaged through a licensed or exempted employment agency.224 Commissioner has to be satised that employee entitled to minimum labour rights under International Labour Organisation Convention. Where work is to be performed in a place for which the Contracts of Employment (Indigenous Workers) Convention 1939225 is not in force, the Commissioner has to be satised that the employee will be entitled to certain rights and protections226 afforded to employees under that Convention either by virtue of the national laws of the country concerned, or by virtue of the terms of the contract of employment.227 Commissioners power to require bond or guarantee for due performance of contract. The Commissioner has the power to require, as a condition precedent to the attestation of a contract, that a Hong Kong with permanent residency status, approved by him, either furnish a bond or sign a guarantee for the performance of the contract by the employer; in particular with regard to the employers undertaking to repatriate the employee and any dependents.228 Failure to obtain consent of Commissioner. A failure on the part of an employer to obtain the Commissioner for Labours consent for a contract of employment outside of Hong Kong is an offence,229 and will result in the employment contract being unenforceable against the employee. It is also an offence for a person to counsel, solicit, procure or induce an employee to enter into a contract of employment which does not comply with the provisions of the CEOHKO, or to leave Hong Kong to commence employment prior to obtaining the consent of the Commissioner.230 The employee has a statutory right of action against the employer for all expenses reasonably incurred in returning to Hong Kong. 13.115

13.116

13.117

220

221 222 223 224 225 226 227 228 229

230

Section 12 of the CEOHKO provides that a person is not capable of entering into a contract to which the CEOHKO would ordinarily apply if he is under 18 years of age or the minimum age of capacity for entering into a contract allowed by the law of the place in which the contract is to be performed. Section 11(a), (b) and (c) of the CEOHKO. Section 11(1)(g) of the CEOHKO. Section 11(1)(e) of the CEOHKO. Section 11(1)(d) of the CEOHKO. International Labour Organisation, Convention No. 64. Namely arts.10 to 16 of the Convention. Section 11(1)(h) of the CEOHKO. Section 8 of the CEOHKO. An employer or agent acting on behalf of an employer who commits such an offence is liable on conviction to a ne of up to HK$50,000: s.14 of the CEOHKO. Section 15 of the CEOHKO. No offence is committed under either s.14 or 15 of the CEOHKO where it can be shown that there was a reasonable belief that the employee is migrating to a place where he would be granted admission on a permanent basis: s.16 of the CEOHKO.

612

CROSS-BORDER EMPLOYMENT

13.118

Employee must undergo medical examination to certify tness to perform work under the contract. Every employee who enters into a contract governed by the CEOHKO has to be medically examined for his tness to perform the work due to be performed under the contract of employment. The medical examination should be conducted at the expense of the employer and needs to take place prior to seeking the approval of the Commissioner.231 Duration of contract. The CEOHKO provides that the maximum duration of a contract of employment cannot exceed two years if the employee is not accompanied by dependents; three years if the employee is accompanied by dependents; or the maximum period prescribed by the law of the place in which the contract is to be performed, whichever is the less. However, an employee may be re-engaged for further periods. Applicability of Hong Kong Law to contracts falling within CEOHK Ordinance. Whether or not Hong Kong laws, other than the EO,232 apply to contracts within the CEOHK Ordinance will depend upon whether the employment contract has a sufcient connection to Hong Kong.233 The application of the CEOHKO is specically excluded in respect of crews of ship or aircraft,234 persons migrating for employment on a permanent basis,235 and any person who does not perform primarily manual work and whose wages exceed an amount set by the Secretary for Economic Development and Labour by notice in the Gazette. For these categories of employees, in cases where a closest and most real connection to Hong Kong can be established, the exclusion from the protections offered by the CEOHKO will operate to the employees advantage, since the employees will then fall within the ambit of the EO. Where, however, the employees contract is not governed by Hong Kong law, it will have the effect of excluding even the minimal protections conferred by the CEOHKO.

13.119

13.120

231 232 233 234 235

Section 10 of the CEOHKO. The EO does not apply to contracts governed by the provisions of the CEOHKO: s.4(2)(c) of the EO. See paras 13.077 to 13.091 for further discussion of this issue. Section 4(2)(a) of the CEOHKO. Section 4(2)(c) of the CEOHKO.

CHAPTER 14

CHANGE OF OWNERSHIP
Para. 1. Introduction ............................................................................................................................. 14.001 2. Employees position and rights on a change of ownership of business ................................... 14.002 (a) Introduction ..................................................................................................................... 14.002 3. Continuous employment ......................................................................................................... 14.005 (a) Introduction ..................................................................................................................... 14.005 (b) What amounts to a transfer of business? ......................................................................... 14.008 (c) One employer .............................................................................................................. 14.011 4. Effect of change of ownership on obligation to pay severance payments ............................... 14.015 (a) Introduction ..................................................................................................................... 14.015 (b) What is a change of ownership of business? ................................................................... 14.017 (c) Termination in accordance with section 6 or section 7 of the Employment Ordinance .................................................................................................. 14.019 (d) No severance payment where employee consents to renewal/re-engagement with new owner ............................................................................................................... 14.020 (e) No severance payment where employee unreasonably refuses offer of renewal/re-engagement with new owner ......................................................................... 14.021 (f) No account must be taken of fact that owner is to be substituted ................................... 14.029 (g) Connection between previous owner and new owner ..................................................... 14.031 (h) No requirement for new contract of employment ........................................................... 14.033 (i) Renewal or re-engagement .............................................................................................. 14.034 5. Effect of change of ownership of business on obligation to pay long service payments ........ 14.036 (a) Introduction ..................................................................................................................... 14.036 (b) Termination in accordance with section 6 or section 7 of the Employment Ordinance .................................................................................................. 14.038 (c) No long service payment where employee consents to renewal/re-engagement with new owner ............................................................................................................... 14.039 (d) Unreasonable refusal of offer of renewal/re-engagement with new owner ..................... 14.040 (e) Connection between previous owner and new owner ..................................................... 14.041 (f) No requirement for new contract of employment ........................................................... 14.042 6. Effect of change of ownership of business on liability for unreasonable termination ........... 14.043 (a) Introduction ..................................................................................................................... 14.043 (b) Termination in accordance with section 6 or section 7 of the Employment Ordinance .................................................................................................. 14.047 (c) No remedies for unreasonable termination available where employee consents to renewal/re-engagement with new owner ...................................................... 14.048 (d) No remedies for unreasonable termination awardable where employee unreasonably refuses offer of renewal/re-engagement with new owner ......................... 14.049 (e) No account must be taken of fact that owner is to be substituted ................................... 14.052

614

CHANGE OF OWNERSHIP

(f) Compliance with all rules ............................................................................................... 14.054 (g) Connection between previous owner and new owner ..................................................... 14.055 (h) No requirement for new contract of employment ........................................................... 14.056 7. Effect of employer insolvency on the employment of employees ........................................... 14.057 8. Preferential rights of employees ............................................................................................. 14.058 (a) Company is a limited company ....................................................................................... 14.058 (b) Relevant period ............................................................................................................... 14.062 (c) Relevant date ................................................................................................................... 14.064 (d) Company is not a limited company ................................................................................. 14.065 9. Protection of wages on insolvency .......................................................................................... 14.069 (a) Introduction ..................................................................................................................... 14.069 (b) Protection of Wages on Insolvency Fund Board ............................................................. 14.071 (c) Funding of Protection of Wages on Insolvency Fund ..................................................... 14.072 (d) Payments from the fund ................................................................................................. 14.074 (e) Entitlement to apply for payment .................................................................................... 14.076 (f) Ex gratia payment ........................................................................................................... 14.084 (g) Statutory cap on amounts that can be recovered ............................................................. 14.089 (h) Change in salary .............................................................................................................. 14.092 (i) Review by board .............................................................................................................. 14.095 (j) Verication of application ............................................................................................... 14.098 (k) Subrogation ..................................................................................................................... 14.099 (l) Conclusion ...................................................................................................................... 14.101

1. INTRODUCTION
Overview of chapter. There is no law in Hong Kong providing for an automatic transfer of an employees employment from one entity to another where there has been a change of ownership of business or a transfer of undertakings. Therefore, the employees current employment contracts will need to be terminated and the new owner will need to conclude new contracts of employment with those employees who will continue to be employed by the business after the transfer of ownership. However, there are provisions in the Employment Ordinance (Cap.57) (EO) which protect the employees and ensure that where there is a transfer of a trade, business or undertaking, the employees period of employment before the transfer will count as a period of employment with the new owner after the transfer and the transfer shall not break the continuity of the period of employment. The change of ownership of business may also have an effect on an employees entitlement to a severance payment or long service payment on termination as well as the employers liability for unreasonable termination. This chapter will explore these provisions. Finally, this chapter will examine the preferential rights of employees in respect of an employers other debts on an employer insolvency as well as the protection afforded to an employees wages on insolvency by the Protection of Wages on Insolvency Ordinance (Cap.380) (PWIO). 14.001

2. EMPLOYEES POSITION AND RIGHTS ON A CHANGE OF OWNERSHIP OF BUSINESS


(a) Introduction No law in Hong Kong provides for an automatic transfer of employment. Unlike some other jurisdictions, there is no law in Hong Kong providing for an automatic transfer of an employees employment from one entity to another where there has been a change of ownership of business or a transfer of an undertaking. A new contract will need to be concluded. It is a settled legal principle that the contractual relationship between a particular employer and employee cannot be transferred to another employer.1 In the event of a change of ownership of a business, the initial employment contracts will terminate automatically by operation of law at the time the change occurs. Therefore, a new owner will need to conclude new contracts of employment with those employees who continue to be employed by the business after the transfer of ownership. Rights and obligations are dealt with in the commercial agreement. In practice, upon a change of business ownership, the seller and purchaser of the business will usually ensure that the rights and obligations of the parties with respect to employees are dealt with in the commercial agreement (for example, a sale and purchase agreement). While the seller and purchaser will have certain statutory obligations with regard to 14.002

14.003

14.004

See dicta of Buckley LJ in the English courts in Woodhouse v Peter Brotherhood Ltd [1972] 2 QB 520.

616

CHANGE OF OWNERSHIP

the employees (for example, the seller may owe certain amounts to the employees on termination and the purchaser may be required to recognise the employees continuous service with the seller), in practice any liabilities with respect to the employees are often resolved by way of warranties and indemnities which will divide responsibility as a part of the commercial agreement.

3. CONTINUOUS EMPLOYMENT
(a) Introduction 14.005 Transfer shall not break the continuity of the period of employment. The EO provides that if a trade, business or undertaking is transferred from one person to another, the period of employment of an employee in the trade, business or undertaking at the time of transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment.2 Contracts of Employment Act 1963. A similar provision to this existed in England in Sch.1 para 10 to the Contracts of Employment Act 1963 (which is no longer in force). This provided: (2) If a trade or business or an undertaking (whether or not it be an undertaking established by or under an Act of Parliament) is transferred from one person to another, the period of employment of an employee in the trade or business or undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment. 14.007 As a result, many of the English authorities on Sch.1 para 10 to the Contracts of Employment Act 1963 are useful in interpreting the Sch.1 para 5 to the EO. (b) What amounts to a transfer of business? 14.008 14.009 Introduction. What amounts to a transfer of business has been considered at length by the courts in both Hong Kong and England. Employment by the principal contractor on the sub-contractors failure to complete work is not a transfer of business. In Chan Kam v Lee Lok,3 the Hong Kong High Court held that the act of a principal contractor which employed the staff of a sub-contractor to nish off the sub-contractors work did not amount to a transfer of business for the purposes of Sch.1 para 5 to the EO. The Court held that there was a break in employment when the employees ceased work for the sub-contractor and commenced work with the principal contractor to nish the site work.

14.006

2 3

EO Sch.1 para 5. [1978] HKDCLR26; [197779] HKC 439.

CONTINUOUS EMPLOYMENT

617

Co-existence of two businesses during transfer period did not preclude transfer of business. While it is more obvious that a transfer of the employment contract has taken place when the original employing entity is dissolved and ceases to exist, where two businesses have existed at the same time during a transfer period, this will not necessarily preclude there being a transfer of business and the relevant employees periods of employment with one business being included in the period of employment with the new owner of the business after the transfer has been completed. Obviously this will depend on the relevant facts and whether there is a clear intention to transfer the employment contracts from one subsisting entity to another. In the case of Cheng Tai Lok v Tai Lee Transportation Co,4 two employees were summarily dismissed. They claimed that the dismissal was not justied and claimed for a payment in lieu of notice and a long service payment on the basis that they had been employed by the respondent company since February 1975 and August 1983 respectively. As part of the defence, the respondent claimed that the respondent company, owned by Cheng Chor Leung, was only established in August 1992. Before that, the respondent claimed that the employees were only working for another company registered in the name of Cheng Chor Leungs father. They had, therefore, not been employed under a continuous contract of employment to qualify for a long service payment. The issue therefore was whether there had been a transfer of business from Cheng Chor Leungs fathers company to Cheng Chor Leungs company. The fathers company and Cheng Chor Leungs company had the same English name, and there was only a slight variation in their Chinese names. Cheng Chor Leungs fathers company ceased business about one year after Cheng Chor Leungs business had been set up. Before Cheng Chor Leung set up his own business, he was working in his fathers business, describing himself as the person in charge or manager. The Hong Kong High Court held that these were clear indications that Cheng Chor Leung intended to make use of the goodwill of his fathers business and, therefore, there had been a transfer of business from Cheng Chor Leungs father to Cheng Chor Leung. The fact that Cheng Chor Leungs fathers business co-existed at the same time as Cheng Chor Leungs business did not preclude the period of employment by staff for one business being included in the period of employment with the new company after the transfer had been completed. (c) One employer Meaning of one employer. As set out above, Sch.1 para 5 of the EO provides that: If a trade, business or undertaking is transferred from one person to another, the period of employment of an employee in the trade, business or undertaking at the time of transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment.

14.010

14.011

[1995] 2 HKC 169.

618

CHANGE OF OWNERSHIP

While there has been little case law in Hong Kong on the meaning of one person, the meaning of one employer (referred to in Sch.1 para 9(1)b to the Contracts of Employment Act 1963 which contains similar provisions to the wording in the EO above) was considered in the case of Harold Fielding Ltd v Mansi in the National Industrial Relations Court in England.5 In this case the court held that for the purposes of preserving continuity of employment the words the one employer were to be construed as meaning the same employer. In this case, two companies (Harold Fielding Ltd and Bernard Delfont Organisation Ltd) formed a partnership specically for the production of a musical play at a theatre in London. The play ran for a period of approximately 99 weeks. Immediately afterwards the appellant, on their own account, produced another play at the same theatre. The employee was employed as a chorister throughout the entire run of both productions. At the end of the second production the employee was dismissed by the appellant by reason of redundancy. The employee then claimed a redundancy payment from the appellant. However, it was held by the National Industrial Relations Court that the employee had not been employed by the same employer throughout the run of two productions since he had been employed by two companies in the partnership jointly for the rst production and by the appellant only for the second production. The court held that the employee had not been continuously employed by the appellant for the requisite period so as to entitle him to claim a redundancy payment. As Sch.1 para 5 to the EO refers to the transfer from one person to another it is possible that the Hong Kong courts would adopt a similar approach.6 14.012 Nature of the business will be a relevant factor. When determining whether there has been a transfer of business, it will be necessary to examine the nature of the business carried on by the seller prior to the transfer and the nature of the business carried on by the purchaser after the transfer. In the case of Woodhouse v Peter Brotherhood Ltd,7 the English Court of Appeal held that to determine whether there had been a transfer of business for the purposes of Sch.1 para 10(2) to the Contracts of Employment Act 1963, it was necessary to look at the nature of the business and to ask whether, by the sale, the purchaser had become the proprietor of the business in succession to the vendor. In this case, on the sale by a vendor (Crossley Premier Engines Ltd) of a factory and adjoining land together with plant and equipment to a purchaser (Peter Brotherhood Ltd), all that the purchaser had acquired on the sale were the physical assets, i.e. the buildings, plant and equipment. They had not acquired the vendors trade or business, which had been transferred to Manchester. The business which the purchaser carried on at the factory was a different business from that which had been carried on by the vendor. The production unit acquired by the purchaser was not used to carry on any trade or business acquired from vendor. Accordingly, the Court of Appeal held that the sale did not constitute a transfer of a business8 and the employees had been employed in a different business from the date of the sale and their period of employment with the vendor did not count in assessing their

5 6

7 8

[1974] 1 All ER 1035. Person is dened widely in the Interpretation and General Clauses Ordinance (Cap.1) Sch.3 as any public body and any body or persons, corporate or unincorporated. [1972] 2 QB 520. As required under Contracts of Employment Act 1963, Sch.1 para 10.

CONTINUOUS EMPLOYMENT

619

entitlement to redundancy payments from the purchaser. Given the similarity of the provisions of Sch.1 para 10(2) to the Contracts of Employment Act 1963 and Sch.1 para 5 to the EO it is likely that the Hong Kong courts would adopt a similar test to determine whether there had been a transfer of business. Sale of real property only is not a change of ownership of business. It is important to note that there must be a transfer of a trade or business or undertaking. Therefore the sale of real property only will not be sufcient. In the case of Dallow Industrial Properties Ltd v Else,9 the English High Court held that there had been no transfer of any part of a trade or business or undertaking to the appellants (Dallow Industrial Properties), but merely a sale of some real property which the appellants were using for a different purpose. Accordingly, the period of employment with the previous owner could not be added to the Plaintiffs period of employment with the appellants. In this case, part of the premises which had previously been used for the storage of stoves was sold to the appellants who carried on a number of manufacturing businesses but who bought the premises in order to convert them into 15 factory units to be leased to manufacturers. Soon after the sale, builders began to convert the premises and the Plaintiffs were given notice to terminate their employment with the appellants. The Industrial Tribunal awarded the Plaintiffs redundancy payments on the ground that the sale of the premises to the appellants was a transfer of a trade, business or undertaking within the meaning of Sch.1 para 10(2) to the Contracts of Employment Act 1963 so that the period of the Plaintiffs employment with the previous owner of the premises could be added to their period of employment with the appellants. However, the English High Court disagreed and held that there had merely been a sale of some real property which was to be used for a different purpose. It is likely that the Hong Kong courts would similarly hold that the mere sale of some real property would not amount to a transfer of business. Transfer of business on appointment of receiver. Where a receiver is appointed during a winding-up procedure, while the receiver will technically become the employer of the relevant employees, this will not be sufcient to constitute a transfer of business. In the case of Deaway Trading Ltd v Calverley,10 although on the resolution to wind up Barber & Moore Ltd (B&M Ltd) (the employees original employer), the receiver had technically become the employer of the applicants, it was held that he had not done so in his personal capacity. Instead, he had done so in his capacity as receiver of B&M Ltd and had done so for B&M Ltd and the debenture holders, to the extent of their respective interests, in order to preserve the value of the business. There had, therefore, at this stage been no change in the ownership of the business for the purposes of Sch.1 para 10(2) to the Contracts of Employment Act 1963. The business had remained that of B&M Ltd and when the receiver had transferred it to Deaway Trading Ltd he had done so as receiver of B&M Ltd. It followed that when the business of B&M Ltd was transferred to Deaway Trading Ltd it was transferred from the applicants existing employers to their new employers. Accordingly, the applicants were entitled to recover redundancy payments from Deaway Trading Ltd. 14.013

14.014

9 10

[1967] 2 QB 449. (English National Industrial Relations Court) [1973] 3 All ER 776.

620

CHANGE OF OWNERSHIP

4. EFFECT OF CHANGE OF OWNERSHIP ON OBLIGATION TO PAY SEVERANCE PAYMENTS


(a) Introduction 14.015 Obligations to pay severance payment. As discussed in Chapter 7, there is an obligation in the EO on an employer to pay to an employee a severance payment where the employee has been continuously employed for not less than 24 months and who is either dismissed by reason of redundancy or is laid off. Section 31A of the EO provides that: (1) Where an employee who has been employed under a continuous for a period of not less than 24 months ending with the relevant date (a) (b) is dismissed by his employer by reason of redundancy; or is laid off within the meaning of section 31E,

the employer shall be liable to pay to the employee a severance payment calculated in accordance with section 31G. 14.016 Employer may be able to avoid liability for a severance payment provided certain preconditions are met. However, an employer11 may be able to avoid liability for a severance payment to an employee12 under s.31J of the EO.13 There are two preconditions which must be met for the new owner to take the benet of s.31J of the EO: (1) (2) there must have been a change of ownership in the business; and the initial owner must have terminated the employees contract by notice under s.6 of the EO or by payment in lieu under s.7 of the EO immediately prior to the change of ownership of business.14 (b) What is a change of ownership of business? 14.017 When the assets and goodwill of an enterprise are sold or transferred on an on-going concern basis. The test for a change of ownership of business and that for the transfer of business15 appear to be used interchangeably by the Hong Kong courts. While this does not reect the difference in the two terms, it is the accepted

11

12 13 14

15

The term employer covers both the actual employer of an employee and authorised persons acting on behalf of such an employer. In this regard, personnel staff acting in a management capacity will be capable of being included as employers for the purposes of the Employment Ordinance (Cap.57). The term employer is dened by reference to any person. Reference should, therefore, be made to Interpretation and General Clauses Ordinance (Cap.1) s.3 which denes a person to include corporate and unincorporated bodies. See EO ss.2 and 4. This section closely follows Redundancy Payments Act 1965 s.13. By virtue of EO Sch.3 para 2 the provisions of EO s.31J does not apply to a change of ownership of the business to a personal representative on the death of an employer. See paras 14.008 to 14.014.

EFFECT OF CHANGE OF OWNERSHIP

621

approach. However, it is clear from the case law that a transfer of a business occurs when the assets and goodwill of an enterprise are sold or transferred on an on-going concern basis. It may involve the whole or only a part of the business carried on by the seller or transferee. Change in shareholding or name does not constitute a change of ownership. A change in the shareholding of a company will not constitute a change of ownership of business as despite the change in the shareholding the company continues to own the business. Similarly, a mere change of name of a business does not amount to a change of ownership of business as there will be no change in the legal identity of the employer responsible for the management of the business. (c) Termination in accordance with section 6 or section 7 of the Employment Ordinance Previous owner must terminate the employment contract lawfully. As a precondition for the operation of s.31J of the EO, the previous owner must terminate the employment contract either by giving employees their requisite notice of termination under s.6 of the EO or by making a payment in lieu under s.7 of the EO. Therefore, particular care should be taken to ensure that the employment contracts are lawfully terminated. In practice, many employers fail to lawfully terminate employee contracts in the event of a change of ownership and instead proceed on the basis that the new owner will simply stand in the shoes of the former employer and thereby keep the initial employment contract alive. Failure to terminate in the prescribed manner will disentitle the new owner from gaining the benets conferred by this section. In such circumstances, an employee may unreasonably refuse a suitable offer of employment from a new owner,16 and may still be entitled to a severance payment. (d) No severance payment where employee consents to renewal/re-engagement with new owner No payment where employee consents to renewal/re-engagement. Provided that these preconditions apply, no severance payment will be payable where the employee agrees to the renewal of his/her contract of employment with the new owner or to his/ her re-engagement under a new contract of employment with the new owner.17 (e) No severance payment where employee unreasonably refuses offer of renewal/re-engagement with new owner No payment where employee unreasonably refuses offer of renewal/re-engagement. Provided that certain conditions are met,18 no severance payment will be payable 14.021 14.020 14.019 14.018

16 17

18

See paras 14.021 to 14.028. EO s.31J(2) extends the application of EO s.31D(2) which disallows a severance payment to employees who are re-engaged or whose contracts are renewed by the same employer. See para 14.016 for details of the conditions which must be met.

622

CHANGE OF OWNERSHIP

where the new owner offers to renew the employees contract of employment (with the substitution of the new owner for the previous owner) or to re-engage him/her under a new contract of employment and the employee unreasonably refuses a suitable offer. This is on the basis that the general exclusions from the right to severance payment by reason of dismissal where the employee has unreasonably refused an offer of employment or re-engagement by his current employer19 also have effect where the offer of renewal or re-engagement is by a new employer.20 14.022 Capacity and other terms offered must not differ from the employees previous contract. To be able to rely on s.31J(3) of the EO, not less than seven days before the relevant date (i.e. the date on which the contracts of employment terminates),21 the new employer must have offered to renew the employees contract of employment, or to re-engage him/her under a new contract. The provisions of the new contract offered as to capacity or place in which the employee is to be employed, and as to the other terms and conditions of employment, must not differ from the employees previous contract; the renewal or re-engagement must be stated to take effect on or before the relevant date; and the employee must have unreasonably refused that offer.22 Exceptions where the offer may differ from the employees previous contract. Alternatively, no less than seven days before the relevant date, (i.e. the date on which the contract of employment terminates),23 the new employer must have made an offer in writing to the employee to renew his/her contract of employment, or re-engage him/her under a new contract. The provisions of the new contract offered as to the capacity and place in which the employee would be employed, and as to other terms and conditions of the employees employment, may differ (wholly or in part) from the corresponding provisions of the contract in force immediately before the employees dismissal, but:

14.023

(1)
(2) (3)

the offer must constitute an offer of suitable employment in relation to the employee;
the offer must constitute an offer of employment no less favourable to the employee; and the renewal or re-engagement must be stated to take effect on or before the relevant date, and the employee must have unreasonably refused that offer.24

14.024

Whether an offer of re-employment is less favourable will be assessed on a case-by-case basis. The circumstances under which an offer of re-employment is to be considered suitable or less favourable than the previous employment are not set out in

19 20 21

22 23 24

EO s.31C(2) and (3). EO s.31J(3). The term relevant date is dened in EO s.2 and refers to the date on which a contract of employment terminates. Special provisions apply by virtue of EO s.31C(4) where the relevant date falls on a rest day or holiday and in such a case, the relevant date shall be construed as reference to the next day after that rest day or holiday. EO s.31C(2). Fn 21. EO s.31C(3).

EFFECT OF CHANGE OF OWNERSHIP

623

the EO. In the event of such an issue arising, each case would need to be judged on its own merits and the terms and conditions will be assessed in their entirety. Courts have tended to interpret the provision narrowly in determining whether refusals are reasonable or not. There is also no set test under the EO for determining which refusals are reasonable or unreasonable. As a general rule, the courts have tended to interpret the provision narrowly so as to include refusals which are patently unreasonable. Clearly, an objective standard must be used to assess what is unreasonable in the circumstances, while taking into account subjective factors which will depend on the facts of the individual employee on a case by case basis. An employees subjective assessment of events is highly relevant when considering if the refusal was unreasonable. An employees subjective assessment of events is highly relevant when considering if the individuals refusal was unreasonable albeit this will be looked at from an objective stance when looking at issues of reasonableness. In the case of Mok Li Yun v DUrban Distributors (Hong Kong) Ltd,25 the High Court considered the case of an employee whose relationship with her employer had soured and allegations were made against the employees integrity. One of the issues to be considered was whether the employee had been constructively dismissed. In that context, in considering the employees right to a severance payment, the court found that further investigation was required into whether the applicants refusal to accept an offer of continued employment was reasonable or if there had been a destruction of mutual condence and trust in the employment relationship. Where change of job nature might justify a refusal to accept an offer. When determining whether a refusal of an offer of employment is reasonable or not, the courts will also look at the nature of the new job being offered to the employee. If it is considerably different to the old job and one for which the relevant employee is not qualied, the courts are likely to determine that any refusal to accept the offer was not unreasonable. In the case of Mindex Battery Works Ltd v Cheng Pak Woon,26 the employee was involved in production in the plastics section of his employers business. He was then transferred to the machine repair section which dealt specically with the repair of dolly machines. Having worked for one morning in the machine repair section, the employee said that he was unable to repair a dolly machine and requested that he be returned to his original post. His employer refused his request and the employee terminated his employment. The employer claimed that the employees refusal to repair dolly machines was unreasonable. The court held that, on the evidence, the employee was not a repairer and was only qualied to do maintenance. His refusal to accept the offer of employment in the machine repair section was, therefore, not unreasonable. Where ceasing entitlement to an allowance might justify refusal to accept an offer. Similarly, if an offer of new employment contains signicantly different entitlements with respect to certain allowances, then a refusal to accept the offer of employment 14.025

14.026

14.027

14.028

25 26

(unrep., HCLA 17/1994, [1996] HKEC 361). (unrep., DCMP 11/1975, 16 Mar 1976).

624

CHANGE OF OWNERSHIP

may not be unreasonable. In the case of Hong Kong & China Gas Co Ltd v Wong Yuen Kwong,27 the High Court held that, on the facts, an employees refusal of alternative employment as a tter with no entitlement to any shift allowance was not unreasonable on the grounds that the job of semi-shift tter (with extra shift allowance) was different to that of a tter. The claimant had, therefore, been constructively dismissed. (f ) No account must be taken of fact that owner is to be substituted 14.029 The offer by a new employer is treated as the same as an offer by the employees previous employer. For the purposes of ss.31C(2) and (3) of the EO which provide for circumstances when an employee shall not be entitled to a severance payment as a result of the employee unreasonably refusing an offer of re-employment or re-engagement, no account may be taken of the fact that the owner is to be substituted for a new owner for the purpose of determining whether the provisions, conditions or terms of the offer of renewal or re-engagement would differ from the corresponding provisions of the contract in force immediately before the change of ownership. The offer by a new employer is treated as the same as an offer by the employees previous employer.28 The employees opinion of a new employer is of no consequence. Further, no account should be taken of the substitution of the new owner for the previous owner when determining whether the refusal of the offer was unreasonable.29 Therefore, the employees opinion of a new employer is of no consequence for the purpose of determining whether the employee has or has not reasonably refused an offer of renewal or re-engagement. (g) Connection between previous owner and new owner 14.031 Application of s.31J where there is a connection between previous and new owner. The provisions of s.31J of the EO will apply where there is some connection between the previous owner and the new owner, for example, by reason of a business being owned by a partnership, trustees or some other form of joint ownership.30 Section 31J prevails where the previous owner and the new owner are associated companies. Further, s.31K of the EO which contains the provisions relating to associated companies and liability for severance payments makes it clear that in a case where the previous owner and the new owner are associated companies31 and s.31J of the EO applies, the provisions of s.31J of the EO shall prevail and s.31K(1) of the EO (which deals with transfers of employees between associated companies) shall not apply.

14.030

14.032

27 28 29 30 31

[1987] 3 HKC 508. EO s.31J(4)(a). EO s.31J(4)(b). EO s.31J(5). Companies shall be taken to be associated companies if one is a subsidiary or the other, or both are subsidiaries of a third company: EO s.31K(5).

EFFECT OF CHANGE OF OWNERSHIP OF BUSINESS

625

(h) No requirement for new contract of employment A consensual variation need not necessitate the termination of the employment relationship with the new employer. The provisions of s.31J(6) of the EO provide that a consensual variation need not necessitate the termination of the employment relationship with the new employer. While the exact meaning of this provision is not entirely clear, it is believed that it reinforces the position that where an employee is re-engaged or re-employed by a new employer, this does not necessarily entail a new contract of employment. (i) Renewal or re-engagement Meaning of renewal. The term renewal is dened in s.2 of the EO and includes two scenarios: where the contract which has been terminated is reactivated on the same terms; and where contracts which, although due to terminate, are extended by mutual agreement prior to the time of termination. Meaning of re-engage. The term renewal is used in contrast to re-engage which is not specically dened in the EO, but it is used throughout Pt VA of the EO in the context of an employee entering into a new contract either with the same employer or with a new employer. 14.034 14.033

14.035

5. EFFECT OF CHANGE OF OWNERSHIP OF BUSINESS ON OBLIGATION TO PAY LONG SERVICE PAYMENTS


(a) Introduction An obligation to pay a long service payment. As discussed in Chapter 7, there is an obligation in the EO on an employer to pay to an employee a long service payment in certain circumstances, including where the employee has been continuously employed for not less than ve years and is dismissed by his/her employer and who is not entitled to receive a severance payment.32 Employer may be able to avoid liability for a long service payment provided certain preconditions are met. An employer may be able to avoid liability for a long service payment to an employee in these circumstances if the requirements of s.31Z of the EO are satised. The two preconditions which must be met for the new owner to take the benet of s.31Z of the EO are as follows: (1) (2) there must have been a change of ownership of business;33 and the initial owner must have terminated the employees contracts by notice under s.6 of the EO or by payment in lieu under s.7 of the EO immediately prior to the change of ownership in the business.34 14.036

14.037

32 33 34

EO s.31R. For what amounts to a change of ownership of business see paras 14.017 and 14.018. By virtue of the EO Sch.6 para 2, the provisions of EO s.31Z does not apply to a change of ownership of business to a personal representative on the death of an employer.

626

CHANGE OF OWNERSHIP

(b) Termination in accordance with section 6 or section 7 of the Employment Ordinance 14.038 Previous owner must terminate the employment contract lawfully. As a precondition for the operation of s.31Z of the EO, the previous owner must terminate the employment contract either by giving all employees their requisite notice of termination under s.6 of the EO or by making a payment in lieu under s.7 of the EO. Therefore, particular care should be taken to ensure that the employment contracts are lawfully terminated. In practice, many employers fail to lawfully terminate their employees contract in the event of a change of ownership and instead proceed on the basis that the new owner will simply stand in the shoes of the former employer and thereby keep the initial employment contract alive. Failure to terminate in the prescribed manner will disentitle the new owner from gaining the benets conferred by this section. (c) No long service payment where employee consents to renewal/re-engagement with new owner 14.039 No payment where the employee consents to the renewal/re-engagement. Provided that these preconditions apply, no long service payment will be payable where the employee agrees to the renewal of his/her contract of employment with the new owner or to the his/her re-engagement under a new contract of employment with the new owner.35 (d) Unreasonable refusal of offer of renewal/re-engagement with new owner 14.040 An employee will be entitled to a long service payment even if the employee is deemed to have unreasonably refused the offer. Section 31Z of the EO does not contain the same provisions as s.31J of the EO in relation to unreasonable refusal of offers of renewal/re-engagement36 with the new owner. It would therefore appear that an employee will still be entitled to a long service payment even if the employee is deemed to have unreasonably refused the offer of renewal of employment or re-engagement with the new owner so long as the employee has more than ve years continuous service. Therefore, there is a difference in treatment of an employee who has between two and ve years continuous service compared to that of an employee with more than ve years continuous service in the same circumstances. This is consistent with the general approach in Hong Kong that employees with ve years continuous employment are provided with a payment on termination in virtually all circumstances with the exception of terminations for gross misconduct under s.9 of the EO. (e) Connection between previous owner and new owner 14.041 Application of section 31Z where there is a connection between previous and new owner. The provisions of s.31Z of the EO will also apply where there is some connection

35

36

EO s.31Z(2) extends the scope of EO s.31T(2) which disallows a long service payment to employees who are re-engaged or whose contracts are renewed by the same employer. For the meaning of renewal and re-engagement in this context please see paras 14.034 and 14.035.

EFFECT OF CHANGE OF OWNERSHIP OF BUSINESS

627

between the previous owner and the new owner, for example, by reason of a business being owned by a partnership, trustees or some other form of joint ownership.37 (f ) No requirement for new contract of employment A consensual variation need not necessitate the termination of the employment relationship with the new employer. The provisions of s.31Z(4) of the EO provide that a consensual variation need not necessitate the termination of the employment relationship with the new employer. While the exact meaning of this provision is not entirely clear, it is believed that it reinforces the position that where an employee is re-engaged or re-employed by a new employer, this does not necessarily entail a new contract of employment. 14.042

6. EFFECT OF CHANGE OF OWNERSHIP OF BUSINESS ON LIABILITY FOR UNREASONABLE TERMINATION


(a) Introduction Entitlement to claim unreasonable termination. As discussed in Chapter 7, an employee may be entitled to claim unreasonable termination where he/she has been dismissed because the employer intends to extinguish or reduce his/her right to a severance payment or to a long service payment. Employer may be able to avoid liability for unreasonable termination provided certain preconditions are met. Where there has been a change of ownership of a business an employer may be able to avoid liability for unreasonable termination under s.32D of the EO provided certain preconditions have been met. Extension of provisions to apply when there has been a change of ownership of business. Section 32D of the EO extends the provisions of ss.32B(3)38 and 32C39 of the EO, which apply to an employees initial employer, to apply equally whenever there has been a change of ownership of business. Preconditions to be met. Two preconditions must be met in order for the new owner to take the benet of s.32D of the EO: (1) (2) there must have been a change of ownership of the business;40 and the initial owner must have terminated the employees contracts by notice under s.6 of the EO or by payment in lieu under s.7 of the EO immediately prior to the change. 14.043

14.044

14.045

14.046

37 38

39 40

EO s.31Z(3). EO s.32B(3) provides examples of when an employee shall not be taken as having been dismissed by his employer and includes if the employees contract of employment is renewed, or he is re-engaged by the same employer under a new contract of employment and the renewal or re-engagement takes effect immediately on the ending of his employment under the previous contract. EO s.32C provides general exclusions from the right to remedies under EO Pt VIA. For what amounts to a change of ownership of business see paras 14.017 and 14.018.

628

CHANGE OF OWNERSHIP

(b) Termination in accordance with section 6 or section 7 of the Employment Ordinance 14.047 Previous owner must terminate the employment contract lawfully. As a precondition to the operation of s.32D of the EO, the previous owner must terminate the employment contracts either by giving all employees their requisite notice of termination under s.6 of the EO or by making a payment in lieu under s.7 of the EO. Therefore, particular care should be taken to ensure that the employment contracts are lawfully terminated. In practice, many employers fail to lawfully terminate their employees contract in the event of a change of ownership and instead proceed on the basis that the new owner will simply stand in the shoes of the former employer and thereby keep the initial employment contract alive. Failure to terminate in the prescribed manner will disentitle the new owner from gaining the benets conferred by this section. (c) No remedies for unreasonable termination available where employee consents to renewal/re-engagement with new owner 14.048 No remedy for unreasonable termination where employee consents to renewal/ re-engagement. Provided the employees employment has been terminated by the former owner in accordance with s.32D(1) of the EO, no remedies for unreasonable termination will be available where an employee is re-engaged by the person to whom the business was transferred, because the provisions of s.32B(3) of the EO (which disallow a remedy to employees who are re-engaged or whose contracts are renewed by the same employer) are extended to apply to renewals or re-engagements41 by a new employer to whom the business was transferred.42 (d) No remedies for unreasonable termination awardable where employee unreasonably refuses offer of renewal/re-engagement with new owner 14.049 No remedy for unreasonable termination where employee unreasonably refuses offer of renewal/re-engagement. As long as the employees employment has been terminated by the former owner in accordance with s.32D(1) of the EO, no remedies for unreasonable termination will be awardable where the person to whom the business was transferred offers to re-engage an employee and the employee unreasonably refuses such an offer, as the provisions of ss.32C(1) and (2) of the EO (which disallow a remedy to any employee who unreasonably refuses a suitable offer to have the employment contract renewed or to be re-engaged under a new contractwhether under the same or different termsby the same employer) are extended to apply to reasonable offers of renewals or re-engagements by a new employer to whom the business has been transferred.43 Capacity and other terms offered do not differ from employees previous contract. To be able to rely on s.32D(1) of the EO the offer of re-employment must be regarded as validly made by a new owner. Namely, the offer of re-employment must:

14.050

41 42 43

For details on the meaning of renewal and re-engagement see paras 14.034 and 14.035. EO s32D(2). EO s.32D(3).

EFFECT OF CHANGE OF OWNERSHIP OF BUSINESS

629

(1) (2) (3)

be made not less than seven days before the employment was terminated by the former owner either by notice or payment in lieu; comprise terms of employment that would not differ from the corresponding provisions of the contract as in force immediately before the termination; and the renewal of employment must take effect on or before the date of termination.44 14.051

Exceptions where the offer may differ from the previous contract. Moreover, remedies will not be available to any employee who unreasonably refuses an offer or re-employment from a new owner on terms which differ from those under which the employee was previously employed. In order for the offer of re-employment on different terms to be regarded as validly made, an offer of re-employment must: (1) (2) be in writing and made not less than seven days before the employment was terminated by the former owner either by notice or payment in lieu; comprise terms of employment that would differ from the corresponding provisions of the contract as in force immediately before termination, but which constitutes an offer of suitable employment45 and terms which are no less favourable46 to the employee as previously engaged; and the renewal of employment must take effect on or before the date of termination.47 (e) No account must be taken of fact that owner is to be substituted The offer by a new employer is treated as the same as an offer by the employees previous employer. For the purpose of s.32C of the EO, no account may be taken of the fact that the owner is to be substituted for a new owner for the purpose of determining whether the provisions, conditions or terms of the offer of renewal or re-engagement would differ from the corresponding provisions of the contract in force immediately before the change of ownership. As a result, s.32D(4) of the EO treats an offer by a new employer to whom the business has been transferred as being no different from an offer by the employees previous employer.48 The employees opinion of a new employer is of no consequence. Further, no account should be taken of the substitution of the new owner for the previous owner when determining whether the refusal of the offer was unreasonable.49 Therefore, the employees opinion of a new employer is of no consequence for the purpose of determining whether the employee has or has not reasonably refused an offer of renewal or re-engagement.

(3)

14.052

14.053

44 45 46 47 48 49

EO ss.32C(1) and 32D(1) and (3). For what amounts to suitable employment see paras 14.024 to 14.030. For what amounts to no less favourable see paras 14.024 to 14.030. EO ss.32C(2) and 32D(1) and (3). EO s.32D(4)(a). EO s.32D(4)(b).

630

CHANGE OF OWNERSHIP

(f ) Compliance with all rules 14.054 An employee will be entitled to a remedy for unreasonable termination if any rule is breached. In the event of a business transfer, it is essential that all the rules relating to an offer of re-employment50 by the new owner are complied with. Where a single rule is breached, an employee will be entitled to claim a remedy for unreasonable termination. However, it should be noted that as the remedies for unreasonable termination are discretionary, a court or Labour Tribunal would in all likelihood not be very sympathetic to any employee who relied on a technical failure by the former employer for the purpose of advancing any claim for a remedy. (g) Connection between previous owner and new owner 14.055 Some connection between the previous owner and the new owner. The provisions of s.32D of the EO will also apply where there is some connection between the previous owner and the new owner, for example, by reason of a business being owned by a partnership, trustees or some other form of joint ownership.51 (h) No requirement for new contract of employment 14.056 A consensual variation need not necessitate the termination of the employment relationship with the new employer. The provisions of s.32D(6) of the EO state that a consensual variation does not necessitate the termination of the employment relationship with the new employer. While the exact meaning of this provision is not entirely clear, it is believed that it reinforces the position that where an employee is re-engaged or re-employed by a new employer, this does not necessarily entail a new contract of employment.

7. EFFECT OF EMPLOYER INSOLVENCY ON THE EMPLOYMENT OF EMPLOYEES


14.057 The laws in Hong Kong on insolvency are complex and beyond the scope of the current chapter. However, there are two key areas which affect both employers and employees: the preferential rights of employees in respect of an employers other debts and the protection of employees wages on insolvency.

8. PREFERENTIAL RIGHTS OF EMPLOYEES


(a) Company is a limited company 14.058 Companies Ordinance provides for the debts to be treated as preferential and the priority of payment. Section 265 of the Companies Ordinance (Cap.32) (CO)

50 51

See paras 14.048 to 14.052 for details of the rules relating to an offer of re-employment which must be complied with. EO s.32D(5).

PREFERENTIAL RIGHTS OF EMPLOYEES

631

provides which debts are to be treated as preferential (as set out in para 14.059 ) and the priority of payment in a winding up of a company. The provisions are complex and largely outside the scope of this chapter but the following should be noted in relation to payments to employees. Payments that will be paid in priority to all other debts. In a winding up, the following payments will be paid in priority to all other debts, that is, they are preferential debts: (1) any payment from the Protection of Wages on Insolvency Fund52 under s.18 of the Protection of Wages on Insolvency Ordinance (Cap.380) to any clerk or servant or labourer or workman in respect of wages53 or salary or both in respect of services rendered to the company so long as such payment was made during a period of four months before the commencement of the winding up;54 wages and salary (including any commission provided that an amount thereof is xed or ascertainable at the relevant date) of any clerk or servant in respect of services rendered to the company during the relevant period55 not exceeding, together with any payment from the Protection of Wages on Insolvency Fund in respect of wages or salary, HK$8,000;56 wages of any labourer or workman, whether payable for time or for piece work, in respect of services rendered to the company during the relevant period not exceeding, together with any payment from the Protection of Wages on Insolvency Fund in respect of wages, HK$8,000;57 any severance payment payable to an employee under the EO, not exceeding in respect of each employee HK$8,000;58 any long service payment payable to an employee under the EO, not exceeding in respect of each employee HK$8,000;59 any amount due in respect of compensation or liability for compensation under the Employees Compensation Ordinance (Cap.282) accrued before the relevant date;60 any wages in lieu of notice payable to an employee under the EO, not exceeding in respect of each employee one months wages or HK$2,000, whichever is less;61 14.059

(2)

(3)

(4) (5) (6)

(7)

52 53 54 55 56 57 58 59 60

61

See paras 14.069 to 14.101 for further details. See para 14.061 for what wages will include. CO ss.265(1)(b)(i) and 265(1)(c)(i). For meaning of the relevant period see paras 14.062 to 14.063. CO ss.265(1)(b)(ii) and 265(1B). CO ss.265(1)(c)(ii) and 265(1B). CO s.265(1)(ca) and 265(1B). CO s.265(1)(caa). Where compensation is a periodical payment, the amount due in respect thereof shall be taken to be the amount of the lump sum for which the periodical payment could, if redeemable, be redeemed on an application being made for that purposes under the Employees Compensation Ordinance (Cap.282). CO s.265(1)(cc).

632

CHANGE OF OWNERSHIP

(8) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer on the termination of his/her employment before or by the effect of the winding up order or resolution;62 (9) any payment from the Employees Compensation Assistance Fund under Pt IV of the Employees Compensation Assistance Ordinance (Cap.365) representing an amount due by the company in respect of compensation or liability for compensation under the Employees Compensation Ordinance (Cap.282) accrued before the relevant date;63 (10) any amount of unpaid contribution or any amount deemed to be unpaid contribution calculated in accordance with rules made under s.73(1)(n) of the Occupational Retirement Schemes Ordinance (Cap.426) which should have been paid by the company being wound up in accordance with the terms of an occupational retirement scheme within the meaning of the Occupational Retirement Schemes Ordinance (Cap.426) before the commencement of the winding up. Where this amount exceeds HK$50,000 in respect of an employee, 50 per cent of such part of the amount that exceeds HK$50,000 shall not be paid in priority to all other debts under s.265(1) of the Companies Ordinance (Cap.32);64 (11) (without prejudice to any right or liability under a trust), any amount of salaries deducted by the company being wound up from its employees salaries for the purpose of making contributions in respect of such employees to the funds of an occupational retirement scheme within the meaning of the Occupational Retirement Schemes Ordinance (Cap.426) which have not been paid into such funds;65 (12) any amount of any unpaid contribution under, or any amount of unpaid contribution calculated in accordance with, the Mandatory Provident Fund Schemes Ordinance (Cap.485) which should have been paid by the company being wound up in accordance with the provisions of the Mandatory Provident Fund Schemes Ordinance (Cap.485) which have not been paid to that approved trustee. Where this amount exceeds HK$50,000 in respect of an employee, 50 per cent of such part of the amount that exceeds HK$50,000 shall not be paid in priority to all other debts under s.265(1) of the Companies Ordinance (Cap.32);66 (13) any amount deducted by the company being wound up from the relevant income of its relevant employees for the purpose of making contributions in respect of such relevant employees to the approved trustee of a registered scheme within the meaning of the Mandatory Provident Fund Schemes Ordinance (Cap.485) which have not been paid to the approved trustee;67 and

62 63 64 65 66 67

CO s.265(1)(cd). CO s.265(1)(ce). CO s.265(1)(cf). CO s.265(1)(cg). CO s.265(1)(ch). CO s.265(1)(ci).

PREFERENTIAL RIGHTS OF EMPLOYEES

633

(14) any sum and interest thereon payable to the Mandatory Provident Fund Schemes Authority under s.17(7) of the Mandatory Provident Fund Schemes Ordinance (Cap.485).68 Priority over statutory debts due from company to government. The debts specied above shall have priority over statutory debts due from the company to the Hong Kong Government and shall rank equally amongst themselves.69 Further, if the assets are insufcient for such debts to be paid in full, they abate equally (i.e. pro rata).70 Denition of wages for the purposes of these provisions. For the purposes of s.265 of the Companies Ordinance (Cap.32) wages is dened to include, in relation to any person, any sum which, by virtue of his/her contract of employment, is payable to him/her as a Lunar New Year bonus, but does not include any accrued holiday remuneration.71 Accrued holiday remuneration is dened to include, in relation to any person, all sums which, by virtue either of his contract of employment or any enactment (including any order made or direction given under any Ordinance), are payable on account of the remuneration which would, in the ordinary course, have become payable to him/her in respect of holiday had his/her employment with the company continued until he/she became entitled to be allowed the holiday.72 (b) Relevant period Meaning of the relevant period. Where reference is made to the relevant period, it shall have the following meaning. In a case where a company is being wound up by the court and the relevant date73 is not the date of the commencement of the winding up, the relevant period means the period (i) beginning four months before the commencement of the winding up and ending on the relevant date; or (ii) beginning four months before the last day of service within the meaning of s.16(4) of the Protection of Wages on Insolvency Ordinance (Cap.380) of any clerk or servant or labourer or workman, as the case may be, who has made an application for an ex gratia payment under s.15(1) of the Protection of Wages on Insolvency Ordinance (Cap.380), and ending on the last day of service, whichever is earlier.74 In any case where para 14.062 does not apply, the relevant period means the period (i) of four months before the relevant date; or (ii) beginning four months before the last day of service within the meaning of s.16(4) of the Protection of Wages on Insolvency Ordinance (Cap.380) of any clerk or servant or labourer or workman, as the case may be, who has made an application for an ex gratia payment under s.15(1) of the Protection of Wages on Insolvency Ordinance (Cap.380), and ending on the last day of service, whichever is earlier.75 14.062 14.060

14.061

14.063

68 69 70 71 72 73 74 75

CO s.265(1)(cj). CO s.265(3)(b). CO s.265(3)(c). CO s.265(6). CO s.265(6). For the meaning of the relevant date see para 14.064. See paras 14.076 to 14.083 for details of the application process under the PWIO. CO s.265(6).

634

CHANGE OF OWNERSHIP

(c) Relevant date 14.064 Meaning of the relevant date. Where reference is made to the relevant date, it shall mean (a) in the case of a company ordered to be wound up compulsorily, the date of appointment (or rst appointment) of a provisional liquidator or, if no such appointment was made, the date of the winding up order, unless in either case the company had commenced to be wound up voluntarily before that date; and (b) in any case where (a) does not apply, the date of the commencement of the winding up. (d) Company is not a limited company 14.065 Trustee in bankruptcy must apply the money received in certain order. Section 38 of the Bankruptcy Ordinance (Cap.6) (BO) provides for the order in which the trustee in bankruptcy must apply the money received from him/her and confers special preferences on certain types of debts in a dened order of preference. The provisions are complex and largely outside the scope of this chapter but the following should be noted in relation to payments to employees. Payments that will be paid in priority to all other debts. In the distribution of the property of a bankrupt the following payments will be paid in priority to all other debts: (1) any payment from the Protection of Wages on Insolvency Fund under s.18 of the Protection of Wages on Insolvency Ordinance (Cap.380) to any clerk or servant or labourer or workman in respect of wages76 or salary or both in respect of services rendered to the bankrupt (provided such payment was made during the period of four months before the date of the ling of the petition);77 any wages and salary (including commission78) of any clerk or servant in respect of services rendered to the bankrupt during a period (A) beginning four months before the date of the ling of the petition and ending on the making of the bankruptcy order; or (B) beginning four months before the last day of service79 of any clerk or servant who has made an application for an ex gratia payment under the Protection of Wages on Insolvency Ordinance (Cap.380),80 and ending on the last day of service, whichever the earlier. These amounts must not exceed, together with any payment for wages under the Protection of Wages on Insolvency Ordinance (Cap.380), HK$8,000;81 any wages of any labourer or workman82 in respect of services rendered to the bankrupt during the period (A) beginning four months before the date of

14.066

(2)

(3)

76 77 78 79 80 81 82

See para 14.068 for denition of wages. BO ss.38(1)(b)(i) and (c)(i). Provided that the amount thereof is xed or ascertainable at the relevant date. Within the meaning of the PWIO s.16(4). Under s.15(1) of the PWIO (Cap.380). BO ss.38(1)(b)(ii) and 38(2B). Whether payable for time or for piece work.

PREFERENTIAL RIGHTS OF EMPLOYEES

635

the ling of the petition and ending on the making of the bankruptcy order; or (B) beginning four months before the last day of service83 of any labourer or workman who has made an application for an ex gratia payment under the Protection of Wages on Insolvency Ordinance (Cap.380),84 and ending on the last day of service, whichever the earlier. These amounts must not exceed, together with any payment for wages under the Protection of Wages on Insolvency Ordinance (Cap.380), HK$8,000;85 (4) any severance payment payable to an employee under the EO, not exceeding in respect of each employee HK$8,000;86 (5) any long service payment payable to an employee under the EO, not exceeding in respect of each employee HK$8,000;87 (6) any amount due in respect of compensation or liability for compensation under the Employees Compensation Ordinance (Cap.282) accrued before the date of the bankruptcy order;88, 89 (7) any wages in lieu of notice payable to an employee under the EO, not exceeding in respect of each employee one months wages or HK$2,000, whichever is less;90 (8) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer on the termination of his/her employment before or as a consequence of the bankruptcy order;91 (9) any payment from the Employees Compensation Assistance Fund under Pt IV of the Employees Compensation Assistance Ordinance (Cap.365) representing an amount due by the bankrupt in respect of compensation or liability for compensation under the Employees Compensation Ordinance (Cap.282) accrued before the date of the bankruptcy order;92 (10) any amount of unpaid contribution or any amount deemed to be unpaid contribution calculated in accordance with rules made under s.73(1)(n) of the Occupational Retirement Schemes Ordinance (Cap.426) which should have been paid by the bankrupt in accordance with the terms of an occupational retirement scheme within the meaning of the Occupational Retirement Schemes Ordinance (Cap.426) before the commencement of the bankruptcy. Where this amount exceeds HK$50,000 in respect of an

83 84 85 86 87 88

89 90 91 92

Within the meaning of the PWIO s.16(4). Under s.15(1) of the PWIO. BO ss.38(1)(c)(ii) and 38(2B). BO ss.38(1)(ca) and 38(2B). BO ss.38(1)(caa) and 38(2B). Where compensation is a periodical payment, the amount due in respect thereof shall be taken to be the amount of the lump sum for which the periodical payment could, if redeemable, be redeemed on an application being made for that purposes under the Employees Compensation Ordinance (Cap.282). BO ss.38(1)(cb) and 38(2B). BO s.38(1)(cc). BO s.38(1)(cd). BO s.38(1)(ce).

636

CHANGE OF OWNERSHIP

employee, 50 per cent of such part of the amount that exceeds HK$50,000 shall not be paid in priority to all other debts under s.38(1) of the Bankruptcy Ordinance (Cap.6);93 (11) (without prejudice to any right or liability under a trust), any amount of salaries deducted by the bankrupt from its employees salaries for the purpose of making contributions in respect of such employees to the funds of an occupational retirement scheme within the meaning of the Occupational Retirement Schemes Ordinance (Cap.426) which have not been paid into such funds;94 (12) any amount of any unpaid contribution under, or any amount of unpaid contribution calculated in accordance with, the Mandatory Provident Fund Schemes Ordinance (Cap.485) which should have been paid by the bankrupt in accordance with the provisions of the Mandatory Provident Fund Schemes Ordinance (Cap.485) before the commencement of the bankruptcy. Where this amount exceeds HK$50,000 in respect of an employee, 50 per cent of such part of the amount that exceeds HK$50,000 shall not be paid in priority to all other debts under s.38(1) of the Bankruptcy Ordinance (Cap.6);95 (13) any amount deducted by the bankrupt from the relevant income of its relevant employees for the purpose of making contributions in respect of such relevant employees to the approved trustee of a registered scheme within the meaning of the Mandatory Provident Fund Schemes Ordinance (Cap.485) which have not been paid to the approved trustee;96 and (14) any sum and interest thereon payable to the Mandatory Provident Fund Schemes Authority under s.17(7) of the Mandatory Provident Fund Schemes Ordinance (Cap.485).97 14.067 Priority over statutory debts due from company to government. The debts specied above shall have priority over statutory debts due from the company to the Hong Kong Government98 and shall rank equally amongst themselves.99 Further, if the assets are insufcient for such debts to be paid in full, they abate equally.100 Definition of wages for the purposes of these provisions. For the purposes of s.38 of the Bankruptcy Ordinance (Cap.6), wages is defined to include, in relation to a person, any sum which, by virtue of his/her contract of employment, is payable to him/her as a Lunar New Year bonus, but does not include any accrued holiday remuneration. Accrued holiday remuneration is defined to include,

14.068

93 94 95 96 97 98 99 100

BO s.38(1)(cf). BO s.38(1)(cg). BO s.38(1)(ch). BO s.38(1)(ci). BO s.38(1)(cj). BO s.38(3)(a). BO s.38(3)(b). BO s.38(3)(c).

PROTECTION OF WAGES ON INSOLVENCY

637

in relation to any person, all sums which, by virtue either of his/her contract of employment or any enactment (including any order made or direction given under any Ordinance), are payable on account of the remuneration which would, in the ordinary course, have become payable to him/her in respect of holiday had his employment with the company continued until he/she became entitled to be allowed the holiday.101

9. PROTECTION OF WAGES ON INSOLVENCY


(a) Introduction An employee may present a bankruptcy or winding up petition against his/her employer to recover wages etc at same time as applying for ex gratia payment from Protection of Wages on Insolvency Fund. An employee may present a bankruptcy or winding up petition against his/her insolvent employer in order to recover debts owed by an insolvent employer such as arrears of wages, wages in lieu of notice and severance payment. At the same time, employees may also apply for an ex gratia payment from the Protection of Wages on Insolvency Fund in respect of wages, wages in lieu of notice and severance payment owed by his/ her employer. Expansion of the scope of the Protection of Wages on Insolvency Fund. The Legislative Council submitted a proposal to expand the scope of the Protection of Wages on Insolvency Fund to cover untaken annual leave payments under the EO.102 At the time of writing, a bill is being drafted with the aim of introducing it into the Legislative Council later in 2010. At present, arrears of wages of the last four months payable by the Protection of Wages on Insolvency Fund already include annual leave pay owed to an employee for his annual leave taken in the period. At its meeting on 30 April 2008, the Protection of Wages on Insolvency Fund Board103 agreed that the Protection of Wages on Insolvency Fund should be extended to cover annual leave pay under the EO for annual leave accumulated and not yet taken by employees of insolvent cases, subject to a limit of one leave year with a maximum of 7 to 14 days annual leave pay as per an employees length of service. In light of the maximum of HK$22,500 for one months wages in lieu of notice payable by the Protection of Wages on Insolvency Fund,104 it was the Protection of Wages on Insolvency Fund Boards consensus that the payment ceiling for annual leave pay should be HK$10,500. It is expected that the proposal will be passed by the Legislative Council. The proposed extended coverage set out above is expected to cost the Protection of Wages on Insolvency Fund HK$17.5 million a year. 14.069

14.070

101 102 103

104

BO s.38(10). LC Paper No. CB(2) 1859/08-09(05). See paras 14.069 to 14.101 for more information on the operation of the Protection of Wages on Insolvency Fund Board. See para 14.090.

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CHANGE OF OWNERSHIP

(b) Protection of Wages on Insolvency Fund Board 14.071 A statutory body known as the Protection of Wages on Insolvency Fund Board has been established105 to manage the Protection of Wages on Insolvency Fund.106 The Schedule to the Protection of Wages on Insolvency Ordinance (Cap.380) contains the procedures of the board. (c) Funding of Protection of Wages on Insolvency Fund 14.072 Sources of revenue. The Protection of Wages on Insolvency Fund is mainly nanced by a levy on each business registration certicate issued.107 Other sources of revenue include moneys recovered under Pt VI of the Protection of Wages on Insolvency Ordinance (Cap.380);108 interest and other income derived from the moneys and investments comprising the Fund;109 and any other moneys lawfully paid into the fund.110 Balance of fund. The Protection of Wages on Insolvency Fund currently111 has a balance of around HK$1.56 billion. In 2008, HK$456 million was paid into the Fund as a result of the levy on business registration certicates alone.112 (d) Payments from the Fund 14.074 Types of payments that must be paid from the Fund. Payments that must be paid from the Protection of Wages on Insolvency Fund are: payments to applicants113 under s.16 of the Protection of Wages on Insolvency Ordinance (Cap.380); payments of expenses incurred by the Protection of Wages on Insolvency Fund Board;114 payment of capital, interest and charges in respect of any loan;115 and any other sum required or permitted to be paid by the Protection of Wages on Insolvency Fund under the Protection of Wages on Insolvency Ordinance (Cap.380).116 Number of applications received from the Fund. In 2008, the Fund received a total of 6,448 applications received from employees against a total of 818 employers. The monetary amount of these claims totaled HK$409 million with a total ex gratia payment of HK$96.3 million being released (representing an average of HK$19,609 per approved application).117

14.073

14.075

105 106

107 108 109 110 111 112 113 114 115 116 117

PWIO s.4(1)(a). The major function of the Protection of Wages on Insolvency Fund Board is to administer the Fund. The Wage Security Division of the Labour Department is responsible for processing and verifying applications for ex gratia payment from the Fund. PWIO s.6(a). PWIO s.6(b). PWIO s.6(c). PWIO s.6(d). As at May 2009. Statistics taken from LC Paper No. CB(2) 1859/08-09(05). PWIO s.7(a). PWIO s.7(b). PWIO s.7(c). PWIO s.7(d). Statistics taken from LC Paper No. CB(2) 1859/08-09(05).

PROTECTION OF WAGES ON INSOLVENCY

639

(e) Entitlement to apply for payment Denition of applicant. To be eligible to make an application for payment under the Protection of Wages on Insolvency Ordinance (Cap.380), the individual has to fall within the denition of applicant under s.2 of the Protection of Wages on Insolvency Ordinance (Cap.380). This includes, any person who would, on the winding up of a company, be entitled to priority under s.265(1)(b), (c), (ca) or (cc) of the Companies Ordinance (Cap.32)118 or who would, on a bankruptcy, be entitled to priority under ss.38(1)(b), (c), (ca) or (cc) of the Bankruptcy Ordinance (Cap.6).119 Exclusions from denition of applicant. Exclusions include employees whose employer is an individual, who is a member of the family of that employer, and who dwells in the same dwelling as that employer.120 If an applicant is or has been a registered director of a company, his/her application to the Fund will generally be refused. Must show wages are due and unpaid. Once the individual fulls this criteria, the applicant must show that he/she has wages121 which are due and unpaid,122 wages in lieu of notice123 which are due and unpaid,124 or the liability to be paid a severance payment125 has arisen and the severance payment is unpaid, whether or not the severance is then due. Denition of wages. Wages is dened to include wages or salary in respect of which an applicant would, on the winding up of a company, be entitled to priority under s.265(1)(b) or (c) of the Companies Ordinance (Cap.32),126 or who would, on a bankruptcy, be entitled to priority under s.38(1)(b) or (c) of the Bankruptcy Ordinance (Cap.6),127 save that the amount specied in s.265(1)(b) or (c) of the Companies Ordinance (Cap.32) or s.38(1)(b) or (c) of the Bankruptcy Ordinance (Cap.6) (as the case may be) as the maximum amount in respect of which an applicant would be entitled to priority shall not apply.128 Denitions of wages in lieu of notice. Wages in lieu of notice is dened to include wages in lieu of notice in respect of which an applicant would, on the winding up of a company, be entitled to priority under s.265(1)(cc) of the Companies Ordinance (Cap.32),129 or would, in a bankruptcy, be entitled to priority under s.38(1)(cc) of the Bankruptcy Ordinance (Cap.6),130 save that the amount specied in s.265(1)(cc) of the 14.076

14.077

14.078

14.079

14.080

118 119 120 121 122

123 124 125 126 127 128 129 130

See para 14.059 for details of who has priority under these sections of the CO. See para 14.066 for details of who has priority under these sections of the BO. PWIO s.2. See para 14.079 for the denition of wages. PWIO s.15(1)(a). Under the EO s.23 wages become due on the expiry of the last day of the wages period and shall be paid as soon as is practicable but in any case not later than seven days thereafter. See para 14.080 for the denition of wages in lieu of notice. PWIO s.15(1)(b). See para 14.081 for the denition of severance payment. See para 14.059 for details of who has priority under these sections of the CO. See para 14.066 for details of who has priority under these sections of the BO. PWIO s.2. See para 14.059 for details of who has priority under these sections of the CO. See para 14.066 for details of who has priority under these sections of the BO.

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CHANGE OF OWNERSHIP

Companies Ordinance (Cap.32), or s.38(1)(cc) of the Bankruptcy Ordinance (Cap.6), (as the case may be) as the maximum amount in respect of which an applicant would be entitled to priority does not apply.131 14.081 Denition of severance payment. Severance payment is dened as any severance payment in respect of which an applicant would, on the winding up of a company, be entitled to priority under s.265(1)(ca) of the Companies Ordinance (Cap.32),132 or would, on a bankruptcy, be entitled to priority under s.38(1)(ca) of the Bankruptcy Ordinance (Cap.6),133 save that the amount specied in s.265(1)(ca) of the Companies Ordinance (Cap.32), or s.38(1)(ca) of the Bankruptcy Ordinance (Cap.6) (as the case may be) as the maximum amount in respect of which an applicant would be entitled to priority does not apply.134 Consideration of the application will be deferred until the severance payment becomes due. Where an application has been made in respect of severance payment which is not due at the date of application, the Commissioner is permitted to defer consideration of the application until the severance payment becomes due.135 Application for an ex gratia payment. The applicant may then apply to the Commissioner in writing and on an approved form136 for an ex gratia payment137 from the Protection of Wages on Insolvency Fund in respect of wages, wages in lieu of notice or the severance payment, as the case may be, or all or any of them. (f ) Ex gratia payment 14.084 The Commissioner may make an ex gratia payment to the applicant out of the Protection of Wages on Insolvency Fund. Where it appears to the Commissioner that an employer has failed to pay any wages, wages in lieu of notice or severance payment to an applicant and in the case of an employer who is not a company: a bankruptcy petition138 has been presented against the employer;139 or the employer has committed an act of bankruptcy140 but a petition cannot be presented against him/her141 or, in the case of an employer who is a company, a winding up petition142 has been presented against the employer;143 the Commissioner may make an ex gratia payment to the applicant out of the Protection of Wages on Insolvency Fund of the amount of wages, wages in lieu of notice or severance payment.144

14.082

14.083

131 132 133 134 135 136 137 138 139 140 141 142 143 144

PWIO s.2. See para 14.059 for details of who has priority under these sections of the CO. See para 14.066 for details of who has priority under these sections of the BO. PWIO s.2. PWIO s.16(1B). PWIO s.15(2). Ex gratia payment is not dened. Bankruptcy petition means a bankruptcy petition under the BO: PWIO s.2. PWIO s.16(1)(a)(i). See BO s.3. As a result of s.6(2)(a) of the BO. Winding-up petition means a winding-up petition under the CO, Pt V (ss.169296) or Pt X (ss.326331A): PWIO s.2. PWIO s.16(1)(b). PWIO s.16(1).

PROTECTION OF WAGES ON INSOLVENCY

641

Notice of the payment and the reasons must be published in the Gazette where bankruptcy cannot be presented against employer. Where the Commissioner makes a payment in circumstances where a petition in bankruptcy cannot be presented against the employer concerned, notice of the payment and the reasons therefore must be published in the Gazette.145 Discretionary power to make an ex gratia payment where no bankruptcy petition been presented. The Commissioner for Labour has a discretionary power to make an ex gratia payment where no bankruptcy petition has been presented against an employer so long as the employer employs less than 20 people; sufcient evidence exists to support the presentation of the petition in that case on the ground (i) if the employer is a company, that he/she is unable to pay his/her debts; or (ii) if the employer is a person other than a company, that he/she is liable to have a bankruptcy petition presented against him/her, and it is unreasonable or uneconomic to present a petition in that case.146 The Commissioner will not make any payment unless the applicant has veried application by way of a statutory declaration. The Commissioner will not make any payment under s.16(1) of the Protection of Wages on Insolvency Ordinance (Cap.380) unless the applicant has veried his/her application by a statutory declaration in a form approved by the Commissioner.147 The Commissioner will not make any payment where limits exceed those prescribed by legislation. Further, the Commissioner will not make any payment of amounts, or in respect of periods of time, exceeding the limits specied in the Protection of Wages on Insolvency Ordinance (Cap.380) as set out below. (g) Statutory cap on amounts that can be recovered Maximum amount of wages and time limits. The amount of wages paid must not exceed a maximum of HK$36,000.148 Further, the wages must not be for services rendered more than four months prior to the applicants last day of service149 or for which an application is made to the Protection of Wages on Insolvency Fund more than six months after the applicants last day of service.150 Maximum amount of wages in lieu of notice and time limits. The amount of wages in lieu of notice paid must not exceed a maximum of either (i) the equivalent of one months wages of the applicant or HK$22,500 whichever the lesser.151 The wages in lieu of notice must not have become due more than six months prior to the date of application.152

14.085

14.086

14.087

14.088

14.089

14.090

145 146 147 148 149 150 151 152

PWIO s.16(1A). PWIO s.18(1). PWIO s.16(2)(a). PWIO s.16(2)(b). PWIO s.16(2)(d)(i). PWIO s.16(2)(d)(ii). PWIO s.16(2)(e)(i). PWIO s.16(2)(e)(ii).

642

CHANGE OF OWNERSHIP

14.091

Maximum amount of severance payment and time limits. The amount of severance payment paid must not exceed an aggregate of HK$50,000 plus half of that part of the applicants entitlement to severance payment which exceeds HK$50,000.153 The severance payment must not have become due more than six months prior to the date of application.154 (h) Change in salary

14.092

Calculation of severance payment where there has been a change in the applicants wages. If the applicants wages have been reduced during the 12 months prior to the dismissal or lay-off and, before the wage reduction took effect, the applicants employer gave an undertaking that if the applicant was dismissed or laid off after the wage reduction, the severance payment to him/her would be calculated in a manner more favourable to him/her than that provided for in s.31G of the EO, then the applicants entitlement to severance payment may, if it is more favourable to the applicant, be calculated: (a) in accordance with s.31G of the EO;155 or (b) in the manner specied in the undertaking, whichever is less.156 The Fund will use the highest wages if the employee has more than one wage reduction. If the employee has had more than one wage reduction in the 12-month period immediately preceding termination of employment, the Fund will use the highest wages level as specied in any of the undertakings given by the employer for the purpose of calculating the ex gratia severance payment.157 Satisfactory evidence of employers undertaking needs to be produced. An applicant will need to produce satisfactory evidence to the Commissioner for Labour that his/her employer has undertaken to pay severance payment on the basis of the agreed wage level. The Commissioner may refuse to accept any alleged undertaking if the applicant fails to produce evidence or if the Commissioner is not satised with the evidence produced. (i) Review by board

14.093

14.094

14.095

Application procedure for review of Commissioners decision. Any applicant aggrieved by any decision of the Commissioner may request (in writing) that the Commissioner give reasons for the decision.158 After being given reasons, an aggrieved applicant may request the Commissioner to refer the application to the Protection of

153 154 155

156 157 158

PWIO s.16(2)(f)(i). PWIO s.16(2)(f)(ii). For the purposes of this section: (i) his last full months wages in EO s.31G(1)(a) shall be construed to mean his full months wages immediately before the wage reduction took effect; (ii) his last 30 normal working days in EO s.31G(1)(b) shall be construed to mean his 30 normal working days immediately before the wage reduction took effect; and (iii) the relevant date in EO s.31G(2) shall be construed to mean the date when the wage reduction took effect. PWIO s.16(2B). PWIO s.16(2B)(d). PWIO s.17(1).

PROTECTION OF WAGES ON INSOLVENCY

643

Wages on Insolvency Fund Board.159 Upon receiving a request from an applicant, the Commissioner is required to forward all documents relating to the application to the Chairman of the board.160 Board may conrm or vary decision. The board may conrm or vary any decision of the Commissioner or may for those purposes require the Commissioner to make further inquiries relating to the application.161 Exercise of statutory discretion cannot be challenged. No decisions of the Commissioner or the Protection of Wages on Insolvency Fund Board made in exercise of any statutory discretion may be challenged in any court.162 ( j) Verication of application Verication procedures. For the purposes of verifying any application for payment from the Protection of Wages on Insolvency Fund, or if required by the Protection of Wages on Insolvency Fund Board,163 the Commissioner may make such inquiries as he/she thinks t, and he/she is empowered to interview the applicant and any other employee.164 The Commissioner may require by notice in writing165 the applicant or any other person to produce any record, book of account, or other document as may, in the opinion of the Commissioner, be necessary to verify the application.166 The Commissioner may require by notice in writing any person who he/she reasonably believes to have possession of any register, record or other document required to be kept by an employer under the EO to produce to the Commissioner such document for his/her inspection.167 The Commissioner is also empowered to require by notice in writing the employer to whom the application relates of any servant, agent or employee of that employer to attend before him/her and to answer questions put by him/her.168 Any person required to answer questions is to have, in relation to any answer to such questions, such privileges as he/she would have had, had such question been asked in a court but is otherwise required to answer any such question.169 The Commissioner is required to proceed as informally as possible and may determine the procedure to be followed in asking questions.170 14.098 14.096

14.097

159 160 161 162 163

164 165

166 167 168 169 170

PWIO s.17(1)(b). PWIO s.17(2). PWIO s.17(3). PWIO s.20. The Board may conrm or vary any decision of the Commissioner on an application referred to it under the PWIO s.17 of or may require the Commissioner to make further inquiries relating to the application under the PWIO s.17(3). PWIO s.19(1)(a). Any notice served by the Commissioner imposing any requirement must state the time when and place where the person to whom the notice is given must comply with that requirement: PWIO s.19(2). Any requirement under the PWIO s.19 for a notice to be served on any person may be served by post: PWIO s.19(3). PWIO s.19(1)(b). PWIO s.19(1)(c). PWIO s.19(1)(d). PWIO s.19(4)(a). PWIO s.19(4)(b).

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CHANGE OF OWNERSHIP

(k) Subrogation 14.099 Applicants rights and remedies transferred to Board. Where an ex gratia payment is made under the Protection of Wages on Insolvency Ordinance (Cap.380), the applicants rights and remedies with respect to outstanding wages171 or severance payment existing immediately before that payment will, to the extent of the amount of that payment, be transferred to and vest in the Protection of Wages on Insolvency Fund Board for the benet of the Protection of Wages on Insolvency Fund. The board is then empowered to take whatever steps it considers necessary to enforce the rights and remedies transferred to the board with respect to the outstanding amount.172 Subrogation right does not affect rights and remedies of applicant with respect to other debts. The subrogation right of the Board will not affect the rights or remedies of the applicant in respect of other debts, including accrued holiday pay, the balance of wages in lieu of notice and the balance of severance payment.173 (l) Conclusion 14.101 When dealing with the issue of employer insolvency, it is important to keep in mind a simple point that can be forgotten: namely that before the insolvency administration came into effect there existed between the employer and each of its employees a legally binding contract of employment. This must be remembered at all times when dealing with this area of law. Notwithstanding the fact that extensive business difculties have arisen, employees are given rights which should be capable of enforcement.

14.100

171 172 173

For the purposes of PWIO s.24, wages includes wages in lieu of notice: PWIO s.24(3). PWIO s.24(1). PWIO s.24(2A).

CHAPTER 15

GOVERNMENT EMPLOYMENT CONTRACTS


Para. 1. Introduction ............................................................................................................................. 15.001 (a) An intention to create legal relations .............................................................................. 15.002 (b) Basic Law ........................................................................................................................ 15.005 (c) Statutory rights ................................................................................................................ 15.009 (i) Labour Tribunal ..................................................................................................... 15.010 (ii) Employees Compensation Boards ........................................................................ 15.012 (iii) Courts .................................................................................................................... 15.014 2. Government employees .......................................................................................................... 15.016 (a) Structure and scheme of management ............................................................................ 15.016 (i) Non-Civil Service Scheme .................................................................................... 15.017 (ii) Ofce holders ........................................................................................................ 15.019 (iii) Judiciary ................................................................................................................ 15.022 (iv) Ministers of religion .............................................................................................. 15.024 (v) Disciplined forces ................................................................................................. 15.026 (b) Civil servants ................................................................................................................... 15.027 (i) Appointment ........................................................................................................... 15.029 (ii) Probation ............................................................................................................... 15.033 (iii) Pay ......................................................................................................................... 15.038 (iv) Welfare and benets .............................................................................................. 15.046 (v) Working time and leave .......................................................................................... 15.055 (vi) Trade unions .......................................................................................................... 15.062 3. Termination and dismissal ...................................................................................................... 15.065 (a) Termination ..................................................................................................................... 15.066 (i) Procedure .............................................................................................................. 15.066 (ii) Disciplinary proceedings ...................................................................................... 15.069 (b) Dismissal ......................................................................................................................... 15.076 (i) Constitutional rights and dismissal of employees ................................................. 15.076 (ii) Common law remedies .......................................................................................... 15.077 (iii) Public private divide .............................................................................................. 15.078 (c) Judicial review ................................................................................................................ 15.085 (i) Relief ..................................................................................................................... 15.086 (ii) Illegality ................................................................................................................ 15.088 (iii) Irrationality ........................................................................................................... 15.092 (iv) Procedural fairness ................................................................................................ 15.096 4. Retirement and pension .......................................................................................................... 15.109 (a) Criteria for retirement ..................................................................................................... 15.110 (i) Outside work after retirement ............................................................................... 15.116

646

GOVERNMENT EMPLOYMENT CONTRACTS (b) Pension ............................................................................................................................ 15.120 (i) Old Pension Scheme ............................................................................................. 15.124 (ii) New Pension Scheme ............................................................................................ 15.125 (iii) Mandatory Provident Scheme ............................................................................... 15.130 (iv) Judicial ofcers ..................................................................................................... 15.132

1. INTRODUCTION
Overview of chapter. The Government is the single largest employer in Hong Kong, employing approximately 4 to 5 per cent of the total labour force at any one point in time.1 Not surprisingly, a signicant and diverse body of employment case law has developed to regulate and govern public ofcers employment rights, privileges and obligations. This body of case law is in part the product of the courts struggle to reconcile the private employer-employee relationship2 between the Hong Kong Government and its civil servants and public ofcers3 with the legal ction that such persons holding such public ofces are liable for dismissal at pleasure, an idiosyncratic divide not unlike that between private and public law generally. This chapter aims to provide an overview of the framework in which the legal principles concerning this area of law operate and to highlight distinctions and similarities between the rights and obligations of public sector employment qua the private sector. (a) An intention to create legal relations Dismissal at pleasure not inconsistent with the intention to create legal relations. Like any valid and binding contract, a contract of employment requires both parties to enter into such an agreement with an intention to create legal relations. Therefore, a colonial practitioner attempting to nd such an intention would have looked to the Letters Patent, the Colonial Regulations and the Government Regulations to determine whether a relationship of employment existed.4 As there was a rule at common law that servants of the Crown were dismissible at pleasure, it was almost impossible to nd such an intention.5 This view was challenged in Kodeeswaran v AG for Ceylon6 where the Privy Council held that the rule of being dismissed at pleasure did not preclude the existence of a contractual relationship. It was apparent to the Privy Council that the dismissal at pleasure rule was a well-established constitutional theory. However, citing Reilly v R,7 Lord Diplock held that the power 15.002 15.001

2 3

As of 31 Dec 2008, the Civil Service including civil servants working in government departments, those who have been seconded or posted to subvented or public-funded bodies, e.g. Hong Kong Monetary Authority and Hospital Authority, Judges and Judicial Ofcers, Independent Commission Against Corruption (ICAC) ofcers and locally engaged staff working in Hong Kong Economic and Trade Ofces numbered 155,840 strong. For other gures, see Civil Service Branch, Civil Service Bureau, Civil Service Reform Consultation Document - Annex B Statistics, Government Secretariat, Mar 1999, http://www.info.gov.hk/archive/consult/1999/reforme.pdf. Kennedy-Skipton v AG (1951) 35 HKLR 55. Interpretation and General Clauses Ordinance (Cap.1) makes no distinction between civil servants and public ofcers (in the Chinese language as ... respectively). However, those holding public ofce in Hong Kong SAR such as members of the judiciary enjoy rights enshrined in the Basic Law that would suggest a public element to their appointment. Kodeeswaran v AG of Ceylon [1970] AC 1111(PC); R v Lord Chancellors Department, Ex p Nangle [1992] 1 All ER 897. See also Lau Kwok Fai v Secretary for Justice (unrep., HCAL 177, 180/2002, [2003] HKEC 711). Colonial Regulation 55 provided that An ofcer holds ofce subject to the pleasure of the Crown, and the pleasure of the Crown that he should no longer hold it may be signied through the Secretary of State, in which case no special formalities are required. See also Lam Yuk Ming at fn 9 below where the Court of Appeal observed that art.XVIA of the Letters Patent excluded the common law rule in relation to judges. (1970) AC 1111 (PC). The Privy Council also established that such an ofcer can recover, on a quantum meruit basis, pay which was due to him before his dismissal became effective: Choi Sum v AG [1976] HKLR 609. Cf Kennedy-Skipton v AG, fn 2. [1934] AC 176, per Lord Atkin at p 180.

648

GOVERNMENT EMPLOYMENT CONTRACTS

to determine a contract at will was not inconsistent with the existence of a contract until so determined.8 Therefore, it followed that the dismissal at pleasure rule would prevent a contractual claim for wrongful dismissal but would not preclude the existence of a contract or a quantum meruit claim arising from the termination of such a contract. 15.003 Contractual relationship between public ofcers and government. The legal relationship between government and its public ofcers was considered in Lam Yuk Ming v AG9 by the Hong Kong Court of Appeal. In Lam Yuk Ming, the Government attempted to suspend civil servants who took industrial action using powers contained in Civil Service Regulation (CSR) 611. All the appellants concerned were appointed prior to the enactment of CSR 611. The appellants argued that they were employees for the purpose of their appointment and that the Government as employer could not therefore unilaterally alter their terms of employment by passing a new regulation. The Court of Appeal held that the nature of the legal relationship between the civil servants and government was capable of being a contractual one, holding that the power to determine a contract at will (dismissal at pleasure) is not inconsistent with the existence of a contract. On the facts of the case, the Court of Appeal found that there was an intention on both sides to enter into binding contract with mutually enforceable terms. As the memorandum of appointment contained an express contractual clause to vary the terms of service, the Court, deciding on contractual principles, dismissed the appellants claim.10 Normal principles of contract apply to public ofcers and government. In the years following the decision in Lam Yuk Ming, the courts have come to hold the position that normal principles from the law of contract apply to persons who are employed by the government or public authorities11 and the mere fact that public ofcers hold public ofce does not in and of itself confer any more rights than those enjoyed by private sector employees.12 Moreover, the increased judicial recognition of the importance of procedural fairness and accountability has relegated the ction of being dismissible at pleasure to the annals of legal history.13 (b) Basic Law 15.005 Statutory framework before 1997. Prior to 1 July 1997, the principal provision in the Letters Patent dealing with the civil service was art.14(1) which provided that the Governor may constitute and appoint judges, justices of the peace and other public

15.004

8 9 10 11

12

13

Fn 6 at 1118. [1980] HKLR 815. See also Trade Unions, 14.061. Fung Yiu Bun v Commissioner of Police [2002] 4 HKC 15; Chan Tak Keung v Commissioner of Police (unrep., HCAL 315/2000, [2002] HKEC 880). R v East Berkshire Area Health Authority Ex p Walsh [1984] 3 WLR 818, 826, per Sir John Donaldson MR, Employment by a public authority does not per se inject any element of public law. Nor does the fact that the employee is in a higher grade or is an ofcer. Khan v AG of Hong Kong [1987] HKLR 250; The Stock Exchange of Hong Kong Ltd v New World Development Co Ltd (2006) 9 HKCFAR 234; Rowse v The Secretary for Civil Service [2008] 5 HKLRD 217; Lam Siu Po v The Commissioner of Police (2009) 12 HKCFAR 237.

INTRODUCTION

649

ofcers as may be lawfully appointed, and who hold such ofce at Her Majestys pleasure. This power enabled the Governor to make rules of administration for the civil service but such rules remained subordinate and inferior to the Colonial Regulations.14 The Basic Law framework. The Basic Law enshrined the common law framework essential for the creating of economic relationships between parties. All laws previously in force, including the ordinances, the common law, rules of equity and legal relations created prior to 1997 are preserved insofar as they are compatible with the Basic Law and the Bill of Rights.15 Letters Patent art.14(1) was supplanted by art.48 of the Basic Law which provides that the Chief Executive may appoint or remove holders of public ofce in accordance with legal procedures thereby maintaining the legal effect of the government regulations previously in force. It has however been suggested that the previous system has not been faithfully replicated under the Basic Law.16 Whereas Colonial Regulations were issued by Britain through the legislature to direct and guide the Governor in making rules of administration, the Provisional Legislative Council subsequently conferred the Chief Executive with general powers to regulate the civil service.17 Labour laws that bind the HKSAR Government. Under the Basic Law, the Hong Kong Special Administrative Region (HKSAR) is vested with full control over its labour resource and retains the autonomy to formulate laws and policies relating to labour. The Employment Ordinance (EO), which regulates labour relations in the private sphere, does not bind the Government and its employees.18 Legislation such as the Sex Discrimination Ordinance (SDO),19 Disabilities Discrimination Ordinance(DDO),20 Family Status Discrimination Ordinance (FSDO)21 and the Race Discrimination Ordinance (RDO)22 expressly bind the Government and require the Government to 15.006

15.007

14 15 16

17

18

19

20 21 22

Fn 5. Basic Law art.8. WesleySmith P, Legal Control of the Public Service in Hong Kong, Asian Journal of Public Administration, Vol.21, No.1 (June 1999), 145553. The Provisional Legislative Council on 1 July 1997 passed the Hong Kong Reunication Ordinance (Cap.2601), HKSAR v David Ma Wai Kwan [1997] HKLRD 761 where the Court of Appeal upheld the constitutionality of the Provisional Legislative Councils actions in passing the Hong Kong Reunication Ordinance. Section 23(3) expressly maintained the continuity of the public service, and s.24(2) vested the Governors prerogative powers to the Chief Executive including the power to regulate the civil service. On 9 and 11 July 1997 respectively, the Chief Executive promulgated the Public Service (Administration) Order 1997, the Public Service (Disciplinary) Regulation. It is unclear to this day whether the Executive Orders are executive or legislative in nature, see Association of Expatriate Civil Servants of Hong Kong v Chief Executive [1998] 1 HKLRD 615 whereby Keith J held that the Executive Orders are nonetheless valid and do not violate the separation of powers doctrine between the Legislature and the Executive. Basic Law art.147. Section 66 of the Interpretation and General Clauses Ordinance (Cap.1) provides that no ordinance should be binding on the State unless it is expressly provided for or unless it appears necessary by implication. Section 4 of the EO does not expressly bind the Government. It is not necessary to imply the EO as binding on the Government as the Civil Service Regulations provides a comprehensive code for public servants. Employees employed by the Government under the Non-civil service scheme are contracted to enjoy equal rights as set down in the EO. Cap.480, discrimination against men (s.6) and women (s.5), against the married (s.7) or the pregnant (s.8) in the hiring or retention of employees is unlawful as well as contract workers (s.13). Cap.487. Cap.527. Cap.602. The Bill was passed by the Legislative Council on 10 July 2008 but is not yet in force as of the date of publication but should be effective sometime in late 2009. The Bill also makes discrimination on the basis of language unlawful.

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ensure its employees terms of employment and service are in compliance with the Basic Law and the laws of Hong Kong. 15.008 Constitutional duty of public ofcers. Public ofcers are constitutionally accountable to the Government of the HKSAR23 and must be permanent residents of Hong Kong.24 Moreover, the public ofces of the Secretaries and Deputy Secretaries of Departments, Directors of Bureaux, Commissioner Against Corruption, Director of Audit, Commissioner of Police, Director of Immigration and Commissioner of Customs and Excise may only be held by Chinese citizens among permanent residents of Hong Kong with no right of abode in any foreign country.25 Art.100 of the Basic Law however preserves the employment positions of all public ofcers who were serving in all Hong Kong government departments before the establishment of the HKSAR including rank, pay, allowances, benets and conditions of service. The pay and allowances, system of appointment, assessment, discipline, training and pension rights of public ofcers are also guaranteed by the Basic Law. For the purpose of the Basic Law, teachers in government aided schools,26 university lecturers,27 doctors employed by the Hospital Authority28 and doctors employed by statutory corporations29 do not hold public ofce.30 However, for employees who fall within the meaning of a servant of the Government under the Crown Proceedings Ordinance,31 their terms and conditions of employment are protected by the Basic Law.32

23

24 25

26

27

28 29 30

31 32

Basic Law arts.99, 104 whereby the Chief Executive, his principal ofcials, members of the Executive Council and Legislative Council, judges of the courts at all levels and other members of the judiciary must swear to uphold the Basic Law and allegiance to the HKSAR. Basic Law arts.3, 99. Basic Law art.101. Cf The Political Appointments System scheme where two additional layers of senior political appointments on non-civil servant terms were created between politically appointed ministers (also on non-civil servant terms) and permanent secretaries who are civil servants. When undersecretaries and political assistants with right of abode in foreign jurisdictions were appointed, a political row over the compliance with the Basic Law over such appointments erupted. The legality of such appointees who retain their foreign right of abode remains at large. For the Chief Executives ofcial position on the legality of the appointments, see http://news. gov.hk/en/category/administration/080604/html/080604en01002.htm. Ko Hon Yue v Liu Ching Leung (unrep., HCA 3494/2003, [2008] HKEC 1314). See also Chan Chi Loi v Cheng For (unrep., CACV 243/2003, [2004] HKEC 1575). Leung Chak Sang v Lingnan University [2001] 2 HKC 435; Jill Spruce v The University of Hong Kong [1991] 2 HKLR 444; [1993] 2 HKLR 65; Re The University of Hong Kong [1990] HKCFI 127 (the court has jurisdiction to stay any ancillary matters that may overtake the proceedings to ensure proceedings determining the nal rights of all parties are not prejudiced; courts will balance the risks between parties). Cf John Ho Hung Chiu v The University of Hong Kong [1996] 2 HKLR 426 (remedies in judicial review are well recognised but applicants cannot seek a remedy by way of judicial pronouncement. See also Ng Ai Kheng, Jasmine v The Open University of Hong Kong [2006] 2 HKLRD 228. Cheng Chun Ngai Daniel v Hospital Authority (unrep., HCAL 202/2002, [2004] HKEC 1375). Matilda & War Memorial Hospital v David Henderson [1997] HKLRD 356. Beeston and Stapleford UDC v Smith [1949] 1 KB 656 at 663; [1949] 1 All ER 394 at 396, (DC Eng), per Lord Goddard CJ, where it was held that the meanings of public ofce and public ofcer vary according to the context in which the terms are used. The Interpretation and General Clauses Ordinance (Cap.1) s.3 denes a public ofce as any ofce or employment the holding or discharging of which by a person would constitute that person a public ofcer. Cap.300. Basic Law Ch IV s.6 (arts 99104). See also Secretary for Justice v Lau Kwok Fai [2005] 3 HKLRD 88.

INTRODUCTION

651

(c) Statutory rights Employment contract terms prescribed by law. The terms and conditions of the employment contract between public ofcers and the Government are set out in the laws of Hong Kong, which include the Basic Law, primary legislation and secondary regulations only. Therefore, unless otherwise directed by such laws, public ofcers (save and except for non-civil service contract workers) cannot rely on external sources to imply contractual rights which purport to confer special or different status regarding their terms of employment.33 The only employment-related statutes that expressly bind the Government in Hong Kong are the Employees Compensation Ordinance (ECO),34 the Personal Data (Privacy) Ordinance,35 FSDO,36 DDO,37 the SDO38 and the RDO.39 (i) Labour Tribunal Jurisdiction of the Labour Tribunal.40 Until Ho Chee Sing James v Secretary for Justice,41 it was not entirely clear whether the Labour Tribunal had jurisdiction over labour disputes between civil servants and the government. The Labour Tribunal being a statutory creature of the Labour Tribunal Ordinance (LTO)42 is necessarily limited in its jurisdiction and powers by legislation, and the Ordinance does not expressly apply to the Government.43 Contractual disputes between public ofcer and government within the jurisdiction of the Labour Tribunal. In Ho Chee Sing James, the presiding Labour Tribunal Ofcer transferred a contractual dispute between a correctional services department ofcer to the High Court after nding that although the nature of the claim was within the jurisdiction of the Labour Tribunal (being a claim for a sum of money arising from a breach of contract), the jurisdiction of the Labour Tribunal was limited to 15.010 15.009

15.011

33

34

35 36 37 38 39 40 41

42 43

McClelland v Northern Ireland General Health Services Board [1957] 1 WLR 594 , where it was held by a majority in the House of Lords that a written provision should be taken to have exhaustively stated the basis on which an employee could be dismissed. Cf Fonua v Tonga Communications Corp Ltd [2008] TOCA 2 (AC 04/2008, 25 July 2008) (Tonga CA) where the Togan Court of Appeal held that primary statutes imply certain conditions into contracts of employment of public sector employees. See also fn 9, Lam Yuk Ming. Cap.282 s.4(1) which provides that application of the Ordinance is subject to the exclusion of members of the armed forces and other employees of the Hong Kong government who may become entitled to a statutory pension or gratuity as a result of injury. Cap.486 s.3. Cap.527 s.17. Cap.487 s.5. Cap.480 s.3. Cap.602 s.3. See also Chapter 17, Dispute Resolution. Ho Chi Sing v Secretary for Justice [2008] 3 HKLRD 319. See also Tjong Kee Ming v Secretary for Justice, (unrep., LBTC 7064/2003) where the Labour Tribunal heard a claim between a civil servant and the Secretary for Justice without considering the question of jurisdiction. Cap.23. This position is distinct from that in England and Wales where the civil service there is protected by virtue of s.191 Employment Rights Act 1996. See Interpretation and General Clauses Ordinance Cap.1 s.66 which provides that no ordinance enacted prior or after 1 July 1997 shall bind the Government unless the ordinance expressly provided or unless by necessary implication that the Government is bound. See also para 15.011 below where the High Court held that by necessary implication, the Labour Tribunal had the jurisdiction to hear employment dispute cases concerning public ofcers.

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disputes arising from the Employment Ordinance (EO). Since the Government was not bound by provisions contained in the EO,44 the Labour Tribunal lacked the jurisdiction to preside over employment disputes between the public ofcers and the Government. The Court of First Instance allowed the appeal and held that while the LTO did not expressly apply to the Government, jurisdiction could be necessarily implied from the Ordinance. Section 23(1)(f) of the LTO conferred rights of audience to a public ofcer, not being a barrister or solicitor, who appears on behalf of the Secretary for Justice, if the Secretary for Justice is a claimant or a defendant. Further, under s.13(1) of the Crown Proceedings Ordinance, all civil proceedings against the Government are to be instituted against the Secretary for Justice,45 and a fortiori s.27 which provides that the Government may sue or be sued by its servants in the Labour Tribunal. There are currently no statistics available as of the date of this publication as to the number of claims being brought to the Labour Tribunal by public ofcers. It has also been held that the Labour Tribunal does have jurisdiction over cases of tortious liability arising from industrial action by public ofcers.46 Likewise, a xed term contract employee under the Non-Civil Service Scheme ought to take their dispute to the Labour Tribunal.47 (ii) Employees Compensation Boards 15.012 Employees Compensation Ordinance.48 The Ordinance provides for the payment of compensation to all employees who suffered injury or death in the course of their employment. The amount of compensation payable is to be rst decided by the Commissioner for Labour, upon which a right of appeal lies against the Commissioners decision to a court under s.6H of the Ordinance.49 Procedures for the recovery of compensation.50 Before a public ofcer can recover compensation under the Ordinance, s.14(1) requires proper notice of the accident to be given to the Government on or behalf of the public ofcer, within 24 months but as soon as practicable after the accident and before the public ofcer voluntarily leaves his ofce. In cases where notication has lapsed, the District Court has held that a public ofcer was able to rely upon s.14(4) to invoke the jurisdiction of the court to hear the application notwithstanding that it was not made on time. The Court was satised in Chan Man Lap v Secretary for Justice that there was a reasonable excuse for the failure to make the application within the two year limitation period as

15.013

44

45 46

47

48 49 50

Leung Ka Lau v Hospital Authority (2009) 12 HKCFAR 924 where it was held that the EO had no application to doctors who were still employed in the public sector as civil servants and whose rights were instead governed by the CSR. See also s.31F and U of EO. Fn 41, Ho Chi Sing v Secretary for Justice at 325 para 19. In cases of industrial action, all civil servants will be deemed to have contracts of employment for the purpose of tort liability arising out of industrial action, e.g. Barretts & Baird Ltd v Institution of Professional Civil Servants [1987] IRLR 3. See also fn 9, Lam Yuk Ming at 821. See para 15.020. It is also expressly stated that such employees would enjoy benets no less favourable than the provisions of the EO (Cap.282). See Chapter 11 above for detailed commentary on the ECO (Cap.282). The court has discretion to extend time for appeal beyond the stated 42-day limit under ECO s.6H(2). See Chapter 11 above for more details.

INTRODUCTION

653

the superior ofcers had informed the plaintiff that he was not eligible for statutory compensation when in fact he was.51 Once the Commissioner (or the relevant court) has determined liability52 and decided on the level of compensation, the employer must, pursuant to the statutory scheme, provide lump sum53 or periodic payments54 either by agreement or by an order of the court. Pursuant to s.26(1) of the Ordinance, any award granted under the provisions must be credited in the event of separate proceedings by way of common law action.55 (iii) Courts Contracts between sovereign and subjects. Historically, under the common law, a sovereign could do no wrong. As a matter of procedure, the sovereign could not be impleaded in its own courts.56 Further, the sovereign enjoyed privileges in relation to civil liability as compared to a private person. Notwithstanding immunity from tortious liability, as no action could lie against a sovereign personally (or by extension, its ministers and civil servants), actions against the sovereign for a breach of contract and restitution of property could only be brought by a petition of right which required the prior consent of the sovereign.57 This position was amended by the Crown Proceedings Act 1947 which removed such privileges and placed the Crown in a similar position as an ordinary defendant to a civil action.58 The Crown Proceedings Ordinance59 (modelled upon the UK version) was enacted in Hong Kong in 1957.60 Civil Procedure to claim against the government. Detailed provisions governing the procedure to make a claim against the Government are set out in the Crown Proceedings Ordinance and the rules made thereunder. The principal rules are found in Rules of the High Court,61 O.77 for claims in the High Court, and Rules of the District Court,62 O.77 for claims in the District Court. Civil proceedings instituted under the Crown Proceedings Ordinance should be made by or against 15.014

15.015

51

52

53

54

55 56 57 58 59 60 61 62

(unrep., DCEC 261/1998, [2001] HKLRD (Yrbk) 462). The District Court held that the applicant, an ofcer in the Correctional Services Department, had a reasonable excuse as he was lowest rank in the Correctional Services Department who was told several times by his commanding ofcers that he did not have an eligible claim, despite the fact that the applicant could have sought independent legal advice but did not. Cf Wong Tak Man v Shaws & Sons Ltd [1957] HKDCLR 85; Yan Hon Kam v Man Hung Concrete Moulding Construction (unrep., DCEC 133/2001, [2001] HKEC 1197). Chan Man Lap v Secretary for Justice (unrep., DCEC 261/1998, [2001] HKEC 1357) whereby it was held that a Correctional Services Ofcer who was using his own motorcycle and upon return from dinner to High Island Detention Centre from the staff canteen was acting in the course of or incidental to his duties. Applicable for compensation for fatal or permanent total incapacity, and permanent partial incapacity, see ss.6, 79. Also relevant for cases where employee requiring attention, see s.8. Applicable for cases for compensation where employee requires attention or suffers from temporary incapacity, ss.8, 10(3) & 20. Chan Wing Fai v Wong Hon Kwong (unrep., HCPI 675/2001, [2002] HKLRD (Yrbk) 391, [2002] HKEC 1019). Crown Proceedings Bill, Hansard 1957, First Reading of the Bill. Petition of Right Act 1860 (repealed). Chitty on Contract Vol 1 30th edn 10.001. Cap.300. Tang Chai On v AG [1970] HKLR 209. Cap.4A. Cap.336H.

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GOVERNMENT EMPLOYMENT CONTRACTS

the Secretary for Justice.63 If there is more than one claim as between the party and the Secretary for Justice representing different departments, the Secretary for Justice may not set-off one claim against another.64 The claim may be in respect of contractual disputes, tortious liabilities or damages under the relevant discrimination ordinances.65

2. GOVERNMENT EMPLOYEES
(a) Structure and scheme of management 15.016 Generally. Persons in the employment of the Government may be divided into three categories, each enjoying different rights and obligations in their relationship with their employer. First, there are those who are appointed as contract workers under the Non-Civil Service Scheme.66 Secondly, there are those who hold public ofce whose terms of appointment and termination are governed by the Basic Law but not on civil-service terms.67 Thirdly, there are public ofcers and civil servants who are in a contractual relationship with the Government but whose conduct is governed by the Basic Law, legislation, sub-legislation and executive orders. The latter category forms the majority of government employees and includes public ofcers (but not the heads) of the 12 policy bureaux and the disciplined forces.68 Furthermore, art.99 of the Basic Law requires that all public servants are responsible to the Hong Kong Government.69 (i) Non-Civil Service Scheme 15.017 Contract workers employed under Non-Civil Service Scheme (NCSC) are employees for the purpose of the Employment Ordinance. The NCSC scheme of employment was introduced in 1999 as a response to a hire-freeze of public ofcers during the Asian nancial crisis, as a measure to allow the government

63

64 65

66

67

68

69

Fu Lok Man James v Chief Bailiff [1999] 1 HKLRD 581; [1999] 2 HKLRD 835, where the courts held that there is no question of vicarious liability. See also Hahn-Shin Micheline, Suckhi v The Government of HKSAR Bailiff (Operation Section) (unrep., HCA 1499/2006, [2007] HKLRD D5, [2007] HKEC 232). Paul Y Construction Co Ltd v AG of Hong Kong [1992] 2 HKLR 120. K v Secretary for Justice [2000] 3 HKLRD 777, discrimination against potential schizophrenia, M v Secretary for Justice [2009] 2 HKLRD 298, dismissal from the Civil Service as an Administrative Ofcer for general anxiety disorder, X v Commonwealth of Australia (1999) 167 ALR 529, dismissal from the army. The Non-Civil Service Scheme expressly provides terms that are equal to the protections afforded to the private sector under the EO. Includes ofces of the Chief Executive and principal ofcials under the Principal Ofcials Accountability System and political appointees chosen by the Chief Executive. The bulk of civil servants are further sub-divided into two different classes, namely generalist grades as Administrative Ofcers and Executive Ofcers and departmental grades such as Architects, Engineers, Social Workers and members of the disciplined forces. Generalist grades are transferable based upon administrative needs whereas departmental grades are comprised of employees with specialised skills. The grade structure of the civil service has not undergone major revision since the hand-over. See Burns, John P, Government Capacity and the Hong Kong Civil Service (Hong Kong: Oxford University Press, 2002) at p 40. Members of the judiciary and the Independent Commission Against Corruption and disciplined forces are public ofcers but are employed on terms that are distinct from the general body of public ofcers. AG v De Winton [1906] 2 Ch 106 (Ch D) where it was held that public servants are not obliged to obey instructions which are unlawful and cannot avoid personal liability by so doing.

GOVERNMENT EMPLOYEES

655

to alleviate labour shortages on more a exible basis.70 Some 16,000 to 17,000 employees have been employed under the scheme at any one point in time since the launch of the scheme.71 Under the scheme, department heads are able to determine the terms and conditions of xed-term contract workers for up to three years subject to guidelines issued by the Civil Service Bureau. Employees under this scheme must be provided with benets including rest days, statutory holidays, annual leave, maternity leave and paid sick leave as may be provided in line with the provisions of the EO. Terms however may not be more favourable than civil servants of comparable rank. Under the issued guidelines, the pay offered to such employees should not exceed the mid-point salaries of comparable civil service ranks or ranks of comparable levels of responsibilities. As such employees are not considered public ofcers, they are not bound by the statutory pay adjustments that occur from time to time. Unequal employment terms. The scheme was launched with a view to meeting service needs which were short-term, part-time or under review and not to replace the civil service. However, openings that required professional qualications such as lawyers, accountants, architects, engineers and surveyors have also been made available under the scheme.72 Further, many NCSC employees have had their xed-term contracts continuously renewed despite the policy aims. This raised and continues to raise a very real concern over inequality of employment benets in the civil service and has become a source of discontentment73 especially since the NCSC employees are remunerated consistently lower than at comparable or equivalent civil service grades.74 Due to the large discretion afforded to heads of department over the appointment and termination of such employees, detailed information on the employment situation of NSCS staff in individual departments is not made accessible and available to the public.75 Further, there is no guarantee that where a NCSC position is converted to a civil service position the employee under the NCSC scheme will be offered the same position as a civil servant. All candidates must go through the ofcial appointment system and any term of service as a NCSC employee does not feature in any calculation of subsequent service as a civil servant. 15.018

70

71

72 73

74

75

Prior to the introduction of the NCSC scheme, all temporary staff were employed as civil servants of the lowest grade and limited to 12 months only. The hire-freeze on civil service (save and except for disciplinary forces) recruitment commenced from Apr 1999 to Apr 2007. Legislative Council Panel on Public Service, Employment of Non-Civil Service Contract Staff, 17 Dec Apr 2007, LC Paper No. CB(1)377/07-08(03). HKSAR Government, Press Releases, LCQ6, Non-Civil Service Contract Staff Scheme, 21 Nov 2007. This has led to certain positions being converted to civil service positions. Legislative Council Panel on Public Service, Review of Employment Situation of Non-Civil Service Contract Staff, LC Paper No. CB(1)471/06-07(03), Dec 2006. The Government has been requested to make a review regarding discrepancies in treatment between employees on civil service contracts and those employed under the NCSC. Legislative Council Panel on Public Service, Updated Background Brief on employment of Non-Civil Service Contract Staff, LC Paper No. CB(1)784/08-09, Feb 2009. Legislative Council Panel on Public Service, Employment of Non-Civil Service Contract Staff, 19 Apr 2004, LC Paper No. CB(1)1505/03-04(04).

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GOVERNMENT EMPLOYMENT CONTRACTS

(ii) Ofce holders 15.019 Ofce Holders. The concept of ofce holders as a special category of persons who are not employed by virtue of a contract of employment with certain privileges attached to their position still exists in the HKSAR today.76 Categories of such persons who can be truly described as ofce holders are however declining.77 Under the Basic Law, public ofces include the Chief Executives ofce, the executive authorities comprising of the civil service and the disciplined forces and the judiciary. Ofcials in the Executive Council and Heads of Bureaux are no longer part of the civil service since the commencement of the Accountability System for Principle Ofcials and such persons are employed under contract. Chief Executive. The Chief Executive is head of the HKSAR. Provisions in the Basic Law govern the terms of his or her appointment to ofce. The Chief Executive must be a Chinese citizen of not less than 40 years of age and a permanent resident with no right of abode in any foreign country and has ordinarily resided in Hong Kong for a continuous period of not less than 20 years. Once assuming ofce, the Chief Executive must declare all of his or her assets78 and serve a ve-year term, subject to a maximum of two consecutive terms.79 The Chief Executive must resign if he or she is unable to discharge his duties as a result of serious illness or other reasons, when the Chief Executive has lost the condence of the Legislative Council in circumstances prescribed under art.52. Principal Ofcials.80 Principal Ofcials are members chosen by the Chief Executive to head the 12 civil service bureaux. Members who were civil servants and accept appointment to the ofce of principal ofcials become full time political employees employed on contract; the new employment packages are separate from the civil service pay scale but are reviewed from time to time at the discretion of the Chief Executive. Under the scheme,81 the principal ofcials are accountable to the Chief Executive for the success or failure of their policy initiatives and where necessary, the Chief Executive may terminate the contracts of the principal ofcials. Further, the terms of such ofcials are limited to ve-year terms and must not exceed that of the Chief Executive who nominated them. Pursuant to their terms of service,

15.020

15.021

76

77

78 79 80

81

Letters Patent art.16 provided that, subject to arrangements protecting judicial tenure, the Governor may, subject to such instructions from the Secretary of State of the Colonies upon sufcient cause, dismiss or suspend from the exercise of his ofce any person holding any public ofce within the Colony, or take other disciplinary action as may seem desirable. R v BBC Ex p Lavelle [1983] 1 WLR 23 , whereby Woolf LJ commented that the distinctions which previously existed between pure cases of master and servant and cases where a person holds an ofce are no longer clear. See also Percy v Church of Scotland Board of National Mission (Scotland) [2006] 2 AC 28 and McMillan v Guest [1942] AC 561. Basic Law art.47. Basic Law art.46. In the pre-political appointees era, certain posts were explicitly removed from the civil service, e.g. the Director of Audit and the Director of the ICAC to strengthen their independence and make clear their direct line of accountability. No primary legislation was used to effect the change. The functions and ofce exercised formerly by civil servants were transferred by virtue of Interpretation and General Clauses Ordinance (Cap.1) s.54A.

GOVERNMENT EMPLOYEES

657

principal ofcials are required to follow the Code for Principal Ofcials under the Accountability System.82 (iii) Judiciary Independence of judiciary enshrined in Basic Law.83 The independence of the judiciary is enshrined in the Basic Law84 and is protected by the method and criteria of their appointment. Judges are chosen on the basis of their judicial and professional qualities and appointed by the Chief Executive on the recommendation of an independent commission composed of local judges, members of the legal profession and eminent persons from other sectors.85 Unlike the legislature and the Chief Executive, there is no requirement for judges to be permanent residents of Hong Kong as they can be recruited from other common law jurisdictions save and except for the Chief Justice of the Court of Final Appeal and the Chief Judge of the High Court.86 Security of tenure for judiciary. Judges are provided with security of tenure.87 The appointment or removal of the judges in the Court of Final Appeal and the Chief Judge in the High Court must follow procedures prescribed in the Basic Law and require the endorsement of the Legislative Council.88 It is a criminal offence to attempt to inuence the Judicial Ofcers Recommendation Commission.89 Further, a judge may only be removed for inability to discharge his or her duties or for misbehaviour by the Chief Executive upon the recommendation of a tribunal appointed by the Chief Justice of the Court of Final Appeal consisting of no less than three other judges.90 Any recommendation to terminate the appointment must be endorsed by the legislature. The same rights protecting security of tenure preserves and protects the pension rights of judges in employment during the handover and those who had retired by then. However, there are no express provisions in the Basic Law preventing the reduction of or other benets of subsequent appointees. 15.022

15.023

82 83

84 85

86 87 88 89 90

Code for Principal Ofcials Under the Accountability System, 28 June 2002, GN 3845. While magistrates hold public ofce in the traditional sense, they are expressly not mentioned in the Basic Law and hold ofce on terms renewable by contract every three years in Hong Kong: cf the position in Knight v AG [1979] ICR 195 where it was held that justices of peace and magistrates are ofce holders. Basic Law art.2. Basic Law art.88. Judicial Ofcers Recommendation Commission Ordinance (Cap.92) s.3 provides that the Chief Justice shall be the chairman of a committee that consists of the Secretary for Justice, seven members appointed by the Chief Executive which must include one barrister and one solicitor holding valid practicing certicates and three lay members. Section 3(1A) also prescribes that the Chief Executive must consult the Bar Council and Law Society for the appointment of members to the Commission. Section 4 also provides that no member of a pensionable ofce (other than a judge) or receiving emoluments from the public revenue may be a member of this commission. Basic Law arts.2 & 90. Basic Law art.93. Basic Law art.90. Judicial Ofcers Recommendation Commission Ordinance (Cap.92) s.12. Basic Law art.89, the Chief Justice may be investigated and such tribunal must be appointed by the Chief Executive consisting of no less than ve local judges.

658

GOVERNMENT EMPLOYMENT CONTRACTS

(iv) Ministers of religion 15.024 Intention to create legal relations for religious ofce holders in England & Wales. Traditionally holders of religious ofce have an awkward status at law; the position of a minister of religion is the position of a person who holds an ecclesiastical ofce,91 and not the position of a person whose duties and rights are dened by contract.92 They are neither civil servants nor are they private employees, but their employment relationships are nonetheless governed by public and not private law.93 However, there are clear indications that in common law jurisdictions, courts are moving away from the previously strict presumption held in England & Wales that ministers of religion are incapable of being appointed under a contract of employment.94 In New Testament Church of God v Stewart,95 the English Court of Appeal held that an employment tribunal was not required to consider the relationship between a minister and his church with the presumption that there was no intent to create legal relations. Whether such intent exists depended on the facts of each and every individual case, e.g. whether the beliefs of the religion entitled legal relations to be presumed. Churches and temples regulated as statutory incorporations in Hong Kong. While there are no cases to date deciding the status of ministers of religion in Hong Kong, churches and temples are regulated under statute as statutory incorporations.96 In Hong Kong, the ofce of the or temple keeper is either directly appointed by the Chinese Temples Committee97 or by way of tender. The appointment may also be terminated on one month notice in writing. However, the same committee may also delegate the administration of a temple and its revenues to an agent; in such a case, it is unlikely that there will be an intention to create legal relations or a contract in employment. It is clear however that most religious organisations98 in Hong Kong are capable of creating legal relations with its employees. In Lok Suk Ling v The Methodist Church Hong Kong,99 the Court of Appeal considered a dispute over compensation for outstanding leave of an employee of the Church100 who held the position of Director

15.025

91

92 93

94

95 96 97 98

99 100

Marshall v Graham [1907] 2 KB 112. Phillimore J held that an established church is not made a department of the State but that the process of establishment means that the State has accepted the church as the religious body and that such body has important links with the state. However, such links provide the church with a unique position but not that of a department of state. Re Employment of Church of England Curates [1912] 2 Ch 563. Diocese of Southwark v Coker [1998] ICR 140. See Percy v Church of Scotland Board of National Mission (Scotland) [2006] 2 AC 28 at para 15 where Lord Nicholls explained the distinction between public ofce and an employment of contract. The underlying principle is based on a belief that religious ministers are called to their profession by spiritual motivation and the nature of the work does not lend itself to an intention to create legal relations. President of the Methodist Conference v Partt [1984] QB 368; Davies v Presbyterian Church of Wales [1986] 1 WLR 323, at 329, per Lord Templeman who held that a pastor does not devote his working life but his whole life to the church and his religion and that his duties are dictated; cf Diocese of Southwark v Coker [1998] ICR 140. See also Santokh Singh v Guru Nanak Gurdwara [1990] ICR 309 where it was held by the English Court of Appeal that a Granthi (priest) at a Sikh temple was not employed under a contract of service. [2008] ICR 282. See e.g. Chinese Temples Ordinance (Cap.153) and China Congregational Church Ordinance (Cap.1009). Chinese Temples Ordinance (Cap.153) s.10. Unlike other organisations and perhaps for historical reasons, the Church of England Trust Ordinance (Cap.1014) does not expressly provide powers for the trustees to employ any person. It is unlikely that the Bishop of Victoria, Hong Kong is under a service of contract. (unrep., CACV 355/2001, [2001] HKEC 1563). The Methodist Church Ordinance (Cap.1133) s.4 provides the Church corporation with residual power to do other things as may appear to be incidental or conducive to the aims and objects of the church.

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responsible for the management of a Church centre until the centre closed down. The court held that such cases were within the jurisdiction of the Labour Tribunal. (v) Disciplined forces Disciplined forces capable of a contractual relationship with government. Unlike England & Wales,101 Hong Kong police ofcers do not hold a unique common law ofce but are employed by the Government102 under terms set out in the Police Force Ordinance103 and the Police Force Guidelines. Like with civil servants, the Government is vicariously liable for wrongful acts by police ofcers.104 Likewise, the same principles apply to ofcers of the correctional services,105 re-ghters106 and the Independent Commission Against Corruption.107 (b) Civil servants Public ofcers capable of a contractual relationship with government. The fact that one holds public ofce is not inconsistent with having the status of an employee under a contract of employment.108 The English Court of Appeal has held that it is possible for prison ofcers to be employed under a contract of employment; whether they have in fact been so employed depends on whether elements of a contract have been made out, namely was there an offer and an acceptance of that offer with consideration and the intention to create legal relations.109 15.027 15.026

101

102

103 104

105 106

107 108

109

Police forces in the United Kingdom are neither part of the civil service nor local government ofcers. They hold a unique common law ofce under the Crown and therefore the ordinary rules of employer and employee or master and servant do not apply to the police who are not subject to principles of ordinary employment law. See AG for New South Wales v Perpetual Trustee Co Ltd [1955] AC 457 (PC); Fisher v Oldham Corp [1930] 2 KB 364 (KBD). Fung Yiu Bun v Commissioner of Police [2002] 4 HKC 15; Chan Tak Keung v Commissioner of Police (unrep., HCAL 315/2000, [2002] HKEC 880). Cap.232. Kimmy Suen King On v AG [1987] HKLR 331, at 333, per Silke JA who held that when considering the liability from wrongful actions of an ofcer in the Police Force, references to police cases in other jurisdictions may well be of little use as the method by which they are given authority differs considerably. In Hong Kong such a person is a Crown servant and his authority derives from the Crown. Crown Proceedings Ordinance (Cap.300), s.4 makes clear the liability of the Crown in respect of tortious acts committed by its servant. Shau Lin Chi v Secretary for Justice [1998] 4 HKC 562; [1999] 2 HKC 585. R (on the application of Dunbar) v Hampshire Fire & Rescue Service [2004] ACD 38 where Elias J held that although re-ghters were subject to employment contracts, such contracts were superimposed by a statutory regulatory framework. Where the issue concerned whether the government was acting lawfully and in accordance with statutory rights conferred upon such employees, judicial review was appropriate. Civil servants are not precluded from going on tours of service with the ICAC, see CSR 176(7). Kodeeswaran v AG of Ceylon [1970] AC 1111; Ranaweera v Ramachandran [1970] AC 962 (PC) (members of income tax board of review were not Crown servants or public ofcers because they were analogous to independent arbitrators); Suttling v Director General of Education (1985) 3 NSWLR 427. See further R v Civil Service Appeal Board, Ex p Bruce [1988] 3 All ER 68 (afrmed [1989] 2 All ER 907; R v Lord Chancellors Department, Ex p Nangle [1992] 1 All ER 897 (civil servant had contract of employment with the Crown and therefore should challenge the fairness of disciplinary procedures by way of a private law action rather than by way of judicial review). McClaren v Home Ofce [1990] COD 257, in England, prison ofcers were employed on a purely statutory basis. See also Shau Lin Chi v Secretary for the Civil Service (unrep., HCAL 4/1999, [2000] HKEC 374) where McClaren was considered.

660

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15.028

Composition of the Hong Kong Civil Service. The entire Hong Kong Civil Service consists of 12 policy bureaux and 67 departments and agencies.110 Public ofcers do not have contracts of service with the government per se but are deemed to be in a contractual relationship. Their employment conditions are not regulated by the EO but by the Basic Law, legislation and sub-legislation such as the Civil Service Regulations (CSR). The various codes of regulations are comprehensive and regulate appointment terms, promotion scale, disciplinary proceedings, termination conditions, medical benets, housing and accommodation benets, and training scholarships. The Public Service Commission,111 an independent statutory body, also supervises matters of appointment, promotion and discipline. Four independent bodies appointed by the Chief Executive further advise the Government on matters relating to pay and conditions of service.112 (i) Appointment

15.029

Appointment of public ofcers to vacant position by the Secretary for Civil Service. When a new vacancy arises and before a new public ofcer can be appointed, matters to be considered by the department head include whether the vacancy can remain unlled and whether it can be lled by the promotion or transfer of another public ofcer from a similar or lower grade.113 Ofces up to the rank of D8 or equivalent must be appointed by the Secretary for Civil Service. These appointments may be approved by ofcers in the Civil Service Bureau to whom the Chief Executive has expressly delegated his powers of appointment114 and in consultation with the Public Service Commission where required.115 Each candidates status at rst appointment must be determined as local or non-local.116 If a candidate is non-local, appointment of such a candidate is subject to the advice of the Public Service Commission.117 Minimum qualications for appointment to public ofce. All newly appointed public ofcers must be permanent residents of Hong Kong.118 For local appointments,

15.030

110 111 112

113

114 115

116

117 118

As of the date of this publication. Public Service Commission Ordinance (Cap.93). The Joint-Secretariat for the Advisory Bodies on Civil Service consists of the Standing Committee on Directorate Salaries and Conditions of Service, the Standing Commission on Civil Service Salaries and Conditions of Service, the Standing Committee on Disciplined Services Salaries and Conditions of Service. The Standing Committee on Judicial Salaries and Conditions of Service advises the Government on judicial ofcers pay and service conditions. CSR Annex 1.1 r.2. See also Public Service Commission Regulations (Cap.93A) whereby the Public Service Commission must be notied of any vacancy in a pensionable ofce. Basic Law art.48(7) and the Public Service (Administration) Order. Public Service Commission Ordinance (Cap.93) Sch.1 outlines categories of ofcers which do not require consultation with the PSC. See also CSR 103. R v The Secretary for the Civil Service Ex p The AECS (1995) 5 HKPLR 490, the civil service experienced an uncertain period prior to the hand-over concerning governmental policy which prohibited the transfer of overseas ofcers from local conditions of service to permanent establishments. As a result of the declaration, all ofcers, local or overseas who were on local terms and conditions were transferred to permanent establishment. CSR 115. Basic Law arts.99 & 100 also provides that all previously serving public servants including those in the police may retain their employment and seniority on the conditions no less favourable than before. Art.101 Basic Law provides that British and other foreign nationals previously serving in the public service in Hong Kong or qualied candidates of foreign nationality as and when the need requires, may be appointed at all levels save and except for director grade bureaux posts.

GOVERNMENT EMPLOYEES

661

all civil service posts requiring tertiary degrees or professional qualications are required to pass the Common Recruitment Examination which includes Chinese as a requirement.119 Candidates selected for appointment to an ofce must also undergo medical examinations to ensure that candidates are t for service.120 Disabled candidates to be provided with reasonable accommodation. If selected candidates are found to have a disability prior to or after a medical examination, such candidates must not be discriminated against and the recruiting department must ensure full compliance with the provisions of the DDO and the up-to-date Code of Practice of Employment issued by the Equal Opportunities Commission (EOC).121 Any selected candidate who is not offered an appointment by virtue of his or her disability must be provided with full reasons why reasonable accommodation cannot be provided for the candidate to perform the inherent job requirements of the ofce.122 Afrmative policy on hiring of disabled persons. It is also the Governments stated policy to place the disabled in appropriate jobs wherever possible to integrate the disabled into the community through vocational rehabilitation.123 Disabled persons applying for appointment to the Civil Service should therefore be considered on equal terms with other applicants and, if found suitable for employment, given an appropriate degree of preference for appointment over other applicants.124 If a disabled ofcer does not meet his probationary terms and it is required to terminate his service, the Secretary for Civil Service must be consulted prior to any decision not to appoint such an ofcer.125 (ii) Probation Probationary appointmenta contract subject to conditions precedent. Employing a candidate on probationary terms gives the employer time to assess the suitability of the candidate for the relevant position. A probationary appointment is therefore necessarily a contract subject to a condition subsequent; if the probationer failed to comply with the requirements demanded under such an appointment, the employer is entitled to avoid the contract as the appointment does not become complete until such conditions are satised.126 In other words, the employer preserves the right to conrm the appointment or to allow it to lapse. Probationer must be given proper opportunities. It is now more or less settled that there are differences in expectations of a probationer vis vis an established employee.127 In White v London Transport Executive,128 the Employment Appeal 15.033 15.031

15.032

15.034

119

120 121 122 123 124 125 126 127 128

The Association of Expatriate Civil Servants of Hong Kong v The Secretary for the Civil Service (unrep., HCAL 9/1998, [1998] HKEC 161) whereby the court upheld the validity of the language policy in that although the treatment was discriminatory, the distinction was fair and therefore lawful. CSR 142(1). CSR 142(2). CSR 142(3). CSR 145(1). CSR 145(2). CSR 145(6). D v Queens University of Belfast [1997] ELR 431 (NICA). Hamblin v London Borough of Ealing [1975] IRLR 354. [1981] ILRL 261, at 263, per Browne-Wilkinson J.

662

GOVERNMENT EMPLOYMENT CONTRACTS

Tribunal in England held that the obligation for an employer of a probationer is to take reasonable steps to maintain an appraisal of a probationer during the trial period and to give guidance by advice or warning where necessary. The employer must also provide the probationer a proper opportunity to prove himself and give such warning if the required standards are not met.129 This is reected in the CSR which mandates staff reports on such ofcers every six months in the rst year of probation and on an annual basis for the remainder of the term of probation.130 15.035 Duration of probation should not be unreasonably long. Under the old civil service scheme, all public ofcers were appointed on permanent and pensionable terms with a xed probationary period for two years. Under the new civil service scheme, ofcers for posts are appointed on probationary terms for three years although the length of the probationary period may vary depending on the grade of the post and may be transferred to different postings.131 It has been suggested that longer probationary periods nonetheless create difculties.132 The longer the period of probation, the employer must justify why a probationary period of such a length of time is required in order to establish the suitability of the employee for the post in question.133 The CSR further provide that once the probation period is set, it can only be extended if the probationer had not been provided with adequate opportunity to demonstrate his or her suitability to be established as a civil servant.134 Probationer not entitled to full disciplinary proceedings. The CSR provides that an ofcer under probation is not entitled to full disciplinary proceedings but only to be informed in writing of such an intention to terminate his or her service (or an extension of such a probation period as necessary), to be provided with reasons that gave rise to such intention, and seven calendar days to submit any representations.135 In D v Queens University of Belfast,136 a university lecturer on probation sought judicial

15.036

129

130

131 132

133

134

135

136

Post Ofce v Mughal [1977] IRLR 178 where the English Employment Tribunal held that a probationer was unfairly dismissed as it had failed to maintain a proper appraisal of her progress and failed to give sufcient guidance or warning during the probation period. CSR 235. See also M v Secretary for Justice (unrep., DCEO 8/2004, [2007] HKEC 1271); [2009] 2 HKLRD 298 where it was adduced as evidence that the probationary Administrative Ofcer of that grade would receive up to two postings during a three-year probationary period. CSR 183(2). Weston v University College Swansea [1975] IRLR 102. The applicant was appointed as a lecturer for the probationary period of three years but was not placed on the permanent staff at the end of the period. The Industrial Tribunal held that a contract providing for normal increments beyond a probationary period was not a xed-term contract but the probation provision was only a break clause in a contract of uncertain duration. R v Chief Constable of Greater Manchester Ex p Lainton [2000] ICR 1324, the English Court of Appeal held that a police constables period of probation could be extended only during the two year probation period initially specied but once extended, the Chief Constable had powers to extend such probation period as he determines t as long as the extension was made in a current period of probation. CSR 183(1)(6). The CSR also provides that any extension of probationary period which results in a nancial loss to the probationer must be approved in accordance with provisions of termination provided by CSR 186. CSR 186. The standard form appointment letter however provides that that only one month notice or one month payment in lieu of notice without recourse to disciplinary procedure and without reasons being given. It is doubtful that a letter of appointment can vary the rights of an ofcer on probationary terms in a manner that is not provided for in the regulations. [1997] ELR 431 (NICA). See also Hamblin v London Borough of Ealing [1975] IRLR 354, at 356 where the majority view of the industrial tribunal held that the probationary period is very much a trial period and that the test of reasonableness in the case of probationary appointments is not quite the same as in the case of an employee.

GOVERNMENT EMPLOYEES

663

review against the decision to dismiss him without a disciplinary hearing. The Northern Ireland Court of Appeal held that there was a difference, arising from considerations which were fair and reasonable, between deciding to terminate the employment of a probationer and deciding to dismiss an established member of staff. The decision maker in deciding to terminate a probationer was only required to consider whether it was fair and reasonable to terminate without further recourse. Discrimination never a reasonable ground for dismissal. Fair and reasonable considerations do not include discrimination on the basis of gender, race, disability and family status. In M v Secretary for Justice,137 the Court of Appeal held that normal anti-discrimination rules apply whether the administrative ofcer in question was under probation or not. However, in Hart v Chief Constable of Derbyshire,138 the English Employment Appeal Tribunal upheld the decision of the chief constable who was accused of being discriminatory. The Court held that while it was ordinarily an employers duty (even under a period of probation) to make a reasonable adjustment or to nd a suitable alternative post for the probationer,139 the chief constable also performed a regulatory function in deciding whether a police probationer had reached a standard of competence against a national criteria. (iii) Pay Salaries and wages distinguished. Like the EO, the CSR distinguishes wages from salaries. Salaries are dened as total salary for public ofcers at higher level grades and basic salary for those on lower grade scales. Wages are dened as the daily rate of pay of casual workers.140 The distinction is relevant to the calculation of income tax and statutory entitlements, such as holiday pay, sickness allowance, maternity, severance and pension. All salaries and allowances are payable monthly and in arrears and all public ofcers are entitled to advices of monthly payments or monthly pay sheets for ofcers paid in cash.141 Salaries are paid with effect from the date of assumption of duty and where an ofcer is promoted, the new pay scale commences from the date the vacancy occurred and not when the ofcer assumes the post.142 Wages may only be paid to persons employed by the Government as temporary staff or casual workers for specic assignments of a short-term nature and for which short-term funds have been approved.143 It has also been held that the Government has the status of a secured creditor against the salary of a public ofcer who enters into the Home Financing Scheme.144 Terms of appointment must not be less favourable than prior to handover. The Basic Law provides constitutional protection for public ofcers to be appointed on terms no less favourable that prior to 1 July 1997. It is also the Governments 15.038 15.037

15.039

137 138 139 140 141 142 143 144

M v Secretary for Justice [2009] 2 HKLRD 298. (unrep., Appeal No. UKEAT/0403/07/ZT, 27 Nov 2007). CSR 145. CSR 600(1)(2). CSR 602. CSR 604 & 605. CSR 785787. See also Non-Civil Service Staff Scheme above 14.020. Re Choi Lai Ming Ex p Ofcial Receiver [2006] 1 HKLRD 7. See also CSR 1670.

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GOVERNMENT EMPLOYMENT CONTRACTS

established policy to offer sufcient remuneration comparable to private sector pay. Four independent commissions carry out periodic surveys to monitor and advise the Chief Executive on appropriate levels of remuneration. Apart from salaries, public ofcers are eligible for fringe benets, allowances and expenses depending on their individual terms of appointment, rank, salary-scale, length of service and vocation guaranteed under the CSR.145 15.040 Reduction or increase in pay. Generally, an employer has no right to reduce wages or salaries unilaterally.146 A private employer who does so will usually be held to have frustrated or repudiated the contract due to the fundamental importance of proper payment. Such an employer may be liable for constructive dismissal.147 Prima facie, this right is guaranteed for civil servants under the Basic Law where it is provided by art.100 that public servants may remain in employment and retain their seniority with pay, allowances, benets and conditions of service no less favourable than before. However, art.107 of the Basic Law also requires the Government to follow a principle of keeping expenditure within the limits of revenues in drawing up its budget to achieve a scal balance, a constitutional duty to avoid decits and to keep the budget commensurate with the growth rate of the gross domestic product. Unilateral reduction of level of pay not unconstitutional. In Secretary for Justice v Lau Kwok Fai,148 the Court of Final Appeal considered whether the Public Ofcers Pay Adjustment Ordinance149 and the Public Ofcer Pay Adjustments (2004/2005) Ordinance150 which reduced public ofcers salaries as a response to the Asian nancial crisis were in breach of the Basic Law or a frustration of public ofcers contracts. The Court of Final Appeal, reversing the Court of Appeal, held that art.100 did not guarantee a level of pay higher than before the handover and that the term no less favourable than before should be construed purposefully, that is no lower than levels pre-1997 only. The Court also found that there were fundamental differences between an executive action unilaterally reducing pay and one by legislative action;151 contractual authority was required for the former but not for the latter and in any event, neither the CSR nor the letters of appointment for public ofcers contained express or implied undertakings against the introduction or enactment of legislation. The legal consequences of the respective ordinances were to adjust the relevant pay scales and reduce the pay which public ofcers were entitled under their contracts of service and, to the extent that was necessary, to vary the contracts.

15.041

145

146

147 148 149 150 151

See CSR 600799 for Salaries and Allowances, 800899 for Housing Benets, 900999 for Medical and Dental Allowances. Miller v Hamworthy Engineering Ltd [1986] ICR 846, and Davies v Hotpoint [1994] ILRL 538. However, courts have also been reluctant to imply that there is a general expectation for annual increases in pay, see Murco Petroleum Ltd v Forge [1987] IRLR 50. See para 15.066 15.108 below. [2005] 3 HKLRD 88; (2005) 8 HKCFAR 304. Cap.574. Cap.580. Cf fn 9 where the Court of Appeal held that the Executive was able to unilaterally alter the CSR insofar as the alterations were within the implied terms of the CSR. It was also held however that should unilateral variations strike at the root of the contractual relationship as to destroy it, the Court would have had to conclude that either the clause repudiated the contract, or that the clause itself was nugatory.

GOVERNMENT EMPLOYEES

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Excessively high pay ultra vires. Conversely, in Roberts v Hopwood,152 a local authority was found to have paid its manual workers such excessively high wages compared to the private sector that the payments were declared as gratuities and were therefore ultra vires of the local authority. Unlike the local authorities of England, the HKSAR Government wields broad prerogative discretion.153 However, the authorities suggest that relying on market forces as the sole yardstick without considering factors would likely be Wednesbury reasonable.154 Suspension or deduction of pay. The CSR provide guidelines on deductions that may be made from an ofcers pay and how an ofcer may be suspended from duties without pay.155 First, monthly rateable allowances are forfeited where sick leave exceeds 30 consecutive days or if sick leave is caused by the ofcers own serious or wilful misconduct.156 Secondly, deductions may be made from an ofcers salary due to absence from, or part performance of his or her duty157 without a reasonable excuse, or incurred in the course of a trade dispute under the no work, no pay principle.158 Thirdly, an ofcer may be suspended without pay if he or she refuses to perform for any period or any part of the usual duties of his or her ofce in connection with a trade dispute.159 Reduction of pay pending industrial action. In the event of industrial action by public ofcers, the Government cannot reduce salaries per se but is nonetheless entitled to withhold wages for non-performance of work as a representation of the value of the work not performed.160 In Choi Sum v AG,161 public ofcers embarked on a work-to-rule campaign, performing no more than 70 per cent of their usual duties. The Secretary for Civil Service decided to reduce their salaries by 30 per cent. The Court held that

15.042

15.043

15.044

152 153

154

155

156 157

158 159

160 161

[1925] AC 578. The Chief Executive created new positions and appointed nine new political assistants to assist the under secretaries on 22 May 2008 but initially refused to disclose the remuneration packages for the appointees who were employed on non-civil service terms. It was later revealed that the remuneration packages higher than comparable positions in the private sector. Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223. See also Carr v District Auditor for No.1 Audit District (1952) 50 LGR 538 where excessive payment was held to be lawful as the decision maker had objectively reasonable grounds; Pickwell v Camden London Borough Council (1982) 80 LGR 798 where the council could advance salaries in excess of national levels as it had considered relevant considerations; Ratcliffe v North Yorkshire County Council [1995] IRLR 439 where the House of Lords held that market forces was no defence when the effect of the councils decision to re female employees and re-hire them on less favourable terms was sexual discrimination. A suspension or deduction of pay is a summary administrative procedure that does not arise incidental to proceedings related to discipline or investigation of misconduct. Interdiction which relates to such proceedings is discussed in para 15.073 below. CSR 609(1)(3), allowances for daily rates are also not payable on absences of leave. Dened in CSR 401 as the usual duties of the ofce in which he is engaged and any other duties which his Head of Department (in respect of work for the ofcers own department) or the Secretary for the Civil Service (in respect of work for another department or organi[s]ation) may call upon him to perform. CSR 610(1)(2). See CSR 611 which also provides that the ofcer is however still able to receive housing benets during such trade disputes. See also fn 9, Lam Yuk Ming where in an industrial action, civil servants who worked to rule were subsequently suspended by the Secretary for Civil Service. The Court of Appeal upheld the legality of implying CSR 611 onto those members who were appointed to established ofces prior to the introduction of CSR 611. Prior to 1 July 1997, the validity of CSR 611 pursuant to art.XVI of the Letters Patent enabled the government to dismiss ofce holders if he was satised that there was sufcient cause. EO s.32(2) allows deductions in respect of absences from work. [1976] HKLR 609.

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GOVERNMENT EMPLOYMENT CONTRACTS

the Crown was not entitled in the absence of express terms, to reduce the salary of its ofcers without having to consider the effect of Civil Service Regulation 610. In the present form, Civil Service Regulation 610 provides expressly that salaries are not reduced, but deducted from the month in which the refusal or omission to perform the usual duties occur.162 Recently, it was held in Cooper v Isle of Wight College163 that the correct test to ascertain the legality of any deduction from pay due to part performance was to rst ask whether the employee is able to sue for wages withheld rather than focus on what the overall losses to the employer were by reason of partial non-performance. 15.045 Withholding of pay against part-performance of usual duties. Where employees have resorted to part-performance of their usual duties (as opposed to not working for certain days), the Court of Appeal in England has held that such part-performance is by itself a repudiatory breach of contract and an employer is entitled to decline to accept the proffered partial performance and will be able to withhold such pay as appropriate.164 It follows that if the Government makes it clear that it would not accept part performance of its public ofcers usual duties, CSR 610 in its present form ensures that ofcers will not be entitled to receive payment for any part performance of their usual duties. (iv) Welfare and benets 15.046 Claimable expenses. Aside from salaried pay, public ofcers may claim various expenses and allowances incurred in the course of performing their duties or as of right. Expenses for entertainment165 and travelling166 require approval from heads of department and may only be incurred where such expenses are strictly required to meet operational requirements or in the public interest. Allowances as of right. Public ofcers appointed to pensionable establishment are provided with a variety of allowances as of right, such as education, medical and housing allowances. Due to civil service reforms, ofcers appointed prior to 1 June 2000 enjoy different terms to ofcers employed thereafter. Difculty arises in attempting to distinguish whether allowances are payment-in-kind or part of a salary especially since public ofcers are not subject to the EO. Allowances such as education and housing benets provided in the CSR expressly state that such benets are not provided as a contractual right but are instead contingent upon the other spouse not receiving a similar benet by their employer. Such benets are tailored to ensure that public ofcers are provided with a comparable livelihood with private sector employees but not at the expense of the public purse. Denition of salary or wages should not be construed narrowly. While there is no direct case law concerning the denition of salary or wages for public ofcers, the Hong Kong courts in corresponding EO cases have declined to construe such

15.047

15.048

162

163 164 165 166

Miles v Wakeeld MDC [1987] AC 539, where the House of Lords held that a superintendent registrar was not a servant of a local authority but the holder of an ofce and his position was similar to that of an employee and his salary could be deducted when he failed to do part of his work. [2008] IRLR 124. Wiluszynski v Tower Hamlets LBC [1989] ICR 493. CSR 750754. CSR 710712.

GOVERNMENT EMPLOYEES

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denitions narrowly. In Mmaama v City University of Hong Kong,167 an academic was dismissed with three months notice without forfeiture of benets. The Court of First Instance held that upon the true construction of the relevant provisions or by necessary implication, the term salary or wages cannot be construed narrowly. In so nding, the court held that vacation leave earned but not used, baggage and travelling allowances and educational allowances were wages for the purpose of the EO. On the facts, as the employer university concerned was also the landlord owner of the academics housing, it was not part of the academics salary as the pleadings claimed for the value of the accommodation. Private tenancy allowance scheme and duty to declare nancial interest. In recent years, there has been a rise in reported cases whereby public ofcers have been found abusing the housing allowance scheme in a variety of ways. Under the Private Tenancy Allowance scheme, an applicant must declare that the property being leased is not owned by any member of the applicant or their spouses family and that they have no nancial interest in it.168 The meaning of nancial interest. It has been held that the term nancial interest is to be given a wide and ordinary meaning169 and that nancial interest included benecial or equitable interest.170 In HKSAR v Leung Yat Ming,171 the Court of Appeal held that the corporate veil is no defence to a charge of using false documentation with intent to deceive a principal contrary to s.9(3) of the Prevention of Bribery Ordinance. In that case, a husband and wife who were employed by a university and had applied for private tenancy allowance were found to have used corporate vehicles to buy and sub-lease property to themselves in an attempt to subvert the universitys scheme. In HKSAR v Szeto Lok Ki,172 where the spouse of the public ofcer in question was found to be the owner of the property leased in question, the defendants appealed on the grounds that the spouse had in fact divested herself of all legal and equitable interest in the property by way of gift to her cousins. The Court of Appeal rejected those submissions, nding that as a matter of law a resulting trust arose and the relationship between the spouse and her cousins is not one that gives rise to any presumption of a gift in their favour in any event. Duty to report changes in nancial interest. The housing allowance scheme under the CSR also requires the beneting ofcer to report any change in the lease conditions.173 It has been held that not reporting reductions in rent payments and continuing to receive the full amount of the original housing allowance is a crime of deception and theft.174 15.049

15.050

15.051

167 168 169 170 171 172

173 174

(unrep., HCAL 67/2006, [2006] HKEC 1705). CSR 852(5). Hau Kam Chor v HKSAR (unrep., FAMC 15/2001, [2001] HKEC 874) . Sin Law Yuk Lin Agnes v HKSAR (unrep., CACC 17/2001, [2002] HKEC 622), per Stock JA at para 124. [1999] HKLRD 402. See also Sin Law Yuk Lin Agnes v HKSAR (unrep., CACC 17/2001, [2002] HKEC 622) . (unrep., CACC 191/2003, [2005] HKEC 329). See also Pettitt v Pettitt [1970] AC 777 where it was observed by Lord Diplock that A presumption of fact is no more than a consensus of judicial opinion disclosed by reported cases as to the most likely inference of fact to be drawn in the absence of any evidence to the contrary. CSR 853. HKSAR v Luk Chung Yee (unrep., HCMA 1170/2002, [2003] HKEC 250) where the defendant was charged and convicted pursuant to Theft Ordinance (Cap.210) s.18D for procuring an entry in a bank record by deception.

668

GOVERNMENT EMPLOYMENT CONTRACTS

15.052

Compensation for death or injury. The CSR distinguishes between ofcers who are appointed to established ofces which attract pension benets and those appointed on new terms. For ofcers appointed to established ofces who are injured or die discharging their duties, they (or their surviving dependents) may opt to receive statutory compensation under the ECO175 or receive benets under the relevant pensions legislation.176 In addition, if such ofcers are incapacitated or die on account of a duty related injury, pension benets will immediately accrue and be granted.177 For public ofcers on new terms who suffer injury or die in the course of discharging their duties, they or their surviving dependents may opt to receive statutory compensation under the ECO and benets under the relevant pensions legislation but only insofar as specied in their contracts of appointment.178 They or their surviving dependents are eligible for benets accrued under the relevant mandatory provision fund schemes. For those who suffer death or injury outside their duties, they are eligible for their pension benets or benets accrued under the mandatory provident fund scheme.179 In the course of employment. When a public ofcer happens upon an accident, the mere fact that the accident occurs outside of Hong Kong will not preclude a claim for compensation if the ofcer was performing a duty that was in the course of his or her employment. The courts will instead consider whether the accident was caused in the course of performing a duty. In Ma Kit Ching Veronica v A-G,180 the court held that an ICAC ofcer who passed away during an overseas tour of duty whilst staying overnight in non-compulsory accommodation did not die in the course of her employment despite the fact that she was overseas for the purpose of her employment. The court held that resting was not an incident of work in the course of her employment. In Chan Man Lap v Secretary for Justice, the court held that a member of the disciplined services is in the course of employment if he was liable for standby. The ofcer in question was travelling in his own personal vehicle and suffered injuries in an accident on his return from dinner at the correctional services canteen.181 Medical board assessment. If an ofcer is injured but recovers from such an injury, he can request the convening of a medical board to assess his or her suitability to continue employment.182 If the medical board is of the view that the ofcer is no longer suitable for that ofce or suffers from such disability to render such an ofcer unsuitable for further employment, the Government as employer owes a duty to make reasonable accommodation or transfer the ofcer to suitable employment. The ofcer has the option to elect to retire and it has been held that such an election does not preclude the

15.053

15.054

175 176

177 178 179 180 181

182

Cap.282. Pensions Ordinance (Cap.89) for civil servants appointed prior to June 2000 and Pension Benets Ordinance (Cap.99) for ofcers under the new pension scheme. See also CSR 792(1). See CSR Annex 2.2: Guide to Pensions, Annual Allowances and Gratuities. CSR 792(3). CSR 792(4). Ma Kit Ching Veronica v AG (unrep., DCEC 122/1982, 18 Apr 1983). (unrep., DCEC 261/1998, 29 Oct 2001) where Deputy Judge Carlson expressly held that the disciplined forces were distinguishable from commercial enterprises where a meal break is prima facie considered as the employees own time rather than his employers time; See also Sir WG Armstrong Whitworth & Co Ltd v Redford [1920] AC 757. CSR 940.

GOVERNMENT EMPLOYEES

669

court awarding loss of future income and earnings in personal injuries proceedings.183 Further, the authorities suggest that any loss of earnings cannot be mitigated by mere speculation.184 (v) Working time and leave Hours of work. Until recently, a standard working week was 44 hours of duty in a 5-day work week, or 45 hours of duty in a six-day work week.185 The Government has now implemented a ve-day work week for most of its workforce save and except for positions which require longer work-days due to operational requirements,186 notwithstanding the conditioned hours per week are not reduced. The conditioned hours for members of the disciplinary forces and the immigration service are determined by operational requirements.187 Standby and overtime. Regular overtime or standby allowances form part of the public ofcers salaries for the purpose of tax and personal injury proceedings.188 As such, overstating overtime or standby is a serious offence and is punishable by compulsory dismissal.189 Public servants who perform ofcial overtime work will be remunerated according to the nature of their work. Shift duty attracts a higher allowance than that of standby allowance and on-call duty attracts no allowance unless the ofcer in question is actually required to report for duty.190 Further according to the guidelines,191 overtime work may only be undertaken when it is strictly unavoidable. Where overtime work is granted, overtime allowance should only be granted when time off in lieu is impractical, and overtime should not become a standard regularised pattern of work. Denition of Work for purpose of overtime. Overtime work can be divided into two categories. The rst category is dened by the CSR as work and attracts allowance or time off in lieu. Shift duty, standby duties and when an ofcer is recalled when on call falls into this rst category. The second category has been subsequently dened as a duty ancillary to an ofcers normal function which may attract allowance 15.055

15.056

15.057

183

184 185 186 187 188

189

190 191

Chun Yat Nam v AG [1995] 1 HKLR 390, a police ofcer in the SDU tactical unit suffered a life threatening injury in the course of discharging his duty. Pursuant to his recovery, he made an application to have his medical status re-assessed pursuant to CSR 940. The medical board convening found that he was unable to carry on the principal duties of a police ofcer whereby he elected to retire and was granted an invalid pension. The Government argued on appeal that having elected to retire; the ofcer in question had failed to mitigate his loss for his loss of earnings as he was re-assigned to perform clerical work until he was of retirement age. The Court of Appeal rejected such an approach and held that the ofcer was merely being paid in advance the price of the salary and benets the ofcer would otherwise have earned without realistically contributing to the police force for the remainder of his service. Lau Li Wing v Secretary for Justice (unrep., HCPI 481/1996, [1999] HKEC 593). CSR 540(a)(b). CSR 540(e). CSR 544. Chan Sze Ki v Department of Justice [2006] 3 HKLRD 413; Liu Chun Kow v Lee Sau Wing (unrep., HCPI 399/2001, 15 Feb 2007). Tsang Kwok Wing v Secretary for Justice (unrep., HCMP 3827/1996, [1997] HKLY 182) where the applicant was dismissed for falsifying entries in an attendance book on 60 occasions and the court criticised the absence of a formal system to ensure proper record keeping. CSR Annex 4.2. CSB Circular No.10/98.

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GOVERNMENT EMPLOYMENT CONTRACTS

or time off in lieu if an ofcer is required to be at his place of work outside conditioned hours. It is now settled that on-call duties fall within this second category. 15.058 No substantive distinction between stand-by and on-call. In Shau Lin Chi v Secretary for Justice,192 it was held that a correctional services ofcer who had to stay in the barracks of the High Island Detention Centre while overnight on call beyond his conditioned hours was working overtime and therefore entitled to claim off-in-lieu. In the course of arguments, the Government conceded that the barracks was a place of work. Findlay J held that CSR 669 (now CSR 678) contemplated that an ofcer on-call has freedom not enjoyed by an ofcer on standby. Because the plaintiff was required to remain at a xed location and did not enjoy freedom of movement, it was held that he did not fall within the on call status and was therefore working and entitled to time off in lieu. The Court of Final Appeal revisited the issue in Cheng Ho Kee v Secretary for Justice193 and without deciding on the distinction between stand-by and on-call held that Correctional Service Ofcers concerned were not at their place of work when performing overnight on-call duties and thus not entitled to overtime allowance.194 The Court of Final Appeal held that the words place of work are words of limitation and it is not sufcient that the ofcer is required to stand by; he must stand by at his place of work. Whether a place of work is a place is a question of fact. In Cheng Ho Kee, although the regulations required the plaintiffs to reside within the vicinity of the prison and that residential premises were provided by the Government, such residential premises with recreational facilities could not be classied as a place of work. Further, the Court of Final Appeal upheld the Court of Appeals ruling in Shau Lin Chi195 in the context that another xed location cannot include the ofcers place of work.196 Therefore, CSR 678 construed properly does not confer any implied contractual right to a public ofcer to choose his location to be on call. Instead, it is not the ofcer but the Government which can specify the option whether to be on call at home, on call at another xed location or on call through the medium of a paging device.

192 193

194

195 196

[1998] 4 HKC 562. [2006] 4 HKLRD 782, (unrep., CACV 54/2004, [2005] HKEC 1759); (unrep., HCA 16883/1999, [2004] HKEC 167); see also Sindicato de Medicos de Asistencia Publica (SIMAP) v Conselleria de Sanidad y Consumo de al Generalidad Valenciana [2001] ICR 1116 , the European Court of Justice in a judgment concerning the status of on call time of doctors employed in primary health care teams held that on call time would only be working time when a worker is required to be at his place of work. When a worker is permitted to be away from workplace when on call and accordingly free to pursue leisure activities, on-call time is not working time. Under the previous CSR 668 (now CSR 677), where an eligible ofcer is required to stand-by at his place of work beyond his conditioned hours, he may be paid a reduced overtime allowance. In contrast, under CSR 669 (now CSR 678) where the ofcer is required to be on call beyond his conditioned hours at, say a xed location, so that he is continuously and immediately available to report for duty if required, the period in question is not regarded as overtime and is not subject to any recompense. (unrep., CACV 54/2004, [2005] HKEC 1759). The Court of Final Appeal also overruled Findlay Js decision that the performance of overnight on call constituted work for the purposes of the overtime regulation. An ofcer performing overnight on call would not be working. It is only when required for duty that he would commence work. See also Leung Kam Keung v Secretary for Justice (unrep., HCMP 4920/2002, [2004] HKEC 1313).

GOVERNMENT EMPLOYEES

671

Days rostered on-call cannot qualify as a rest day. In Leung Ka Lau v Hospital Authority,197 the Court of Final Appeal held that doctors who were rostered on-call on rest days were entitled to time-off in lieu and in absence of time-off in lieu, damages and not merely nominal damages. The Court of Final Appeal overruling the Court of Appeal on this point held that rostering on-call required doctors to comply with employment obligations whether or not the doctors in question were required to treat patients. Employment outside Government generally not allowed. During working hours, public ofcers are not normally allowed to work outside or to supplement their income by outside work.198 For public ofcers with professional qualications, they may undertake paid outside work in their profession by way of private practice or as a paid employee where it is in the public interest to do so and with the approval of the Head of Department. If the work is to be done within ofce hours, the Government has a right to part of the honorarium paid to such ofcers.199 Outside of working hours, public ofcers must obtain permission from the Head of Department before commencing work outside the Government. The decision maker must consider whether the work will impair the ofcers efciency, whether the income is more than a mere supplement, whether the nature of the work conicts with the ofcers duty and responsibility to the Government, whether the work is a source of embarrassment to the Government and whether such work is in breach of the apolitical status of the civil service.200 Failure to comply with the regulations to seek approval for outside work is a ground of compulsory dismissal.201 CSR provides comprehensive scheme for leave. Leave can be broadly classied into two groups; the rst being those that are earned according to terms of appointment of the ofcers such as vacation leave, annual leave, casual leave, basic leave and overseas addition leave. The second being those that are granted under special circumstances, namely maternity leave, sick leave, study leave and unpaid leave. The CSR provide a comprehensive scheme for leave matters as opposed to the EO which refers to a more general scheme.202 (vi) Trade unions Right to trade union membership a constitutional right. Article 27 of the Basic Law provides expressly that Hong Kong residents shall have the right and freedom to form and join trade unions, and to strike. The right to form and join trade unions is also guaranteed under art.18 of the Hong Kong Bill of Rights. In respect of international labour conventions, China has declared the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No.87) applicable to Hong Kong with

15.059

15.060

15.061

15.062

197 198 199 200 201 202

Fn 45. See also (unrep., CACV 57/2007, [2008] HKEC 111) and (unrep., HCA 1924/2002, [2006] HKEC 399). CSR 550 (a)(f). CSR 550 (g)(j). CSR 551. Wong Wai Tak v Secretary for Justice (unrep., CACV 611/2001, [2001] HKEC 847). An example is maternity leave which is dealt with under CSR 12971298 and includes absence from work due to miscarriages, ante-natal checkups, post connement medical treatment as separate sub-categories and are not counted as sick leave.

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GOVERNMENT EMPLOYMENT CONTRACTS

modications.203 The Right to Organise and Collective Bargaining Convention, 1949 (No.98) as well as the Labour Relations (Public Service) Convention, 1978 (No.151) are applicable without modications. It follows that membership of trade unions by civil servants are not only permitted but is recognised as a constitutional right.204 Police Ofcers are statutorily prohibited from joining trade unions which are not composed of only police ofcers by virtue of s.8 of the Police Force Ordinance.205 15.063 Public ofcers permitted to partake in industrial action. Pursuant to international law and constitutional obligations, all public ofcers employed are permitted to take industrial action for the purpose of resolving employment-related disputes as long as the industrial action does not threaten the provision of essential services.206 In Re Hong Kong Union of Post Ofce Employees,207 various post ofce unions representing around 2000 public ofcers threatened industrial action over the length of the work-week, the salary scale and promotion prospects which had been in issue for over 10 years. The Post Master notied the unions and warned that their actions may invite the imposition of sanctions under CSR and Art.XVI of the Letters Patent. Article XVI of the Letters Patent stated that the Governor may dismiss, suspend from the exercise of his ofce any person holding any public ofce within the Colony [and] may take such other disciplinary action as may seem to him desirable. The International Labour Organisations Administrative Tribunal held that the letter amounted to a threat and intimidation in violation of art.8 of Convention No.151. The Tribunal rejected the Governments submissions that the disruption of postal service could be said to constitute a threat to essential services in the strict sense of the term. By threatening retaliatory measures such as dismissal or suspension against workers who threatened to sit-in and protect, the Government had breached the postal workers legitimate economic and social interests and their right of association. Disciplinary action or right of employer to withhold pay not an infringement of workers economic and constitutional rights per se. The withholding of pay or suspension from duties pending industrial action does not constitute an unlawful threat against the freedom of association and right to strike per se. The court may also consider whether the intention of the suspension was administrative or punitive. In Lam Yuk Ming v A-G,208 the Court of Appeal upheld the Governments decision to withhold payment as a matter of contract as opposed to discipline. The case concerned a dispute between the Dispensers Staff Association which represented the interest of pharmaceutical dispensers in the public service and the Government over-grading and pay structure. The association advised its members to work to rule and go slow.

15.064

203

204

205

206 207 208

See LegCo Panel on Manpower Meeting, 3 Mar 1999, where it was stated that modications in respect of Convention No. 87 cover the qualications of trade union ofcers and restrictions on the use of trade union funds for political purposes. The right to join a trade union or to take industrial action is not absolute. Article 18(2) of the HKBORO provides that restrictions may be placed on the rights insofar as they are prescribed by law and necessary in the interest of inter alia, a democratic society, national security, public safety and public order. Cap.232. See also Road Trafc Ordinance (Cap.374) s.59(6) repealed in 1995 which also provided that trafc wardens required the consent of the Commissioner of Police before joining a trade union. The consent of the Commissioner of Police was not a necessary restriction that fell within art.18(2) of the HKBORO. Article 8 of Convention No.151. ILO, Report No. 277, Case 1553 (Vol. LXXIV , 1991, Series B, No.1). Fn 9, Lam Yuk Ming.

TERMINATION AND DISMISSAL

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The threatened action took place and members refused to perform part of their duties. Those members were suspended from duty pursuant to CSR 611 which provided the Government with powers to suspend public ofcers involved in trade disputes who refuse or omit to perform their usual duties without pay. Without considering the legality of the suspension as a violation of art.8 Convention No.151, the Court of Appeal held that CSR 611 was applicable towards the striking members. Lam Yuk Ming must however be understood in context as a decision of a time before the promulgation of the Bill of Rights and the Basic Law. Furthermore, the central issue before the courts in Lam Yuk Ming was one of contract namely whether the Government was capable on unilaterally changing the terms of such a contract if it exists. Nonetheless, on the facts of Lam, suspending the public ofcers who participated in that industrial action today would likely to be seen as a disproportionate restriction against their freedom to associate. Further, CSR 610 has been modied to provide that any absence from the place of work or failure perform or omission of usual duties arising from a trade dispute may result in a deduction from the public ofcers wages in proportion to the work not done without necessitating the suspension of such ofcers.209

3. TERMINATION AND DISMISSAL


Mutually enforceable rights between Government and public ofcers. The CSR confers contractual rights for both the Government and the public ofcers themselves to terminate the contract of employment through giving due notice or salary in lieu of notice. Where public ofcers commit a breach of regulations or bring the government service into disrepute, such ofcers are liable for disciplinary action or dismissal with or without forfeiture. A public ofcer may also be dismissed on account of the abolition of his position or reorganisation of the civil service changing the establishment requirements.210 (a) Termination (i) Procedure Notice to be given in writing. Notice of resignation or termination should be given in writing and it becomes effective on the date the public ofcer gives or receives such notice.211 Ofcers on probation need only provide one-month notice or one-month pay in lieu of notice unless otherwise provided in their contract. Any resignation by 15.066 15.065

209 210

211

Aug 2006. CSR 611 still provides that an ofcer may be suspended from duty without pay. But as regards an ofcer made redundant in this manner, the Government is contractually bound to use reasonable endeavours to nd him suitable alternative employment in the Civil Service pursuant to CSR 383. Further the Government has a policy of adopting a last in, rst out policy in that those in service longest will have priority in terms of re-appointment. See CSR Annex 2.1. CSR 300(1) and 320. The general rule for notice or payment in lieu of notice is that an ofcer who resigns must give a minimum three calendar months notice in writing or by paying to the Government one month salary (or any other pensionable pay or allowance) in lieu of notice. The general rule may differ among different ofces such as the Police whose notice requirement is set out in the Police Force Ordinance (Cap.232).

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GOVERNMENT EMPLOYMENT CONTRACTS

letter should be addressed to the Permanent Secretary by way of registered post. The Permanent Secretary, [or] Head of Department may, in exceptional circumstances and at the request of a non-directorate ofcer, dispense with the normal period of notice or the payment in lieu of notice.212 Where it is in the public interest, a public ofcer who had previously given notice of resignation may have such notice withdrawn at the discretion and approval of the Secretary for Civil Service (for directorate ofcers) and the relevant Permanent Secretary or Head of Department.213 Once the resignation or termination is approved, the Director of Accounting Services and the Director of Audit must be notied.214 15.067 Invaliding by medical board. Where an ofcer is suspected to be unt to perform the duties of his ofce, a medical board must be convened at the behest of the ofcer or the Government to examine the ofcer before any further action may be taken.215 If the medical board is of the view that an ofcer is not t for appointment, the ofcer must be informed verbally and that he may have a copy of the medical board report.216 Grant of leave upon termination. Public ofcers who resign or have their service terminated are entitled to a grant of leave in special circumstances. An ofcer who resigns from service will be granted their earned leave up to the maximum allowed unless the Secretary for Civil Service is of the view that the resignation was prompted to avoid disciplinary proceedings.217 If the public ofcers appointment was terminated for reasons other than misconduct (e.g. termination of establishment), the ofcer will be granted leave subject to any potential encashment of excessive leave.218 On invaliding, a public ofcer will be granted sick leave under the CSR until he is notied in writing that his retirement on medical grounds has been approved. (ii) Disciplinary proceedings 15.069 Sources of law regulating disciplinary proceedings. The Public Service (Disciplinary) Regulation and the Public (Service) and the Public Service (Administration) Order govern the disciplinary proceedings for most public ofcers employed by the government. The disciplined forces have independent regulations and legislation which largely correspond with the civil service.219 Public ofcers cannot be dismissed without showing cause. The Chief Executive must show cause before dismissing any public ofcer.220 In Khan v AG of Hong Kong,221 the Court of Appeal held that because the Letters Patent required the Governor to show cause before he could dismiss a public ofcer, local legislation which purported to confer unfettered power to the Governor to summarily dismiss his employees were

15.068

15.070

212 213 214 215 216 217 218 219 220 221

E.g. for compassionate grounds. See CSR 320(2)(5). CSR 321. CSR 306(4). CSR Annex 2.3 and CSR 944. CSR 365. CSR 1106. CSR 1163. For example, the Police Force General Orders. Public Service (Administration) Order s.5. [1987] HKLR 250.

TERMINATION AND DISMISSAL

675

ultra vires. Further, before the commencement of any formal inquiry, public ofcers accused of misconduct must rst be given an opportunity to make representations to exculpate themselves.222 Inquiries to investigate alleged misconduct. The Chief Executive (or a properly delegated authority) may commence an inquiry if the alleged misconduct is deemed to be sufcient serious.223 Public Service (Administration) Order provides for two forms of inquiry. An inquiry may be carried out by a public ofcer senior to the ofcer subject to the inquiry, or by a committee consisting of two or more senior public ofcers.224 Accused public ofcers have a right to a disciplinary hearing. Public Service (Disciplinary) Regulation and the Public (Service) and the Public Service (Administration) Order provide for a procedure whereby an accused ofcer has the right to a disciplinary hearing. The inquiring ofcer or chairman of the inquiring committee or the inquiring ofcer shall request for the public ofcer under investigation to appear before the committee or ofcer to present his defence.225 Under s.8 of the Regulations, the accused ofcer is entitled to know the case against him, be afforded an opportunity to make his defence either orally or in writing and to call and question any witnesses.226 Although the CSR expressly states that an accused ofcer may not be assisted by a lawyer unless authorised by the Chief Executive, this clause may now be construed to be in breach of the Basic Law and the Bill of Rights.227 Further, the entire hearing is conducted on a fact nding basis and is not bound by rules of evidence nor is the inquiring committee or ofcer intended to perform a legaljudicial function.228 Interdiction distinct from suspension. Interdiction is a legally distinct concept from suspension in that the former is always used incidental to disciplinary proceedings or the investigation of conduct whereas the latter is merely a summary administrative procedure to withhold the pay in the event of a contractual dispute resulting in non or part-performance of duties.229 Interdiction and restriction to freedom of movement. The decision to interdict a public ofcer is a serious one. Formerly, a public ofcer who is placed under interdiction is liable to have his freedom of movement restricted. In Association of Expatriate Civil Servants v Chief Executive of HKSAR,230 the court held that the interdiction was not a procedure prescribed by law. Since the restriction on freedom of movement was protected by art.8(2) of the Bill of Rights and the restriction was not provided by law 15.071

15.072

15.073

15.074

222 223 224

225 226 227

228

229 230

Public Service (Disciplinary) Regulation reg.4. Public Service (Disciplinary) Regulation regs.5 and 6. Public Service (Administration) Order s.9 provides for misconduct that does not warrant dismissal or compulsory retirement, and s.10 provides for misconduct that warrants dismissal or compulsory retirement. Public Service (Disciplinary) Regulation reg.8(1). Public Service (Disciplinary) Regulation reg.8(2). Public Service (Disciplinary) Regulation reg.8(3). See Right to Legal Representation at paras 15.10115.104 below. Public Service (Disciplinary) Regulation reg.8(4)(5). See also Public Service (Disciplinary) Regulation Schedule Pt A and Pt B. It is further noted that the evidence of witnesses are not taken on oath, and there are no restrictions as to the types of questions which can be asked. Fn 9, Lam Yuk Ming para 50. [1998] 1 HKLRD 615. For considerations at leave stage, see (unrep., HCAL 90/1997, [1998] HKLRD (Yrbk) 420), (unrep., CACV 120/1998, [1998] HKEC 1003).

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GOVERNMENT EMPLOYMENT CONTRACTS

within the meaning of art.8(3) of the Bill of Rights, public ofcers were not bound by its terms. Subsequent to that decision, the relevant section has been repealed from the Public Service (Administration) Order. A similar restriction came under challenge in Lau Kwok Fai v Commissioner of Police where the court held that Police General Order 6-06 which required an interdicted police ofcer to provide 24 hours written notice of his intention to leave Hong Kong was not a disproportionate restriction so as to violate his freedom of movement.231 15.075 Withholding of salary pending interdiction. A public ofcer who is interdicted will have up to half of his salary withheld pending the completion of the inquiry or criminal proceedings against him. As such the decision to interdict may be made only if serious allegations of misconduct that warrant compulsory dismissal or retirement are raised, or that criminal proceedings have been or are likely to be instituted, or that an inquiry is being undertaken and it is against the public interest for the accused ofcer to exercise powers and functions on the ofce in the interim period.232 In Yeung Chung Ming v Commissioner of Police233 the applicant argued that the corresponding statutory provisions in the Police Force Ordinance on the withholding of pay during interdiction pending criminal proceedings implied that he was guilty and thereby breached his right to be presumed innocent. The Court of Final Appeal dismissing the challenge held that the withholding of any proportion of pay to an interdicted ofcer does not imply a view that the person charged was guilty. (b) Dismissal (i) Constitutional rights and dismissal of employees 15.076 Protection from unlawful dismissal. Employees of the Government or public bodies enjoy the same statutory protections as employees in the private sector as regards dismissal on the ground of sex234 and disabilities,235 family status and race discrimination. Security of tenure for judicial ofcers against peremptory termination is also built into the Basic Law.236 The CSR also provides a formal disciplinary procedure to ensure that disciplinary proceedings are accorded due procedure. Unlike the private sector where employer decisions are purely within the realm of private law and contract, the source and nature of decision-making powers by the Government as a public sector employer may give rise to administrative law considerations and engage the supervisory jurisdiction of the courts. In such cases, the Governments

231 232 233

234

235

236

(unrep., HCAL 95/2003, [2004] HKEC 1580). Public Service (Administration) Order s.13. (2008) 11 HKCFAR 513 where Bohkary PJ in his dissenting judgment held that withholding an ofcers pay during interdiction was not comfortable with the nature and purpose of the presumption of innocence. L v Equal Opportunities Commission (unrep., DCEO 1, 6/1999, [2002] HKEC 1390); Sit Ka Yin Priscilla v Equal Opportunities Commission (unrep., DCEO 11/1999, 23 Oct 2007). K v Secretary for Justice [2000] 3 HKLRD 777 discrimination against potential schizophrenia; M v Secretary for Justice [2009] 2 HKLRD 298 , dismissal from the Civil Service as an Administrative Ofcer for general anxiety disorder; X v Commonwealth of Australia (1999) 167 ALR 529 (HCA), dismissal from the army. Basic Law art.89; the Judicial Ofcers (Tenure of Ofce) Ordinance (Cap.433).

TERMINATION AND DISMISSAL

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decision as an employer must be consistent with principles of natural justice including rights enshrined in the Basic Law and Hong Kong Bill of Rights. Thus, the courts have quashed decisions made by the Government as an employer especially in light of the constitutional rights enshrined in the Basic Law and Bill of Rights.237 (ii) Common law remedies Common law. Most cases involving employment disputes in Hong Kong are brought now before the Labour Tribunal or the courts when seeking statutory compensation.238 However, other jurisdictions have seen a small rise in claims seeking common law remedies such as damages for breaches other than contractual arrears. Thus it has been held that actions may be brought for wrongful dismissal and for damages due to a failure by the employer to follow contractual disciplinary procedures with the measure of damages limited to the loss suffered by the employee due to such a failure.239 Further, where an employer has purported to act in contravention of contractual disciplinary procedures, an application for interlocutory injunction may be granted.240 While extremely rare, courts have granted specic performance of an employment contract.241 (iii) Public private divide Generally. Judicial review is only available where there is sufcient public element to invoke the supervisory jurisdiction of the court. It has therefore been held that public law remedies are only suitable when there has been a failure on the part of a public body in the exercise of a public right and not when the true nature of the dispute is purely private.242 In most employment cases, even where the employer is a statutory body or the government itself, judicial review is excluded when the dispute is founded upon the contractual relationship between employer and employee.243 Classifying government employment contracts. It has been suggested that the courts have adopted a four-fold classication to determine whether a contractual claim for unfair dismissal or disciplinary action raises public law issues. In McLaren v Home Ofce,244 Woolf LJ set out four broad categories where employment disputes often arise. Where claims are purely private. First, where an employee is employed on terms of contract and the construction of the contract is limited to the entirety of that contract only, disputes arising from the employment relationship are purely private law disputes. Thus enforcement of contractual claims is a private ordinary action for damages or a 15.078 15.077

15.079

15.080

237

238 239 240 241

242 243 244

Rowse v Secretary for Civil Service [2008] 5 HKLRD 217. See also Ridge v Baldwin [1964] AC 40; R v Wear Valley District Council Ex p Binks [1985] 2 All ER 699; Woolwich Equitable Building Society v Inland Revenue Commissioners (No. 2) [1993] AC 70 where the Government has been held accountable by courts on public law principles when making commercial decisions. Such as the District Court which has exclusive jurisdiction over discrimination-related cases. Boyo v Lambeth LBC [1994] ICR 727; Gunton v Richmond-upon-Thames LBC [1981] Ch 448. Jones v Lee [1980] ICR 310; Wishart v National Association of Citizens Advice Bureaux [1990] ICR 794. Powell v Brent LBC [1988] ICR 176; cf Wishart v National Association of Citizens Advice Bureaux [1990] ICR 794 where the court held that specic performance will only be ordered if there was no issue as to trust and condence between the employer and employee. Davy v Spelthorne Borough Council [1984] AC 262. R v Derbyshire County Council Ex p Noble [1990] IRLR 332. McClaren v Home Ofce [1990] ICR 824 and Clive Lewis, Judicial Review Remedies, 3rd edn, (Sweet and Maxwell, 2004) at 2.145.

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declaration or injunction.245 Where the dispute arises from termination (as opposed to the procedure of termination),246 or not exercising a power to promote or appoint the employee, the dispute will also be treated as a purely private law dispute.247 The courts will be slow to imply obligations of public law upon essentially private law disputes.248 15.081 Where contractual powers are regulated by legislation. The second class of claims is where an employee in a contractual relationship with the government or public body will be able to seek judicial review. Where the terms of employment are subject to a code of discipline deriving from statute,249 or where contractual powers are regulated in part by statute,250 an employee of the government or a public body may, in certain circumstances, challenge a decision to dismiss or punish251 him. An example is where the disciplinary proceedings under s.10 of the Administration Order were considered in the case Rowse v Secretary for Justice.252 The Court of First Instance found that despite the informality of the inquiry committee such as an absence of evidential rules, the nature of the hearing, the source of powers of the hearing and the ruinous effect on a defendant to such proceedings if the inquiry committee made adverse ndings against the public ofcer in question, required the Courts to intervene to ensure when fairness and due procedure of such proceedings are questioned.253

245 246

247

248 249

250

251

252 253

R v East Berkshire Area Health Authority Ex p Walsh [1984] 3 WLR 818. R v Derby County Council Ex p Noble [1990] ICR 808 where it was held that termination of the appointment of a police surgeon was private law only. R v Secretary of State for the Home Department, Ex p Moore, [1994] COD 67. See also Cheng Chun Ngai Daniel v Hospital Authority (unrep., HCAL 202/2002, [2004] HKEC 1375) where the High Court in Hong Kong dismissed the submissions that the dismissal of an audiologist in the manner and reason by the Hospital Authority would deny the applicant the right to be employed in his chosen profession, given the very limited employment opportunities for audiologists in Hong Kong. Hartmann J held that it was a purely private issue concerning no public law principles; Fung Yiu Bun v Commissioner of Police [2002] 4 HKC 15 (termination of contract after poor performance during probation period of promotion as an inspector). Chan Tak Keung v Commissioner of Police (unrep., HCAL 315/2000, [2002] HKEC 880) (non-appointment to the rank of Sergeant). R v Derby County Council Ex p. Noble [1990] ICR 808, per Lord Woolf. R v Secretary of State for the Home Department, Ex p Benwell [1985] QB 554 (applicant appointed by the Home Secretary to the prison service as a person holding the ofce of constable). Cf R v East Berkshire Health Authority, Ex p Walsh [1985] QB 152; see Home Ofce v Robinson [1982] ICR 31. Cf Fraser v The Chief Executive of the HKSAR [2000] 3 HKLRD 492 (court held that a non-renewal of a contract is not a dismissal even if not renewed under the Police (Disciplinary) Regulations. As no disciplinary proceedings were involved, it was a private matter and not within the jurisdiction of the court on a judicial review). Leung Chak Sang v Lingnan University [2001] 2 HKC 435, where it was held that a tribunal set up pursuant to statutory power is susceptible to review as opposed to one set up by private consensual arrangement. As to when a public authoritys dismissal of employee may be a public matter, see Chik Po Yee v Vocational Training Council [2007] HKEC 746. Ridge v Baldwin [1964] AC 40; Vine v National Dock Labour Board [1957] AC 488; Malloch v Aberdeen Corp [1971] 1 WLR 1578; R v Trent Regional Health Authority, Ex p Jones (unrep., Queens Bench Division, 17 June 1986); R v Hertfordshire County Council, Ex p National Union of Public Employees [1985] IRLR 258. But note Tong Pon Wah v Hong Kong Society of Accountants [1998] 2 HKLRD 427, at 443 where it was held that It must be recognised that over-legalising informal disciplinary proceedings is undesirable. Most disciplinary tribunals are presided over by men or women with no legal qualications. [2008] 5 HKLRD 217. Yeung Chung Ming v Commissioner of Police (2008) 11 HKCFAR 513; Lam Chi Pan v Commissioner of Police (unrep., HCAL 93/2005, [2008] HKEC 905). Cf Lau Chi Fai v Secretary for Justice [1999] 2 HKLRD 494, 496, per Keith JA where he held that as a matter of privity of contract regarding teachers employment in government aided schools, the undertaking given by the school management committee in terms of s.57 Code of Aid did not become a binding obligation in the principals contract of employment. See also Chan Chi Loi v Cheng For (unrep., CACV 243/2003, [2004] HKEC 1575).

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Where a policy decision affects all public ofcers. The third identiable class of claims is where the government or a public body makes a policy decision in relation to all staff generally.254 In the case Secretary for Justice v Lau Kwok Fai255 the civil servants of Hong Kong challenged the decision to legislate a pay reduction256 for civil servants across the board on the basis that such a policy was in breach of art.100 of the Basic Law which confers civil servants a right to enjoy conditions of service no less favourable than before 1 July 1997, and a breach of art.103 in that there was no survey conducted to ensure the pay reduction was on par with the private sector. The Court of Final Appeal held that the legislation was constitutional and not in breach of the Basic Law. The ordinance therefore altered the pay to which public ofcers would otherwise have been entitled under their contracts of service by adjusting the relevant pay scales and, to the extent that was necessary, vary those contracts.257 Where the decisions require procedural fairness. The fourth identiable class of claims concern situations where although disciplinary procedures are purely private between the public authority employer and the employee and thus the process of judicial review not normally available, the existence of such disciplinary proceedings may indicate that the employee concerned is not limited to a claim for damages but can in appropriate circumstances seek declarations or injunctions to ensure proceedings are conducted fairly.258 Courts generally reluctant to intervene. Nonetheless, courts are generally unwilling to impose public law obligations on the government or public bodies to observe principles of public law in employment-related disputes.259 Attempts by employees in public sector in Hong Kong to establish rights based on public law principles have met with mixed success.260 A party seeking to enforce a private right which includes

15.082

15.083

15.084

254 255 256 257

258

259

260

Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374. (2005) 8 HKCFAR 304. King v AG of Barbados [1994] 1 WLR 1560. See para 52 of the judgment. But note that the Court of Appeals decision in [2004] 3 HKLRD 570 where the majority held that the effect of the ordinance to adjust the pay scale would frustrate the contract. The Court of Final Appeals judgment was conned to the constitutionality of the statutory provisions. It is suggested that the Court of Appeals decision on frustration of contract has not been overruled. Ridge v Baldwin [1964] AC 40; Law v National Greyhound Racing Club Ltd [1983] 1 WLR 1302; R v British Broadcasting Corp, Ex p Lavelle [1983] ICR 99. R v Lord Chancellors Department Ex p Nangle [1991] ICR 743. See also Cheung Chi Keung v Hospital Authority [2006] 2 HKLRD 46 where it was held that a contractual agreement referring to a statutory disciplinary proceeding was held to be a purely private matter; as long as the Hospital Authority terminated the contract of employment with notice as stipulated in its terms, there is no public scope involved for the Gunton principles to apply (termination for cause as opposed to termination by notice). The public body is able to act as if a private employer, capriciously if it wishes to, and such rights can be exercised by both parties, therefore negating unfairness. Cf Gunton v Richmond-upon-Thames, LBC [1981] 1 Ch 448; Shau Lin Chi v Secretary for Civil Service (unrep., HCAL 4/1999, [2000] HKEC 374) . Tong Pon Wah v Hong Kong Society of Accountants [1998] 2 HKLRD 427, at 443 where Liu JA held that over-legalising informal disciplinary proceedings is undesirable. Most disciplinary tribunals are presided over by men or women with no legal qualications[ ]these proceedings are often distressfully awed in the courts by a fault-nding expedition in which non-professional judges are clearly more vulnerable.

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elements of public law ought to pursue the claim through normal procedures of issuing a writ as opposed to judicial review proceedings.261 (c) Judicial review 15.085 Grounds for review. An application for judicial review may be made against the government to ensure that it carries out its public duties in a manner that is consistent with the law. In the context of employment law in Hong Kong, cases have been argued on three general grounds of review. First, where the Government as employer has acted illegally and contrary to the legal rights and duties of parties involved. Secondly, where the public body has acted irrationally whereby the decision made was so unreasonable that no reasonable decision maker would have arrived at that decision or that the decision maker had taken into account of irrelevant considerations in arriving to that decision.262 Thirdly, where there has been procedural impropriety, e.g. failure to act with procedural fairness, a breach of legitimate expectation.263 (i) Relief 15.086 Judicial review not available where remedy based on contractual principles sufces. The claim must be brought within O.53, Rules of the High Court264 and since the nature of judicial review proceedings are supervisory and invoke the discretionary jurisdiction of the court, judicial review is not generally available if a remedy based on contractual principles sufces.265 Further, it is settled law that the court in judicial review proceedings does not sit as an appeal court and that it is not the function of court so seized to substitute its opinions or ndings for the decision-making body.266 Forms of judicial review remedies. If a public ofcer is of the view that his or her grievance has a sufcient public element and proceeds with judicial review, the court has the power to quash the unlawful decision by an order of certiorari,267 declare the lawful construction of legislation or sub-legislation regulating the relationship between parties,268 or issue a mandamus or compel such parties to certain actions. 269 Normally, the courts consider it undesirable to grant mandamus orders because relationships have soured to the extent that it is no longer practical to order restoration to the

15.087

261

262

263 264 265 266 267 268 269

Roy v Kensington and Chelsea and Westminster Family Practitioner Committee 1992 1 AC 624; Davy v Spelthorne BC [1984] AC 262; Wandsworth LBC v Winder (No.1) [1985] AC 461. This is important as judicial review requires the applicant to apply for judicial review as soon as possible or within three months of the decision made. See Doyle v Northumbria Probation Committee [1991] 1 WLR 1340 where the court held that a genuine cause of action should not be defeated by a public law issue raised by the defence. See also In Fred Jackson v AG [1980] HKLR 323, where the Court of Appeal on a O.15 r.6 construction summons dismissed the application on the basis that such a declaration sought was purely advisory. Cf Malloch v Aberdeen Corp [1971] 1 WLR 1578 where the House of Lords upon construction of the statutory regime governing the appointment and dismissal of a Scottish school teacher employment held that a dismissal without due deliberation was improper and subject to judicial review. Fn 254, CCSU. Cap.4A. Cheung Chi Keung v Hospital Authority [2006] 2 HKLRD 46. Lam Che Wai v Director of Food and Environmental (unrep., HCAL 53/2003, [2003] HKEC 1483). Clive Lewis, Judicial Remedies in Public Law, 4th edn,(Sweet & Maxwell, 2004), 6.001. Ibid, 7.001. Ibid, 6.046.

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employment relationship. In Khan v AG (No.2),270 the court held that damages were the usual and appropriate remedy in private law damages cases and relief such as declarations will normally be refused. However on the facts of that case, where a public ofcer is dismissed, the court held that it would take into account the nature of the unlawful dismissal, its effect on the plaintiff, the manner in which the decision was taken, the nature of ofce held by the ofcer in question, the conduct of both parties, whether unaccountable delay was incurred in pursuing proceedings and the availability of alternative relief.271 It is highly unlikely for a court in judicial review proceedings to grant retrospective relief.272 (ii) Illegality Rules, regulations and legislation must not contravene superior legislation. Illegality in judicial review proceedings arises in a variety of forms. In Khan v A-G of Hong Kong,273 the Court of Appeal held that legislation purporting to give the Governor unfettered power to dismiss public ofcers contravened the Letters Patent. The same principle applies between legislation and sub-legislation; any provision in sub-legislation that goes beyond the totality of the legislative power which is conferred by the enabling statute is unlawful.274 Ultra vires and the unlawful use of lawful power. It is unlawful for a decision maker to use his lawful powers in an unlawful manner or in a manner that exceeds his jurisdiction. In Lam Siu Tai v Commissioner of Correctional Services,275 the Courts decided that upon the proper construction of the Prison Rules, the Commissioner did not have the power to increase the correctional service ofcers punishment above and beyond the jurisdiction of the superintendent who headed the initial disciplinary 15.088

15.089

270

271

272

273

274

275

(unrep., HCA A329/1980, [1989] HKLY 474). Cf Jill Spruce v The University of Hong Kong [1991] 2 HKLR 444; [1993] 2 HKLR 65 (PC), the court will look to the effect of its order to ascertain if a remedy is suitable as any remedy given is an exercise of discretionary power; granting a certiorari here would amount to specic performance of a contract and reinstate the appellant as a teacher when relationships have soured. See also R v Hertfordshire county council, Ex p. National Union of Public Employees [1985] IRLR 252 where the English Court of Appeal considered a case where shop steward who obtained an injunction against employers from barring him from their premises but was subsequently suspended then dismissed. The employers appealed and sought to quash the injunction. The court allowed the appeal and held that an injunction did not survive the suspension or termination of employment. An injunction that carried on post suspension would be in fact a grant of specic performance. Khan v AG (unrep., HCA A329/1980, [1989] HKLY 474) , in considering damages, the court will not consider damages for social discredit, depression, frustration and loss of reputation. Instead the calculation is based upon the amount for loss of ofce calculated from the time of dismissal until the time when the ofcer would have retired. Lam Che Wai v Director of Food and Environmental (unrep., HCAL 53/2003, [2003] HKEC 1483) where retrospective promotion was one of the relief sought. Fn 221, Khan, where the Court of Appeal also held that if the reason for dismissal unrelated to the conduct of the individual, e.g. as part of a compulsory termination of service, the police ofcer would have no right to a hearing but must be given reasons. If it was in relation to misconduct, natural justice may demand that he has a right to representation and to respond to allegations against him. This position is now reected in the CSR and the Public (Service) Administration Order. Pang Tak Kwai v Commissioner of Correctional Services (unrep., HCAL 1610/2000, [2000] HKEC 1298). However in (unrep., CACV 48/2001, [2001] HKEC 1139) , the Court of Appeal overruling the judge at First Instance held that Prison Rules 255B was intra vires but because decision maker did not have the relevant facts before making the decision, the decision to punish was nonetheless wrong. (unrep., HCAL 68/1999, [2000] HKLRD (Yrbk) 5, [1999] HKEC 681); (unrep., CACV 25/2000, [2000] HKEC 540) .

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enquiry, nor could the Commissioner refer the case to the Chief Executive as he was already the appellate body in question. 15.090 Failure to exercise powers unlawful. It is also unlawful for an authority that has powers but fails to exercise its powers. Therefore, in R v Secretary of State for Home Department Ex p Benwell 276 the court held that the Secretary of State had acted ultra vires when dismissing a prison ofcer, as his lawful power to do so was limited to circumstances set out in the disciplinary code which the relevant statutory instrument had imposed. Unlawful delegation prohibited. In Rowse277 an inquiry committee found that a public ofcer had failed to discharge his duties and was guilty of misconduct. The public ofcer then sought to appeal the ndings made against him to the Chief Executive under s.20 of the Public Service (Administration) Order whereby the Chief Executive delegated to the Chief Secretary the authority to determine the appeal. The Court held that while the Chief Executive may seek an advisory bodys advice on the matter, nothing in the Order implied that the power to determine appeals can or ought to be delegated and had therefore acted unlawfully. (iii) Irrationality 15.092 High standard of proof. The complaint of irrationality involves a high standard of proof. Further, taking into account the special trust and position of public ofcers, very few challenges have in fact succeeded before the courts in quashing decisions on the basis that they were Wednesbury unreasonable.278 It has also been held that on Wednesbury principles, the court can only interfere by way of judicial review if the decision was irrational or perverse.279 In Lam Che Wai v Director of Food and Environmental Hygiene280 it was held that the decision to dismiss a public ofcer for running large debts was not unreasonable, despite the fact that the debts were accrued by the ofcers estranged spouse who subsequently divorced him, because of the special trust and powers exercised by public ofcers. Even if the court is of the view that the evidential basis for the ndings were thin or that it would have come to a different conclusion, such decisions are not irrational or perverse.281 Relevant or irrelevant considerations. In Re Ngai Kin Wah,282 the court held that while the decision in question was not irrational or outrageous, the decision maker had excluded key evidence and materials relevant to the assessment. Where the misconduct was not so severe or of such a serious nature as to require severe sanctions such as

15.091

15.093

276

277 278 279 280 281 282

[1985] QB 554. See also Re Ngai Kin Wah (unrep., HCMP 2911/1985, [1986] HKLY 8) where the court held that a Commissioner of the Customs and Excise could not exercise his power to dismiss when acting in the capacity to review an appeal. The Commissioners remit was limited to that of the initial inquiry and the Commissioner could not exercise the powers he would have had as if he had heard and determined the charge in the initial inquiry. Fn 252, Rowse. Associated Provincial Picture Houses v Wednesbury Corp [1948] 1 KB 223. R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696 at 751D, per Lord Templeman. (unrep., HCAL 53/2004, [2003] HKEC 1483). Fn 252, Rowse. [1986] HKLY 8.

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compulsory retirement, it has been held that the prevalence of such misconduct within certain departments was a relevant consideration in deciding the level of punishment.283 Fettering of discretion. A decision maker must not fetter his discretion and blindly apply a policy of deterrence. In Pang Tak Kwai v Commissioner of Correctional Service, Cheung J (as he was) held that the rule against the fettering of discretion directs the attention to the attitude of the decision-maker who must be prepared to make an exception to that rule or to police in a deserving case.284 Disproportionate punishment. The authorities have also consistently stressed that it is for the disciplinary authorities to decide on the appropriate punishments for disciplinary offences and to decide what weight, if any, to be given to mitigations put forward.285 The line between a challenge on the severity of an award based on irrationality and failure to take into account relevant considerations is extremely narrow, and judicial review proceedings must not be used as avenues of appeal against the awards imposed.286 The courts will only intervene if the punishment is severe beyond any rational relationship to the seriousness of the offence and the situation of the offender.287 (iv) Procedural fairness Presumption of fairness. Generally, where a particular procedure is prescribed by statute or regulations and has been followed, but it is alleged that there has nonetheless been unfairness, the court must decide whether the statutory procedure is to be treated as comprehensive code, or whether it is necessary to supplement the prescribed procedure.288 A presumption that the prescribed procedure is a fair one may more readily be made where the instrument has the force of law or was expressly agreed between the government and the trade associations.289 Exercise of powers must be subject to rules of natural justice. The authorities suggest that the government must, in the exercise of its executive orders be subject to rules of natural justice such as procedural fairness. It has therefore been held that the Chief Executive cannot summarily dismiss a police ofcer without rst holding an 15.096 15.094

15.095

15.097

283

284 285 286

287 288 289

Tsui Ma Ching v An Investigation Committee Appointed Pursuant To Section 6 Of The Public Service (Discipline) Regulation And Section 10 Of The Public Service (Administration) Order 1997 (unrep., HCAL 20/2004, [2005] HKEC 141). See also Ng Wai Sang v Secretary for Justice (unrep., HCAL 7/1997, [1998] HKLRD (Yrbk) 30, 8 Dec 1997) where the court held that the decision was not irrational although the punishment was harsh. Extravagant expenditure is a serious offence for public ofcers and deterrence to seek others from taking on debt as such burdens may compromise their ability to carry out their public duty is in the public interest. The Court of Appeal (unrep., CACV 18/1998, [1998] HKLRD (Yrbk) 6, 29 July 1998) held that fairness in this circumstance required that the sentence should have been considered. (unrep., HCAL 1610/2000, [2000] HKEC 1298). Wong Wai Tak v Secretary for Justice (unrep., CACV 611/2001, [2001] HKEC 847). Chung Wing Yim v Commissioner of Police (unrep., HCAL 96/2003, [2004] HKEC 1572); (unrep., CACV 290/2005, [2006] HKEC 546). Au Yeung Kwok Hing v AG (unrep., CACV 205/1994, [1995] HKEC 216). Fn 252, Rowse. See also Right to be Heard, 15.099 below. Furnell v Whangarei High Schools Board [1973] AC 660 (PC); Maynard v Osmond [1977] QB 240; Khanum v Mid Glamorgan Area Health Authority [1979] ICR 40 at 46, See also R v Harrow London Borough Council, Ex p D [1989] 3 WLR 1239.

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inquiry.290 Further, in R (on the application of Dunbar) v Hampshire Fire & Rescue Service,291 the English High Court held that although re ghters were subject to terms in their employment contracts, these were superimposed by a statutory regulatory framework. When the issue concerned a question of whether the employer was acting lawfully and in accordance with statutory rights conferred upon employees, the courts cannot ignore public law elements when considering if a dismissal was lawful. A dismissal can only be lawful if carried out in strict compliance with the terms and procedure of the statutory provisions. 15.098 Commonsense approach. In Canada, the Supreme Court of Canada held that a police ofcer was entitled to fair treatment in his dismissal292 and fair treatment included the opportunity to be made aware of the case against him, and have his case presented to the decision maker.293 However, in Cabaj v Westminster City Council,294 the English Court of Appeal held that although the employing authority failed to observe its contractual disciplinary procedure, this was not necessarily sufcient to render the dismissal unfair. The matter complained of was that two as opposed to three members of the committee heard the complainants case. Right to be heard. While there is a constitutional guarantee for a fair trial or hearing in all criminal proceedings or civil suits,295 there is no common law right to be heard in the context of disciplinary proceedings nor does natural justice demand a right to be heard. Instead, the courts main concerns are whether the proceedings carried out were fair. In Jill Spruce v The University of Hong Kong,296 the Privy Council dismissed the appellants submissions that the Universitys council to refuse to grant an oral hearing for mitigation purposes constituted a breach of the rules of natural justice. On the facts of the case, the board held that the council had already been drawn to any mitigating circumstances in writing by the appellant and was held to have made every effort to treat the appellant with utmost fairness.297 Principles of fairness do not operate in a vacuum. Whether a right to an oral hearing arises, as opposed to a right to make written representations, will depend on the circumstances of the case.298 The reasons and purposes for requiring oral hearings and/or cross-examinations and, conversely, the prejudice suffered by reason of the absence of an oral hearing and/or an opportunity to cross-examine are important

15.099

15.100

290 291 292 293 294 295

296

297

298

Fn 221, Khan. [2004] ACD 38. Nicholson v Haldimand Norfolk Commisioners of Police (1978) [1979] 1 SCR 311 (SCC). Evershed v Ontario 5 DLR (4th) 340; Knight v Indian Head School Division No.19 [1990] 1 SCR 653 (SCC). [1996] IRLR 399. Lam Siu Po v Commissioner f Police [2009] 4 HKLRD 575 and art.10, Hong Kong Bill of Rights Ordinance (Cap.383). [1993] 2 HKLR 65, 72 (PC) where Lord Browne-Wilkinson held that there is no general principle that the rules of natural justice require an oral hearing, let alone an oral speech in mitigation. See also Board of Education v Rice [1911] AC 179 at 182, per Lord Loreburn LC. The opportunity may still have to be given even though the matter is being determined on the basis of written representations rather than an oral hearing. R v Secretary of State for the Home Department, Ex p Doody [1994] 1 AC 531 at 560, where Lord Mustill held that fairness will very often require that a person who may be adversely affected by the decision will have an opportunity to make representations on his own behalf either before the decision is taken with a view to producing a favourable result, or after it is taken with a view to procuring its modication.

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considerations in deciding whether an applicant has been deprived of a fair hearing on the ground that there is no oral hearing and/or no opportunity to cross-examine the witnesses.299 In situations were the allegations are serious, fairness will require a deciding body to take the initiative in inviting the interested parties to submit representations to it.300 Where an oral hearing was convened, not allowing the accused to cross-examine witnesses on the consistency of previous statements, or the adjudicators witnesses, was procedurally improper and a denial of natural justice.301 Ultimately, a fair hearing does not necessarily require an oral hearing; much less does it require that there should be an opportunity to cross-examine. Whether a particular procedure is fair will depend upon all the circumstances, including the nature of the applicants interest, the seriousness of the matter for him and the nature of any matters in dispute.302 No common law entitlement to legal representation for disciplinary proceedings. The longstanding view was, because of the informal nature of disciplinary proceedings and its purpose of fact nding as opposed to resolving questions of law, legal representation was not necessary in disciplinary proceedings against public ofcers.303 Section 8(3) of the Public Service (Disciplinary) Regulations expressly provide that an ofcer may not be assisted by another legally qualied ofcer. In Fraser v Mudge, Lord Denning MR held in the context of prison ofcers discipline that the rst consideration is that such cases be dealt with quickly and that legal representation would mean considerable discipline, and any hearing can be held fairly even without legal representation.304 His views somewhat shifted later in Maynard v Osmond305 but Lord Denning nonetheless held that legal representation for persons on disciplinary charges was not an entitlement as of right, but a matter of discretion. Developing a constitutional right to legal representation. With the new constitutional order in Hong Kong, the courts have now recognised a constitutional right to legal representation for all suits of law including both criminal and civil suits. While the courts have maintained that quasi-judicial tribunals are not courts in the context of the Basic Law, it is now settled that fairness may require an accused to have legal representation in disciplinary hearings. Section 8(3)(b) of the Public Service (Disciplinary) Regulations has therefore been interpreted to confer a discretion upon the Chief Executive to grant an accused ofcer legal representation.306 15.101

15.102

299 300

301 302 303 304 305 306

Lam Che Wai v Director of Food and Environmental (unrep., HCAL 53/2003, [2003] HKEC 1483). Chan Sik Pan v Wylams Services Ltd [2001] 4 HKCFAR 308, the Court of Final Appeal held that where a party had been denied the opportunity to be heard, a new trial will be ordered unless it is perfectly plain that exactly the same result will be reached even after a proper trial. Re Ngai Kin Wah (unrep., HCMP 2911/1985, [1986] HKLY 8). R (on the application of Vetterlein) v Hampshire County Council [2002] 1 P & CR 31. Re Fong Hin Wah [1985] HKLR 332. [1975] 1 WLR 1132 at 1133. [1977] 1 QB 240. Section 8(3)(b) provides that such other person as the Chief Executive may authorize. Fn 252, Rowse whereby Hartmann J (as he then was) construed the words such other person to include members of the legal profession.

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15.103

The legal position prior to Lam Siu Po v The Commissioner of Police. The constitutionality of s.8(3)(a) of the Public Service (Disciplinary) Regulations which prohibit legal representation was rst considered in the case Association of Expatriate Civil Servants v Chief Executive of HKSAR.307 The complaint arose on the basis that certain public ofcers were afforded legal representation (such as police ofcers of certain ranks and judicial ofcers) but not other ranks in contravention of art.21(c) of the Bill of Rights which provided for equal access to all public services in Hong Kong. While the court held that s.8(3)(a) of the Public Service (Disciplinary) Regulations did prohibit equal access, the prohibition was not unreasonable in the circumstances as there was a genuine need for preferential treatment, the treatment was rationally connected with the need to which justied it, and the preferential treatment was proportional to the need. Curiously, the learned judge in arriving at his ndings posited that the vast majority of public ofcers were treated equally (in being denied legal representation) and only a select few had such rights and this form of differential treatment did not mean that their right of access to the public service on general terms of equality had been restricted. With respect to the learned judge, this view may have been indirectly overruled in light of recent judgments. Right for legal representation for disciplinary proceedings ensures fairness. Prior to Lam Siu Po, the Court of Final Appeal in The Stock Exchange of Hong Kong Ltd v New World Development Co Ltd308 decided that there was no absolute right to legal representation before informal tribunals, this being a matter for the tribunal to decide as a matter of discretion and in accordance with principles of fairness and proportionality. The factors to be taken into account in deciding what fairness requires are not exhaustive but includes the seriousness of the allegations, the potential penalty, whether potential points of law are likely to arise, the capacity of the individual to present his own case, procedural difculties, whether undue delay will be caused and the need for fairness among the individuals concerned. The Court of Final Appeal further developed the principle of legal representation in the landmark case of Lam Siu Po v The Commissioner of Police309 where it held that legal representation was no longer viewed as something good to have for a select few when facing informal tribunals. Instead, members of the legal profession play an integral constitutional role to ensure fairness in all criminal proceedings and civil suits.310 Further the term suit at law in art.10 of the Bill of Rights which guarantees equality before the courts and a right to a fair and public hearing included all civil and criminal proceedings. What was fair was therefore a question of procedural fairness which includes a right, where circumstances ought to permit, to legal representation. The plaintiff in Lam Siu Po was a police ofcer who was compulsorily retired after a declared HK $600,000 in stock market losses in breach of police regulations. Police Regulations 9(11) provided that a defaulter may only be represented by other police

15.104

307 308 309 310

[1998] 1 HKLRD 615. (2006) 9 HKCFAR 234; [2006] 2 HKLRD 518, See also fn 252, Rowse. [2009] 4 HKLRD 575. Golder v United Kingdom (197980) 1 EHRR 524 at para 35 whereby the European Court of Human Rights held that in democratic societies, a fair hearing is a guaranteed right.

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ofcers or a police ofcer who is qualied as a barrister or solicitor but no practicing member of the legal profession. The Court of Appeal,311 applying Chan Keng Chau v Commissioner of Police312 held that procedural fairness was sufcient without legal representation as judicial review was available to ensure procedural regularity and in any event, public ofcers are more suitable than professional judges for determining whether one of their own members had breached discipline. The Court of Final Appeal rejected this approach.313 The blanket prohibitions compelled the disciplinary tribunal to deny fairness even if the circumstances call for fairness in the form of legal representation. The prohibitions (which were in the form of regulations and thus lawful as a matter of common law) would mean that any decision by the disciplinary tribunal could not be quashed on the basis of unfair refusal to legal representation. Failure to give reasons. Natural justice and fairness require, in certain circumstances, that reasons be given.314 Reasons are required not only in the decisions of tribunals, but also in the day-to-day administrative decisions of government departments and authorities.315 It has also been held that an administrator performing an administrative function is nonetheless duty bound to give reasons.316 It is also well established that reasons given must be intelligible and meet the substance of the arguments advanced.317 Most importantly, it has been held that any advice given to the decision maker must be made available to the accused ofcer to allow the ofcer an opportunity to see such advice and comment on it.318 The mere failure to provide reasons may on its own be insufcient to constitute unfairness. The reasons of administrative decision-makers are meant to be informative but not to be scrutinised upon over-zealous judicial review by seeking to discern if some inadequacy may be gleaned from the way they are expressed.319 Further, the failure to give reasons is not procedurally fatal and can be subsequently cured in appeal proceedings.320 15.105

311 312

313

314

315 316 317

318 319 320

[2008] 2 HKLRD 27. (Chan Keng Chau v Commissioner of Police) (unrep., HCMP 2824/2004, 29 Dec 2004). Bryan v United Kingdom (1995) 21 EHRR 342 (ECHR). Begum v Tower Hamlets LBC [2003] 2 AC 430; R (Wright) v Secretary of State for Health [2009] 1 AC 739, per Baroness Hale of Richmond, what amounts to full jurisdiction varies according to the nature of the decision being made. It does not always require access to a court or tribunal even for the determination of disputed issues of fact. Much depends upon the subject matter of the decision and the quality of the initial decision-making process. Judicial review may be adequate to supply the necessary access to a court, even if there is no jurisdiction to examine the factual merits of the case. de Smith, Woolf & Jowell, Principles of Judicial Review, Sweet & Maxwell (2007) at p 410 at para 7.087. See also fn 252, Rowse, where it was held by the court that Public Service (Administration) Order, s.20 did not impose a duty to give reasons but fairness in those circumstances required it. Tong Pon Wah v Hong Kong Society of Accountants [1998] 2 HKLRD 427 at 443A-B, Liu JA. Hong Leong Equipment SDN BHD v Liew Fook Chuan and Other Appeal [1996] 1 MLJ 481 (Msia). Oriental Daily Publisher Ltd v Commissioner for Television and Entertainment Licensing Authority [1998] 2 HKLRD 857 at 867I and 869GI. See fn 252, Rowse and Dato Tan Leong Min v Insider Dealing Tribunal [1998] 1 HKLRD 630. Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259, 272 (AU). Lam Che Wai v Director of Food and Environmental (unrep., HCAL 53/2003, [2003] HKEC 1483). See also Calvin v Carr [1980] 1 AC 574 at 592593, where Lord Wilberforce recognised that it was possible for procedural defects in the original decision-making process to be cured by the appeal procedure and it was for the court to decide whether, at the end of the day, there had been a fair result reached by fair methods.

688

GOVERNMENT EMPLOYMENT CONTRACTS

15.106

Actual and apparent bias. The test for both actual bias and apparent bias is now well settled.321 The court must be satised, having ascertained all the relevant circumstances, that those circumstances would lead a fair minded and informed observer to conclude that there was a real possibility that the tribunal was biased. In Rowse,322 the Court decided that there was apparent bias in that the same individual from the Department of Justice who advised the Government whether there was rst, a prima facie case against the applicant, secondly, advised on the draft charges and thirdly, advised on whether the applicant should be granted legal representation. However, this can be easily avoided by having appropriate divisions within the Department of Justice.323 Right against self-incrimination may be abrogated in disciplinary proceedings. The right against self-incrimination is a long-standing common law right that is applicable to non-judicial proceedings.324 However, in civil proceedings such as disciplinary tribunals, the authorities suggest that this right may be expressly abrogated.325 Right against self-incrimination may be abrogated in the public interest. In Fu Kin Chi Willy, a police ofcer was charged with failing to assist a police investigation and that such conduct was contrary to Police Regulations 3(2)(c).326 The police ofcer was suspected of misconduct and refused to answer questions put to him by a senior police ofcer. The police ofcer was found guilty and was directed to compulsory retirement. Interestingly, the case turned exclusively on the special role of the police force and the necessity for discipline and order.327 The Court of Final Appeal held that the common law right against self-incrimination was abrogated by s.30 of the Police Force Ordinance328 by necessary implication. Section 30 imposes on all police ofcers a statutory duty to obey all lawful orders of his superior ofcers, including abrogating the privilege in relation to a disciplinary investigation as it was in the public interest for the maintenance of the integrity and efciency of the police force. It is doubtful that Fu Kin Chi Willy is authority for a general principle that the right against self-incrimination in the course of public ofcers disciplinary proceedings has been abrogated per se. Whether public ofcers are compellable to testify against themselves in such proceedings must necessarily depend on the facts and circumstances of each case.329

15.107

15.108

321 322 323

324

325 326 327

328 329

Deacons v White & Case Ltd Liability Partnership (2003) 6 HKCFAR 322; Porter v Magill [2002] 2 WLR 37. See fn 252, Rowse. See also Cheng Chui Ping v The Chief Executive of the HKSAR (unrep., HCAL 1366/2001, [2002] HKEC 26); (unrep., CACV 138/2002, [2002] HKEC 1561), Hartmann J (as he was) held that bias can be discharged if different divisions within the Department act in their respective roles independently from each other. Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 (HCA); Sorby v The Commonwealth (1983) 152 CLR 281; and Police Service Board v Morris (1985) 156 CLR 397. See also R v Director of Serious Fraud Ofce Ex p Smith [1993] AC 1. Lee Ming Tee v HKSAR (2001) 4 HKCFAR 133; Koon Wing Yee v Insider Dealing Tribunal [2008] 3 HKLRD 372. [1997] HKLRD 520; [1998] 1 HKLRD 271. Pang Tak Kwai v Commissioner of Correctional Services (unrep., HCAL 1610/2000, [2000] HKEC 1298) where Cheung J. (as he was) decided that although courts should recognize the special circumstances involved with discipline forces, courts should nonetheless intervene when the facts clearly justify intervention. See also R v Ministry of Defence, Ex p Murray [1998] COD 134; R v Admiralty Board of the Defence Council, Ex p Coupland [1996] COD 147. Cap.232. Basic Law art.99 provides that all public ofcers must be responsible to the Government.

RETIREMENT AND PENSION

689

4. RETIREMENT AND PENSION


Retirement benets constitutionally guaranteed. Article 102 of the Basic Law guarantees all pensions, gratuities, allowances and benets due to public ofcers who retire or leave service in compliance with the regulations. Upon appointment to pensionable establishment,330 statutory entitlement to pension benets is as of right and all sums of money granted by way of pensions in such manner are charged on and paid out of the governments general revenue. Public ofcers are statutorily required to retire from service upon reaching the prescribed normal retirement age under various pension legislation for the civil service, discipline and judicial branches of government. Prior to the introduction of the Mandatory Provident Fund scheme331 the Government was the only statutory bound employer to provide any form of mandatory pension scheme for its employees.332 Today, it remains the only employer that is obliged to provide non-contributory pension schemes for its ofcers. There are currently three major operational pension systems in Hong Kong:333 the Old Pension Scheme, the New Pension Scheme introduced in 1987 and the Civil Service Provident Fund Scheme. They are governed by the Pensions Ordinance,334 the Pension Benets Ordinance335 and the Civil Service Provident Fund Scheme (CSPF Scheme) set up under the Mandatory Providence Fund Schemes Ordinance336 respectively. The former two schemes are for public ofcers appointed before 1 June 2000 and who are serving on pensionable terms and are non-contributory. The CSPF scheme applies to all public ofcers appointed on or after 1 June 2000. (a) Criteria for retirement Mandatory retirement age. The retirement age under the Old Pension Scheme and New Pension Scheme is 55 and 60 respectively, although the Chief Executive 15.110 15.109

330

331 332

333

334 335 336

An ofce which attracts pension. A complete list of Government departments is available at the HKSAR Government website Organization Chart of the Government of the HKSAR at http://www.gov.hk/en/about/ govdirectory/govchart/index.htm. Mandatory Provident Fund Scheme Ordinance (Cap.485). The Occupational Retirement Schemes Ordinance (Cap.426) introduced a framework for the private sector in 1992 to allow employers to administer voluntary non-contributory schemes through insurance providers that were regulated through a registration system. Other legislative pension schemes exist in addition to the three major schemes discussed in this chapter. They include schemes which facilitate the transfer of pension benets from former public ofcers to recognised public sector institutions, e.g. the Pensions (Special Provisions) Hospital Authority Ordinance (Cap.80), Pensions (Special Provisions) (The Hong Kong Institute Of Education) Ordinance (Cap.477), Pensions (Special Provisions)(Hong Kong Polytechnic) Ordinance (Cap.90). Other schemes such as the Surviving Spouse and Childrens Pensions Ordinance (Cap.79) augment the non-contributory schemes by providing public ofcers with an option to contribute up to 3.5% of their salary to a pension fund for their surviving spouses and dependents in the event of their death. Cap.89. Cap.99. Cap.485.

690

GOVERNMENT EMPLOYMENT CONTRACTS

may approve the continued service of public ofcers beyond the statutory limits.337 Disciplined services ofcers are required to be retired at 55 and 57 for prescribed ranks and 60 for general staff. 15.111 Voluntary retirement schemes. In 2000 and 2003, the Government introduced the Voluntary Retirement scheme as a compensation scheme pursuant to s.6A of the Pensions Ordinance and s.13 of the Pension Benets Ordinance. Under the respective schemes, public ofcers who had not reached the prescribed age of retirement in accordance with their appointment was eligible to retire from service with full pension benets accrued from the date of their appointment.338 Retirement due to medical reasons. If a public ofcer is unable to discharge his public duties for medical reasons, he may be retired from service under the non-contributory pension schemes or terminated under the new schemes of appointment. Public ofcers who are forced to retire due to medical reasons are eligible immediately for pension benets or accrued benets under the CSPF Scheme.339 Before a public ofcer can be invalidated, his medical status may be certied by a Medical Board convened in accordance with the procedures set out in the CSR.340 Compulsory retirement. A public ofcer may be compulsorily retired on three grounds.341 First, where the ofce in which he occupies is abolished. Secondly, where his ofce is restructured. Thirdly, due to serious disciplinary misconduct. Under the rst two limbs, the public ofcer retains his pensionable or accrued benets as of right.342 Under the third limb, the pensionable benets may or may not be forfeited depending on the severity of the misconduct. Transfer to other public service. Public ofcers may transfer to other approved public services in Hong Kong and retain their entitlement to pension benets on the condition that approval is granted by the Secretary for the Civil Service.343 Maximum pension status. Public ofcers who attain maximum pension status before retirement age may be permitted to retire and be re-employed in the same rank without a break in service until the retirement age. Maximum Pension Status is dened as a the period of pensionable service which the ofcer had earned up to two-thirds of the ofcers highest pensionable emoluments which is normally calculated as 450 months of pensionable service.344 In Cheong Man Fai v Secretary for Justice,345 the court held that on a proper construction of the Pension Benets Ordinance,346 the maximum pension status is not reached solely on the completion of 450 months of pensionable

15.112

15.113

15.114

15.115

337 338

339 340 341 342

343 344 345 346

Pension Benets Ordinance (Cap.99) s.10. Only ofcers who had served 10 years or more were eligible for voluntary retirement under the second scheme in 2003. CSR 365. CSR Annex 2.3 para (2)(5). CSR 383. For public ofcers appointed on probationary or New terms, the public ofcer must be provided with three months notice or three months pay in lieu of notice. CSR 390. Approval is granted if it serves the public interest to do so. CSR 277. (unrep., HCA 7048/1995, [2000] HKEC 544). Cap.99.

RETIREMENT AND PENSION

691

service as stated in the CSR but when the ofcers entitlement to pension equalled two-thirds of his highest salary. (i) Outside work after retirement Post-service outside work. In the private sector, certain employers employ restrictive covenants to ensure that employees who leave their service do not carry their trade secrets over to competitors. Such covenants may include restrictions on use of certain knowledge when employed elsewhere347 or a period of garden leave in the hope that the value of such knowledge will diminish over time.348 Likewise, there is no real public objection against public ofcers taking up employment post-public ofce retirement in areas which do not compete with the government. However, owing to the sensitive nature of policy formulation, decision making and the information and knowledge of public ofcers, the CSR provides for restrictions against all public ofcers who wish to take up employment after cessation of their public duties. Failure to observe the relevant regulations may result in the suspension of pension, civil action for injunction or damages, withdrawal of approval, further suspension from taking outside work and public censure.349 Non-directorate grade ofcers. Public ofcers on pensionable terms appointed to lower grades may not, without the permission of the Chief Executive in writing, enter into any business on his own account, become a partner in a partnership, a director or an employee in a company in Hong Kong within two years of his retirement.350 For any paid work outside of Hong Kong, public ofcers must inform their approving authority that they are working within those two years. Before approval of employment within the statutory control period, the Chief Executive will take into account the scope of the ofcers public duties and whether his involvement or special knowledge will benet the prospective employer, whether the knowledge gained during public ofce will provide the employer with an unfair advantage, public perception or any possible suggestions of impropriety.351 There are no restrictions on such ofcers working in charitable, academic or non-prot making organisations or the Central Authorities.352 Directorate grade ofcers. Public ofcers holding directorate grade ofces are subject to higher scrutiny in regard to taking up occupation post-retirement from public ofce. Regardless of the manner in which such ofcers leave public service, they must apply for prior permission from the Secretary for Civil Service to take up outside work, enter into any business on his own account or become a partner in a partnership, a director or employee in a company both within and outside of 15.116

15.117

15.118

347

348

349 350 351 352

International Business Machines Corp v Mark D. Papermaster (Case. No. 08-Civ-9078 (KMK) USDS SDNY, 7 Nov 2008. Provident Financial Group Plc v Haywood [1989] ICR 160; GFI Group Inc. v Eaglestone [1994] FSR 535; Eurobrokers Ltd v Rabey [1995] IRLR 206; TFS Derivatives v Morgan [2005] IRLR 246; HSBC Bank Plc v Andrew Wallance [2008] 1 HKLRD 613; Bearing Point Australia Pty Ltd v Hillard [2008] VSC 115 (VSC). For a full list see Civil Service Bureau, Circular No. 10/2005. CSR 398, Pensions Ordinance (Cap.89) s.16, Pension (Benets) Ordinance (Cap.99) s.30. CSR 398(3). CSR 398(8).

692

GOVERNMENT EMPLOYMENT CONTRACTS

Hong Kong.353 The control period commences from the rst date of the formal departure from service. For directors at the highest grades and who have served for six or more years of continuous service, the statutory control period is three years, and for other directorate grade ofcers, the period is two years. Those who served six years or less are subject to one and a half years and one year respectively.354 Further and in addition to the statutory control period, there is a period of sanitization or blanket ban against any against any form of outside work355 except charitable, academic or non-commercial work for up to 12 months.356 15.119 Advisory Committee on Post-service Employment. To assist the Secretary for Civil Service, an Advisory Committee on Post-service Employment of Civil Servants was rst established in Oct 1987 and its terms of reference are to consider and advise on all applications to take up post service employment from directorate ofcers during the statutory control period. The Advisory Committee will consider whether the employment or commercial activities of the retired or resigned public ofcer would cause actual or potential damage, and/or actual or apparent public perception of a conict of interest in its recommendation of each application. In addition to considerations stated for non-directorate ofcers above, the committee must also consider if the public ofcer had previous contractual, legal, regulatory dealings with the prospective employer, and whether such employment will give rise to public suspicion of a conict of interest or other impropriety, and whether any aspects of the proposed work would bring disgrace and embarrassment to the government or civil service. Public ofcers who wish to make an application must also declare their service history in their last three years of government service, provide details of their proposed outside work and further declare whether they have had previous dealings with the prospective employer or its competitors.357 In the Report on the Processing of the Application from Mr. Leung Chin-man to take up post-service outside work with New World China Land Limited 358 the Secretary for Civil Service had, upon the advice of the Advisory Committee approved a former Grade 1 administrative ofcer at directorate level 8 to take up a full-time paid appointment with a land developer as an executive director within his control period. The Secretary for Civil Service subsequently admitted that both the advisory committee and their ofce had failed to consider the ofcers previous involvement with a development project and the parent company of his prospective employer.359

353 354 355

356 357 358 359

CSR 397(1)(3). CSR 397(4). CSR 397(8)(9) The sanitization period also includes the nal leave period. Further, CSR 397(10) provides that there is no minimum sanitization period for directorate ofcers who retired voluntarily or resigned. Such cases must be considered on a case by case basis. CSR 397(7). Form CSB/PSE/1 (12/2005). http://www.csb.gov.hk/english/info/les/common/leung_eng.pdf. HKGOV Press Release, SCS Submits Report to Chief Executive on Leung Chin-mans case http://www.info.gov. hk/gia/general/200808/15/P200808150232.htm.

RETIREMENT AND PENSION

693

(b) Pension Pension adjustment mechanism. Increase in pensions is governed by the Pensions (Increase) Ordinance360 and Widows and Orphans Pension (Increase) Ordinance.361 In accordance with the pension increase legislation, pensions paid to pensioners and their dependants under pension schemes for civil servants and judicial ofcers are subjected to an annual increase according to the annual increase in the Consumer Price Index. Pensions rights crystallise after regular retirement. A right to pension only becomes a right after regular retirement from public service but the retirement itself is not a right but a matter of discretion.362 Due to the discretionary nature for early retirement, in the event that a public ofcer is subject to disciplinary proceedings and suffered from a medical problem which warranted early retirement, the disciplinary proceedings must be determined rst as pension rights may be affected if it is decided that the termination of service was irregular.363 Calculations of pensions based on length of service. While the legislation schemes dealing with pensions have undergone a drastic overhaul since 1997, pensions are calculated largely on the basis of the length of service, the highest pensionable emolument,364 and the pension factor which is determined by the terms of appointment, the grade of the ofcer and the legislative scheme the ofcer falls under. A difculty in calculation of pensions arose in Cheong Man Fai v Secretary for Justice365 where the court was faced with a plaintiff who had been in public service for 40 odd years, during which he was placed on various pension schemes. The plaintiff argued that his highest pensionable emolument should be calculated under his entitlement of 100 per cent under the Old Pension Scheme which was the highest level and not 90 per cent under the New Pension Scheme which he voluntarily transferred to. The Court held that all public ofcers who voluntarily transferred to the new Pension Benets Ordinance became a serving ofcer for the purpose of pension benets calculation. Assignment of pension statutorily prohibited. Statutory protections against the assignment of pension rights ensure that judgment debts and bankruptcy proceedings will not affect a public ofcer from enjoying his pension. This principle is statute specic and does not apply in common law. In Re Ng Shiu Fan366 it was held that the legal right to be paid pension benets upon the cessation of employment formed an immediate chose in action and constituted as property under the Bankruptcy 15.120

15.121

15.122

15.123

360 361 362 363 364

365 366

Cap.305. Cap.205. Pension Ordinance (Cap.89) s.6(1). See above Retirement. Cheung Hin Kwan v Commissioner of Police (unrep., HCAL 92/2003, [2005] HKEC 313); [2006] 2 HKC 278. Also dened as the highest salary atvtained by the public ofcer during his or her years of service. See also Lau Kwok Fai Bernard v Secretary for Justice (unrep., HCAL 177, 180/2002, [2003] HKEC 711) where Hartmann J (as he then was) afrmed that the basis for pensionable salary calculation was not on the basis of the salary of the highest grade attained but on the highest actual salary earned. (unrep., HCA 7048/1995, [2000] HKEC 544). [2008] 4 HKLRD 813.

694

GOVERNMENT EMPLOYMENT CONTRACTS

Ordinance (BO).367 In the absence of an effective non-alienation provision, that right formed part of the bankrupts estate and was vested in the ofcial receiver immediately on the ofcial receiver becoming the trustee.368 In Re Ng Shiu Fan which concerned a teacher whose pension rights were governed by the Education Ordinance,369 there was no specic provision to protect the teacher from transferring his accrued benets as a chose in action immediately to the Ofcial Receiver. Further, it was held by the Court that even if the teacher had discharged his bankruptcy, there was no common law principle of automatically conferring the benets back to and such benets remained vested in the ofcial receiver after his discharge. It was held in AG v Ng Shiu Fai370 that the Crown was not entitled to attach a pension governed by the Pensions Ordinance. Section 12(1) expressly prohibited the judgment debt from attaching as it is not payable to someone liable to pay any other person within s.23(1) of the Crown Proceedings Ordinance, as it would in fact end up paying itself. However, s.12(1) of the Pensions Ordinance provides a statutory exception to the rule against assignation. In K v K,371 the court decided that the petitioners income as a public ofcer was an income capable of being attached pursuant to s.28(1)(b) of the Matrimonial Proceedings and Property Ordinance372 as s.12(1) provided for the maintenance of a spouse or former spouse. However, in Re Choi Lai Ming Ex p Ofcial Receiver 373 a public ofcer who, after having taken out a Home Finance Scheme allowance with the government to acquire property but subsequently declared bankruptcy, the court held that the government was not only a secured creditor in respect of the ofcers salary but also over his pension. The court held that the formal application, the agreement form for repayment of down-payment loan and the CSR make clear that the intention was for the government to have a security interest in any pension that the ofcer may become entitled. (i) Old Pension Scheme 15.124 Old Pension Scheme. The scheme was set up under the Pensions Ordinance taking effect retrospectively from 1947 and applied to all public ofcers appointed before 1 July 1987. The Civil Service Bureau classied public ofcers into Category A and Category B ofcers. Category A ofcers were appointed to an established ofce374 and who are conrmed in an established ofce at the time of their retirement or resignation from the service. Category B ofcers were ofcers who held a non-established ofce at the time of their retirement or an established ofce but was not conrmed in such ofce.

367 368 369 370 371 372 373 374

Cap.6. BO ss.43(1)(a) & 58(1), (2). Cap.279. [1977] HKDCLR 51(DC). (unrep., HCMC 2/2004, [2005] HKEC 285). Cap.192. [2006] 1 HKLRD 7. Pensions Ordinance (Cap.89), s.2, Pension Benets Ordinance (Established Ofces) Order (Cap.99J) Schs.1 & 2.

RETIREMENT AND PENSION

695

Annual pensions were only granted to both categories of ofcers if they served a qualifying service of not less than 10 years and resigned or retired in accordance with the CSR. Public ofcers who retire from the service before completing the period of qualifying service375 will not be eligible for a pension but will be eligible for a one-off payment of short service gratuity.376 An ofcer who was permanently injured in the actual discharge of his duty and not due to his own serious and wilful misconduct was eligible for an additional pension on retirement provided that he had not been paid under the Employees Compensation Ordinance or the Pneumoconiosis (Compensation) Ordinance or the Occupational Deafness (Compensation) Ordinance in respect of the same injury.377 In the event a public ofcer was injured in the course of his duty, the annual additional pension was calculated by multiplying the annual pensionable emoluments (in case of a Category A ofcer) or annual salary (in case of a Category B ofcer) drawn by the ofcer at the date of his injury. The degree of impairment determined by a Medical Board ranges from slightly impaired to totally destroyed.378 (ii) New Pension Scheme Generally. The New Pension Scheme was applicable to every ofcer who was appointed or re-appointed to service under the government on or after 1 July 1987 and before 1 June 2000, whether on transfer from other public service or otherwise, to pensionable establishment under the Pension Benets Ordinance.379 Ofcers who were appointed before that date may also come under this scheme if they had applied before 31 December 1995. More exible pension scheme. This scheme introduced innovations such as the extension of the mandatory retirement age to 60 years of age.380 The public ofcer could also, with the approval of the Chief Executive elect to retire earlier or work beyond the mandatory retirement age.381 In addition to the granting of pension in similar circumstances as the Old Pension Scheme, if the public ofcer was required to retire on a compulsory basis due to non-disciplinary misconduct reasons, such an ofcer may receive an annual pension insofar as he or she has served not less than two years. Further, a public ofcer also became eligible for pension under the New Pension Scheme if the public ofcer was made invalid in the course of his duties and where he had only served ve years of qualifying service. 15.125

15.126

375

376

377 378

379 380 381

Qualifying service means service which may be taken into account in determining whether an ofcer is eligible by length of service for pension benets. It counts from the date an ofcer begins to draw salary in respect of his public service to the date of his leaving public service, provided that the period of service is in a civil capacity and is continuous. For an ofcer who retires from the service with less than the specied qualifying service, the short service gratuity payable is equal to seven times the annual pension or annual allowance for which the ofcer would have been payable had there been no requirement for qualifying service. Cap.360 and Cap.469. The additional pension ratios are calculated as follows; slightly impaired 50/600, impaired 100/600, materially impaired 150/600 and totally destroyed 200/600. Cap.99. Pension Benets Ordinance (Cap.99) s.10. Ibid, ss.10(4) and 11(1)(b).

696

GOVERNMENT EMPLOYMENT CONTRACTS

15.127

Suspension of pension. Section 30 of the Pension Benets Ordinance also empowers the Chief Executive to suspend pension payments to any former public ofcer who breached rules concerning post-service commercial employment and work. The legislative provision also provides a procedure for the aggrieved pensioner to petition to the Chief Executive to vary or reverse the decision at his discretion. Further the Chief Executive is also conferred powers to restore the pension upon being satised that the former ofcer had ceased to engage in prohibited activities. Bankruptcy. If a pension recipient had been adjudicated as bankrupt or declared insolvent by a judgment of any court, payment of pension granted shall cease.382 The Chief Executive may, where he thinks t, direct that ex gratia payment of all or any part of the monies originally entitled to him before his bankruptcy or insolvency be paid to him. Upon discharge from bankruptcy or insolvency, payment of pension would be restored as from the date on which he is so discharged. A pensioner may also have his pension cancelled, suspended or reduced upon being convicted of any offence in connection with the public service under the government, any offence under Pt II of the Prevention of Bribery Ordinance383 or treason under s.2 of the Crimes Ordinance.384 Payment. Pension payments are normally paid in monthly instalments unless the Chief Executive species that payments be paid earlier or as deferred pensions.385 Deferred pensions are normally granted to public ofcers who left the service in accordance with regulations and before attaining retirement age. (iii) Mandatory Provident Scheme

15.128

15.129

15.130

Civil Service Provident Fund Scheme. The new retirement benets scheme introduced in 1 June 2000 is distinct from the Old and New Pensions Scheme in that it is a contributory scheme. The scheme provides a more exible approach to allow retirement benets to follow the public ofcer when switching between the public and private sector. The introduction of the scheme also heralded a new system of entry terms and conditions of appointment which conferred greater discretion upon departmental heads to formulate their own policies such as the length of probationary periods. The CSPF Scheme is set up pursuant to the Mandatory Provident Fund Scheme Ordinance386 and applies to ofcers who joined the civil service under new entry terms, those who progress onto permanent terms of appointment and those who are appointed on a short-term basis. Contributory system. As the employer, the Government provides mandatory and voluntary contributions that follow a progressive contribution rate. The Government contribution rate is calculated in terms of the percentage of the public ofcers basic salary at substantive rank. An ofcer who has completed less than three years is eligible for 5 per cent of his or her salary as the Governments contribution whereas

15.131

382 383 384 385 386

Ibid, s.28. Cap.201. Cap.200. Ibid, s.7. Cap.485.

RETIREMENT AND PENSION

697

the Government will contribute 25 per cent of the public ofcers salary for those who have worked 30 years and above. When a public ofcer is promoted to a higher grade or posting, the Governments contribution rate will be determined in accordance with the years of experience required for that grade and/or post in addition to the ofcers years of continuous service since appointment to that promoted grade or post. For disciplined services ofcers who are mandatorily retired at 55, there is an additional Special Disciplined Services Contribution at 2.5 per cent of the basic salary. The Special Disciplined Services Contribution fully vests when the ofcer reaches 55 but not beforehand. Under the new scheme, the Government nonetheless retains the right to forfeit accrued benets provided under the Governments voluntary contributions. However, like the private sector Mandatory Provident Fund Scheme, individual public ofcers are allowed to choose their preferred constituent fund and invest accordingly. (iv) Judicial Ofcers Retirement age. The pension scheme for the judiciary of Hong Kong is provided by the Pension Benets (Judicial Ofcers) Ordinance.387 The normal retirement age for judges is 65 years of age.388 There is no retiring age for a non-permanent judge, and he may hold ofce for a term of three years but that term may be extended for one or more periods of three years by the Chief Executive upon recommendation of the Chief Justice. The term of ofce of a judge of the High Court may be extended for a specied period or periods not exceeding ve years in the aggregate by the Chief Executive upon recommendation of the Judicial Service Commission. Similarly, a District Judge may continue in ofce until he has completed any work commenced before he attained retirement age. The retirement age of a Registrar of the High Court or a Senior Deputy Registrar or Deputy Registrar of the High Court is also 65 while the retirement age of all other ofcers is 60.389 Pension scheme. The circumstances under which an ofcer under this scheme will be granted a pension is largely similar to that of an ofcer under the Old and New Pension schemes. An ofcer may be granted a pension on attaining retiring age and having completed not less than 10 years of qualifying service if he was appointed before 50 years of age, and ve years of service if he was appointed only after attaining that age. Pension will be granted to an ofcer appointed before 1 July 1987 when he reaches 55 years of age, and for those appointed after 1 July 1987, it will be granted on his attaining 60 years of age. The Chief Executive may grant a suitable ex gratia payment to an ofcer who leaves the public service.390 The conditions for cancellation or reduction of pension payments are along the same lines as those prescribed under the Old and New Pension schemes. 15.132

15.133

387 388 389 390

Cap.401. Pension Benets (Judicial Ofcers) Ordinance (Cap.401) s.6(3). Ibid, s.6. Ibid, s.19.

698

GOVERNMENT EMPLOYMENT CONTRACTS

15.134

Transfer of service. Many judges were also professional civil servants with experience in the Department of Justice and have therefore served both as public ofcers in established ofces in addition to their appointment to the bench. As such, public ofcers who accrued benets under the Old and New Pension schemes may also choose to transfer such benets for consideration under the Pension Benets (Judicial Ofcers) Ordinance.391 The judicial pension scheme also provides for dependants and surviving spouses in the unfortunate event that the judicial ofcer passes away.392

391 392

Ibid, s.9. Ibid, Cap.401 s.20(1)(i). The pension will cease when the dependant attains 18 years of age unless he or she is receiving full-time education which, in such a case the pension ceases when he or she attains 23 years of age. A dependant pension is payable as soon as possible after the death of the ofcer and shall be paid in monthly instalments, or less frequently if so requested by the recipient.

CHAPTER 16

TRADE UNIONS
Para. 1. Introduction ............................................................................................................................. 16.001 (a) Sources of fundamental rights ........................................................................................ 16.004 (b) Regulatory framework .................................................................................................... 16.007 2. Registration and regulation of trade unions ............................................................................ 16.009 (a) Registration of trade unions ............................................................................................ 16.009 (i) Meaning of trade union ...................................................................................... 16.009 (ii) Requirement to register ...................................................................................... 16.010 (iii) Refusal to register a trade union ........................................................................ 16.012 (iv) Documentation to be provided by the registrar of trade unions upon registration ................................................................................................ 16.014 (b) Restrictions on trade unions ............................................................................................ 16.015 (i) Rules of a trade union ........................................................................................ 16.015 (ii) Ofcers and members of trade unions ............................................................... 16.018 (iii) Amendment to the registered rules of a trade union .......................................... 16.020 (iv) Refusal to register rules of a trade union ........................................................... 16.022 (v) Use of name ....................................................................................................... 16.023 (vi) Amalgamation .................................................................................................... 16.025 (vii) Use of funds ....................................................................................................... 16.026 (viii) Loss of certicate ............................................................................................... 16.028 (ix) Return of certicate on cancellation of registration ........................................... 16.029 (c) Trade union federations .................................................................................................. 16.031 (i) Provisions which apply to a trade union federation ........................................... 16.031 (ii) Registration and regulation ................................................................................ 16.032 (iii) Ofcer of a trade union federation ..................................................................... 16.033 (iv) Addition to membership of trade union federations .......................................... 16.034 3. Major labour organisations in Hong Kong .............................................................................. 16.035 (a) The four major labour organisations ............................................................................... 16.035 (b) Afliated unions ............................................................................................................. 16.039 (c) Work of the labour organisations .................................................................................... 16.040 4. Rights and immunities granted to trade unions and members ................................................ 16.041 (a) Legal status of a trade union ........................................................................................... 16.041 (b) Trade disputes ................................................................................................................. 16.042 (c) Immunity from criminal prosecution .............................................................................. 16.044 (d) Other rights given to trade union members ..................................................................... 16.045 5. Recognition of collective bargaining and collective agreements ............................................ 16.046 (a) Historical background ..................................................................................................... 16.046 (b) No statutory recognition ................................................................................................. 16.049 (c) Terms must indicate intention to create legal relations ................................................... 16.050 (d) Collective agreement incorporated into an employment contract .................................. 16.051

700

TRADE UNIONS 6. Protection of trade union members against discrimination ..................................................... 16.052 (a) Right to trade union membership .................................................................................... 16.052 (b) Right to become a member of a registered trade union .................................................. 16.053 (c) Right to take part in the activities of a trade union ......................................................... 16.054 (d) Right of association to form or register a trade union .................................................... 16.059 (e) Employer must not prevent or deter employee from exercising his/her trade union rights ............................................................................................................ 16.060 (f) No offer of employment may be made conditional on avoidance of trade union afliations and activities .............................................................................. 16.061 7. Resolution of trade disputes .................................................................................................... 16.062 8. Right to strike .......................................................................................................................... 16.063 (a) Meaning of strike ......................................................................................................... 16.063 (b) Frequency of industrial action ......................................................................................... 16.064 (c) The relevant freedoms ..................................................................................................... 16.066 (i) Basic law ............................................................................................................ 16.066 (ii) Bill of Rights Ordinance .................................................................................... 16.067 (d) Right to Strike and the Public Order Ordinance ............................................................. 16.068 (i) Obligations to observe before going on strike ................................................... 16.068 (ii) Public place .................................................................................................... 16.070 (iii) Public meeting .................................................................................................... 16.071 (iv) Public procession ............................................................................................... 16.074 (v) Guidance on giving notication of a public meeting or a public procession ..... 16.077 (vi) Prohibition or restriction of a public meeting or a public procession ................ 16.078 (vii) The form for giving notication of a public meeting or a public procession .... 16.079 (viii) Unlawful assemblies .......................................................................................... 16.080 (ix) Riots ................................................................................................................... 16.081 (e) Right to strike and the Employment Ordinance .............................................................. 16.082 (i) No right to terminate summarily ........................................................................ 16.082 (ii) Continuity of employment .................................................................................. 16.083 9. Other types of industrial action ............................................................................................... 16.085

1. INTRODUCTION
Overview of chapter. This chapter provides an overview of industrial relations in Hong Kong including the statutory requirements regarding registration and regulation of trade unions, the four major labour organisations, employees trade union rights, the enforceability of collective bargaining agreements, the freedom of association and the right to strike. The focus will be on the regulation of trade unions because, as will be seen, collective bargaining is not widely practised nor, as a general rule, legally enforceable, and industrial action, although lawful, is comparatively rare. Nonetheless, participation in trade unions remains steady, and has even experienced some incremental growth in recent years. Trade Unions in Hong Kong. As of 31 December 2009, there were 812 trade unions, consisting of 768 employees unions, 18 employers associations and 26 mixed organisations of employers and employees registered under the Trade Unions Ordinance (TUO).1 There were also four trade union federations in Hong Kong, namely, the Federation of Trade Unions in Vocational Training Council, the Hong Kong Federation of Civil Service Unions, The Federation of Hong Kong Electrical & Mechanical Industries Trade Unions and The Federation of Hong Kong Food & Beverage Industries Trade Unions, registered under the TUO.2 Trade union participation rate. The trade union participation rate3 measures the declared membership of employees unions as a percentage of salaried employees and wage earners. In Hong Kong, the trade union participation rate in 2009 was 22.48 per cent.4 This gure represented a slight increase from 21.51 per cent in 2008.5 By way of comparison, with regard to all employees6 in the United Kingdom, the trade union density was 27.4 per cent in both 2008 and 2009.7 (a) Sources of fundamental rights Basic Law. Hong Kongs Basic Law is the foundation for most of the fundamental rights that are important in the context of trade unions. Article 27 of the Basic Law guarantees that Hong Kong residents shall have freedom of association and the right 16.004 16.001

16.002

16.003

3 4 5 6

Cap.332. Figures from the Annual Statistical Report 2009, issued by the Registry of Trade Unions of the Labour Department: http://www.labour.gov.hk/tc/public/pdf/rtu/ASR2009.pdf), pp 12. There were 22 new trade unions registered in 2009 (Hong Kong Yearbook 2009, p 128 at http://www.yearbook.gov.hk/). Annual Statistical Report 2009, ibid, pp 1, 2, 93 and 187. These four trade union federations should not be confused with the four major labour organisations which, not being trade unions or federations, are not registered under the TUO but under the Societies Ordinance (SO) (Cap.151). See paras 16.031 to 16.034 for elaboration on trade union federations. Also known as trade union density. Annual Statistical Report 2009 (fn 1 above), p 1. Ibid. The statistics for United Kingdom include information on trade union density for both all employees and all in employment. In order to adopt a consistent basis for comparison with the Hong Kong statistics, only information on all employees is shown. See Trade Union Membership 2009 by James Achur, issued by the Department for Business Innovation & Skills in Apr 2010, at http://stats.bis.gov.uk/UKSA/tu/TUM2009.pdf, p 6.

702

TRADE UNIONS

to form and join trade unions. By virtue of art.39 of the Basic Law, the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social and Cultural Rights and international labour conventions as applied to Hong Kong when the Basic Law was promulgated shall remain in force. Each of the two covenants and certain of the ILO conventions contain important provisions regarding the right to form and join trade unions. The International Covenant on Economic, Social and Cultural Rights protects the right to form and join trade unions free of restrictions and prejudice (art.8), and the International Covenant on Civil and Political Rights protects the right of assembly (art.21) and the right to form and join trade unions free of restrictions and prejudice (art.22). The status of ILO conventions is considered below in para 16.006. 16.005 Bill of Rights Ordinance. The Hong Kong Bill of Rights Ordinance8 (BORO) is the domestic enactment of the ICCPR as applied to Hong Kong. In the context of trade unions, the most relevant provisions of the BORO are art.17 and 18(1), which provide for the right of peaceful assembly and the freedom of association, respectively. Art.16 of the BORO provides for the right to freedom of opinion and expression, a right that has close association with the right to peaceful assembly. Conventions of the International Labour Organisation. China is a member of the International Labour Organisation (ILO),9 but Hong Kong is not and never has been a member, because it is not a sovereign state. Prior to the 1997 transfer of sovereignty, Hong Kong participated in ILO activities by virtue of its status as a non-metropolitan territory, and became bound by those ILO conventions (ILC) ratied by the United Kingdom and extended to Hong Kong. Art.39 of the Basic Law provides that ILC as applied to Hong Kong before the transfer of sovereignty shall remain in force. In the context of trade unions, the freedom to associate and organise is specically protected for in two important ILC, 87 and 98, both of which are ratied and extended to Hong Kong. ILC 87 is aimed directly at the right to organise and form trade unions, including the right to afliate with international organisations of workers, while ILC 98 is concerned with anti-union discrimination. As Hong Kong is bound by both, it is obliged to ensure that the obligations and protections in those conventions are enforced in Hong Kong.10 (b) Regulatory framework 16.007 Registration and regulation of trade unions. The TUO and the Trade Union Registration Regulations (TURR) make provision for the registration and regulation of trade unions, requiring them to draw up and register a set of union rules with the Registrar of Trade Unions.

16.006

8 9 10

Cap.383. Website address - http://www.ilo.org/. Regarding ILC 87, see paras 16.027, 16.048 and 16.052 below.

REGISTRATION AND REGULATION OF TRADE UNIONS

703

Trade unions rights. The Employment Ordinance (EO)11 provides protection against anti-union discrimination generally, while the TUO sets out the rights and duties of trade union members, including the trade unions right to independence, and protection for trade union members and ofcers against criminal prosecution or civil suit. The Labour Relations Ordinance (LRO)12 is concerned with the resolution of trade disputes through conciliation, mediation, arbitration and hearing by a board of inquiry.

16.008

2. REGISTRATION AND REGULATION OF TRADE UNIONS


(a) Registration of trade unions (i) Meaning of trade union Meaning of trade union. Under the TUO, a trade union is dened as any combination the principal objects of which are under its constitution the regulating of relations between employees and employers, or between employees and employees, or between employers and employers, whether such combination would or would not, if the Ordinance had not been enacted, have been deemed to have been an unlawful combination by reason of some one or more of its purposes being restraint of trade.13 An afliation between two or more trade unions is separately provided for as a trade union federation.14 (ii) Requirement to register Registration of a trade union is required. Every trade union is required to be registered under the TUO with the Registrar of Trade Unions, administered by the Labour Department.15 It is a criminal offence for any person to act as an ofcer of, or participate in the management of, a trade union which is not registered. An offender is punishable on conviction by a ne16 and to imprisonment for six months.17 Application must be made within 30 days of the establishment. An application for the registration of a trade union is to be made to the Registrar of Trade Unions in the prescribed form within 30 days of the establishment of the trade union.18 Every such application must be signed by not less than seven voting members of the trade union, any 16.010 16.009

16.011

11 12 13 14

15 16 17

18

Cap.57. Cap.55. TUO s.2. See paras 16.031 to 16.034 for elaboration. By comparison, in England, a trade union can either mean an individual trade union or a group of trade unions. Each is governed in the same way under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). TUO s.5(1). The level of ne is currently set at HK$1,000:TUO s.5(5). TUO s.5(5). By comparison, in England, the Certication Ofcer (Website addresshttp://www.certofce.org/), whose functions are set out in the TULRCA, maintains a list of trade unions but it is optional for an organization to apply to be included in the list. However, there are advantages to being a listed trade union. For example, it is evidence that the body concerned satises the statutory denition without further proof being required. See Norman Selwyn, Selwyns Law of Employment (15th edn), p 553. TUO s.5(2).

704

TRADE UNIONS

of whom may be ofcers thereof.19 A voting member means any member of a registered trade union who is entitled to vote for any purposes under the rules of the trade union.20 (iii) Refusal to register a trade union 16.012 Discretion to refuse to register. The Registrar of Trade Unions has a discretion to refuse to register a trade union if: (a) any statutory provisions have not been complied with, (b) any purpose of the trade union is unlawful,21 (c) the name under which it is proposed to register the trade union is identical with that by which any other trade union, whether existing or having ceased to exist, has been registered, or (d) the Registrar is of the opinion that the trade union applying for registration is substantially the same trade union of which the certicate of registration has been cancelled.22 Where the Registrar refuses to register a trade union, the applicants for registration must be served with a notice in writing to that effect specifying the ground for refusal.23 Right to appeal a refusal to register. If an application to register a trade union is refused by the Registrar of Trade Unions, the applicant may appeal to the Court of First Instance within 28 days after the service of the notice of refusal.24 The Court of First Instance may (i) declare that the Registrars refusal to register was wrong and the Registrar will register the trade union or (ii) dismiss the appeal.25 (iv) Documentation to be provided by the registrar of trade unions upon registration 16.014 Evidence of registration. Upon registration of a trade union or a trade union federation, the Registrar of Trade Unions will issue to the trade union a copy of the TUO and the Trade Union Registration Regulations, a certicate of registration and a copy of the rules which are certied by the Registrar as complying with the provisions of s.18 of the TUO.26 (b)Restrictions on trade unions (i) Rules of a trade union 16.015 Restrictions prescribed by the TUO upon the rules of a registered trade union. The TUO sets out a number of restrictions in relation to the structure and operations of a registered trade union. These include restrictions upon the contents of the rules of the registered trade union. A registered trade union is required to draw up and register a set of rules with the Registrar of Trade Unions which provide adequately for matters

16.013

19 20 21

22 23 24 25 26

TUO s.5(3). TUO s.2. Article 18(1) of the Hong Kong Bill of Rights (under the Hong Kong BORO s.8) provides the right to freedom of association. However, it should be noted that art.18(2) of the Hong Kong Bill of Rights states that restrictions to the right may be placed in the interests of public safety, etc. TUO s.7(1). TUO s.7(2). TUO s.8. TUO s.8. TURR reg.6.

REGISTRATION AND REGULATION OF TRADE UNIONS

705

specied in Sch.2 to the TUO.27 The matters which must be stated in the rules include the name and address of the registered ofce of the trade union,28 the objects for which the trade union is established,29 the conditions under which persons may enjoy voting membership and non-voting membership30 and the amount and manner of payment of fees payable by members of the trade union.31 A registered trade union that fails to make rules in accordance with s.18(1) of the TUO commits an offence and is liable on summary conviction to a ne.32 Two copies of the rules needed on application for registration. Where rules are sent to the Registrar on application for registration of a trade union, two copies of the rules must be sent and both copies must be signed by the same individual(s) who signed the application for registration of the trade union or, in certain circumstances, another voting member of the trade union.33 Requirements where wholly new rules are sent to the Registrar. Where wholly new rules are sent to the Registrar of Trade Unions for registration by a registered trade union, the following requirements must be satised: (a) two copies of the rules must be submitted, (b) an application for the registration must be made in the prescribed form and must be signed by the chairman and one other ofcer of the trade union and (c) both copies of the rules must be signed by not less than seven voting members of the trade union.34 (ii) Ofcers and members of trade unions Individual under the age of 16. Unless the rules of a trade union provide otherwise, an individual under the age of 16 may be a member of a registered trade union but cannot be a voting member or a member of the executive of a registered trade union.35 Individual under the age of 18. Unless the rules of a trade union provide otherwise, an individual between the age of 16 and 18 may be a member of a registered trade union and may have other specic rights but cannot be a member of the executive of a registered trade union.36 (iii) Amendment to the registered rules of a trade union Any amended rule must be sent to the Registrar within 30 days. Where any registered rule of a registered trade union has been altered or amended, any rule has been added to the registered rules or where the registered rules of a registered 16.020 16.018 16.016

16.017

16.019

27 28 29 30 31 32

33 34 35 36

TUO s.18(1). TUO Sch.2 para (a). TUO Sch.2 para (b). TUO Sch.2 para (c). TUO Sch.2 para (i). The ne is nominal, currently set at HK$200:TUO s.18(7). There is no equivalent penalty in England. In England, a trade union has a duty to supply, at the request of any person, a copy of its rules, either free or on payment of a reasonable charge: TULRCA (c.52) s.27. Failure to comply with such request may render the trade union and its ofcer or member (if applicable) guilty of an offence and liable on summary conviction to a ne: TULRCA (c.52) s.45. The current level of maximum ne is level 3 on the standard scale which is GBP1,000. TURR reg.5. TURR reg.10(1). TUO s.17(4). TUO s.17(5).

706

TRADE UNIONS

trade union have been wholly rescinded or otherwise cancelled and replaced by new rules, the rule so amended or altered or the rule so added or the new rules (whichever is applicable) must be sent to the Registrar of Trade Unions within 30 days.37 A registered trade union that contravenes this provision commits an offence and is liable on summary conviction to a ne.38 16.021 Further requirements. Where an alteration to or amendment of a registered rule, or an addition to the registered rules, of a registered trade union is sent to the Registrar for registration by a registered trade union, the following requirements must be satised: (a) the application must be made in the prescribed form and must be signed by the chairman and one other ofcer of the trade union, (b) one copy of the registered rules which is marked to indicate the amendments must be submitted at the time of the application and (c) one copy of the text of the amendment which is signed by not less than seven voting members of the trade union must be submitted at the time of the application.39 (iv) Refusal to register rules of a trade union 16.022 Circumstances where the Registrar refuses to register the rules of a trade union. If the Registrar of Trade Unions is not satised that (i) the rules have been duly made, (ii) the rules make adequate provision for each and all of the matters specied in Sch.2 to the TUO,40 (iii) the rules are not inconsistent with any provision of the TUO or the Trade Union Registration Regulations or the principal objects of the trade union and the rules are not contradictory, imprecise or incomprehensible and (iv) where the rules relate to the taking of decisions by secret ballot, every voting member of the trade union has an equal right and a reasonable opportunity of voting and that the secrecy of the ballot is ensured, then the Registrar will not register the rules.41 If the Registrar refuses to register the rules, the Registrar must serve on the applicants for registration of the trade union a notice in writing notifying of the refusal and the ground of the refusal.42 Any person who is aggrieved by the refusal of the Registrar to register the rules may, at any time before the expiry of 28 days after service by the Registrar of the notice, appeal to the Court of First Instance against such refusal.43 (v) Use of name 16.023 Restrictions on use of name. A registered trade union or registered trade union federation must not display or make use of any name purporting to be the name of the trade union or of the federation except the name under which such trade union or federation is currently registered.44 Any trade union or trade union federation that contravenes this requirement will be guilty of a criminal offence and liable on summary conviction to a ne.45

37 38 39 40 41 42 43 44 45

TUO s.18(4). The level of ne is currently set at HK$200: TUO s.18(8). TURR reg.10(2). See para 16.015 for further details. TUO s.18(2)(b). TUO s.18A(1). TUO s.18A(3). TURR reg.7. The level of ne is currently set at HK$250: TURR reg.17(3).

REGISTRATION AND REGULATION OF TRADE UNIONS

707

Requirements for change of name. Section 23 of the TUO provides that a registered trade union may agree to change its name by secret ballot of a majority of its voting members present at a general meeting or of a majority of members representatives present at a general meeting where the rules of the trade union allow voting by members representatives. When a registered trade union or a registered trade union federation makes an application under s.23 of the TUO to change its name, the applicant must also submit the certicate of registration to the Registrar of Trade Unions.46 When the Registrar registers a change of the name of any registered trade union or registered trade union federation, the Registrar will amend the existing certicate of registration or issue a new certicate of registration.47 (vi) Amalgamation Trade unions are required to seek the approval of the Registrar if they wish to amalgamate. Trade unions are required to seek the approval of the Registrar of Trade Unions if they wish to amalgamate.48 Where the Registrar registers a trade union or trade union federation which is formed by the amalgamation of two or more trade unions or trade union federations, the Registrar will issue one certicate of registration in the name under which such trade unions or trade union federations are amalgamated and a copy of the rules.49 (vii) Use of funds Restrictions on use of funds. The TUO imposes restrictions on the use of funds by a trade union for political purposes. Other than as permitted under ss.33A and 33B, the funds of a registered trade union shall not, whether in Hong Kong or elsewhere(a) be applied either directly or indirectly for any political purpose or (b) be paid or transferred to any person or body of persons in furtherance of any political purpose.50 The permitted exceptions are the payment of expenses incurred by a candidate for election to a District Council or the Legislative Council,51 expenses for the holding of a meeting or the preparation and distribution of documents in support of a candidate for election to a District Council or the Legislative Council52 or expenses related to the registration of elector or the selection of a candidate for election to a District Council or the Legislative Council.53 Unhelpfully, the TUO does not dene the term political purposes, so the full effect of the restriction is unclear.54

16.024

16.025

16.026

46 47 48 49 50 51 52 53 54

TURR reg.8. TURR reg.9. TUO s.24. TURR reg.11. TUO s.34. TUO ss.33A(1)(a) and 33B(1). TUO ss.33A(1)(b) and 33B(1). TUO ss.33A(1)(c) and 33B(1). By way of comparison, in England, Chapter VI of the TULRCA sets out the necessary requirements before a trade union can have a political fund and pursue political objects. As far as the meaning of political objects is concerned, s.72 of the TULRCA provides that funds can be used for purposes such as payment of any expense incurred by a political party, the provision of any services or property for the use by or on behalf of a political party, or the holding of a ballot by a trade union in connection with any election to a political ofce: TULRCA (c. 52) s.72(1)(a), (b) and (c).

708

TRADE UNIONS

16.027

Background on the restriction of the use of funds. By way of historical background, s.34 of the TUO, restricting the use of funds for political purposes, was added as a result of the enactment of the Employment and Labour Relations (Miscellaneous Amendments) Ordinance 1997 (ELRO). In the complaint presented by the CTU to the International Labour Organisations Committee on Freedom of Association in 1997,55 the CTU contended that the provisions relating to the use of funds for any political purposes directly or indirectly56 and the restriction on the use of funds in Hong Kong or elsewhere57 violated the International Labour Organisations Convention No. 8758 which recognises the principle of freedom of association. Despite the CTUs complaint, the provisions now form part of the TUO. (viii) Loss of certicate

16.028

Circumstances where the Registrar may issue a duplicate of a certicate. The Registrar may issue a duplicate of a certicate of registration free of charge if the original has been lost, destroyed or defaced.59 (ix) Return of certicate on cancellation of registration

16.029

Return of certicate of registration. If the registration of a registered trade union or a registered trade union federation is cancelled, the person who has custody of the certicate of registration must return the certicate to the Registrar of Trade Unions within 14 days of the publication of a notice in the Gazette.60 Such notice in the Gazette must be published pursuant to s.66 of the TUO. Criminal sanction for failure to return the certicate. If the person who has custody of the certicate of registration fails to return the certicate before the required deadline, the person will be guilty of a criminal offence and will be liable on conviction to a ne.61 (c) Trade union federations (i) Provisions which apply to a trade union federation

16.030

16.031

Meaning of trade union federation. Trade union federation is dened as a trade union which is wholly an association or combination of other registered trade unions.62 Part IX of the TUO relates to the registration and regulation of trade union federations. Section 53 of the TUO provides that the provisions of the TUO will generally apply to a trade union federation as if the component trade unions comprising the trade union federation were individual members of a trade union and this is the position in

55 56 57 58

59 60 61

62

See paras 16.046 to 16.048 for further details. TUO s.34(a). TUO s.34. The Hong Kong government has applied the International Labour Organisations Convention No.87 with modications since 1963. TURR reg.12. TURR reg.13. The level of ne is currently set at HK$250 and a daily ne of HK$10 for each day during which the offence continues: TURR reg.17(1). TUO s.2.

REGISTRATION AND REGULATION OF TRADE UNIONS

709

practice. For example, s.36(2) of the TUO63 refers to registered trade union with no mention of a trade union federation. However, both a registered trade union and a trade union federation are required to comply with the requirements under s.36(2) of the TUO although the prescribed forms are different. The prescribed forms for a trade union and a trade union federation are Form 10 and Form 10F, respectively.64 There are also a number of provisions which apply only to trade union federations.65 (ii) Registration and regulation A trade union federation must consist of only registered trade unions. A trade union federation will not be registered by the Registrar of Trade Unions unless each of the component trade unions comprising the trade union federation is a registered trade union.66 Pursuant to s.54 of the TUO, an application for registration of a trade union federation must be signed by the chairman and one other ofcer of each of the individual registered trade unions. The application must be accompanied by a declaration from each of the individual unions (signed by seven voting members) evidencing that the application is made with the consent of the voting members of each union as declared by a majority of votes taken by secret ballot at a general meeting of the trade union. (iii) Ofcer of a trade union federation Eligibility of a person to be an ofcer of a registered trade union federation. A person may only be an ofcer of a registered trade union federation if: (a) he is an ofcer of one of the component registered trade unions comprising such trade union federation, and (b) he is ordinarily resident in Hong Kong.67 Alternatively, a person may be an ofcer of a registered trade union federation if he is a voting member of one of the component registered trade unions comprising such trade union federation.68 (iv) Addition to membership of trade union federations An additional trade union entering a trade union federation. After a trade union federation is registered, an additional trade union is allowed to enter into agreement for membership of the trade union federation only if each of the following conditions is fullled: (a) application for membership of such registered trade union federation has been submitted to the Registrar of Trade Unions in the prescribed form, which is signed by the secretary and not less than seven voting members of the trade union applying for such membership (any of whom may be ofcers of the trade union), and contains a declaration that such application is made with the consent of the voting members of the trade union as declared by a majority of the votes taken by secret ballot 16.034 16.033 16.032

63

64

65

66 67 68

This sub-section requires a trade union or a trade union federation (where applicable) to submit information of its membership and names of ofcers to the Registrar of Trade Unions on an annual basis. A copy of Form 10 and Form 10F can be downloaded from the public forms section of the website of the Labour Department. For ease of reference, the forms are titled RTU 13(s) and RTU 31(s), respectively, on the website. For example, s.56 of the TUO which deals with an additional trade union entering a trade union federation. See para 16.034 for details. TUO s.55. TUO s.57(a). TUO s.57(b).

710

TRADE UNIONS

at a general meeting, (b) a declaration signed by all of the ofcers of the registered trade union federation signifying consent has been submitted to the Registrar of Trade Unions and (c) the Registrar of Trade Unions has signied his/her consent in writing.69

3. MAJOR LABOUR ORGANISATIONS IN HONG KONG


(a) The four major labour organisations 16.035 The four major labour organisations in Hong Kong. The four major labour organisations in Hong Kong, namely the Hong Kong Federation of Trade Unions (FTU), the Hong Kong and Kowloon Trades Union Council (TUC), the Hong Kong Confederation of Trade Unions (CTU) and the Federation of Hong Kong and Kowloon Labour Unions (FLU), are not registered under the TUO but under the SO. These organisations are not formed for the sake of a specic industrial or occupational group of employees. Rather, they are formed with membership cutting across industries but with similar political or union ideologies. Therefore, they are not required (or eligible) to be registered under the TUO. Denition of a society under the Societies Ordinance. The SO provides for the registration of societies, for the prohibition of the operation of certain societies and for related matters.70 A society is dened as any club, company, partnership or association of persons, whatever the nature or objects, to which the provisions of the SO apply.71 The labour organisations fall within the denition of society or club. Registration is compulsory and failure to register attracts criminal sanctions.72 The Societies Ofce is the governing body of societies and is administered by the Hong Kong Police.73 Advantages of operation as a society. Though registration is compulsory, operating as a society has advantages compared to incorporation as a corporate legal entity. There is no fee for registering under the SO and the application process is comparatively simple. Application for registration requires only the name and objects of the society, the particulars of the ofce-bearers and the addresses of the principal place of business and premises owned by the society.74 There are no annual ling or reporting obligations as with a limited company. There are also no statutory accounting requirements. A society is therefore essentially self-governing and regulating which allows for less formality and more exibility. The ofcers are also not subject to the duties of a limited company director. These reasons may explain why the four major labour organisations choose to register under the SO rather than incorporate as a company limited by guarantee. SO does not apply to any trade union or trade union federation which is registered under the TUO. Whilst each of the four labour organisations in Hong Kong is

16.036

16.037

16.038

69 70 71 72 73

74

TUO s.56. SO, Long Title. SO s.2. SO s.5C. The address of the Societies Ofce of the Hong Kong Police is 12/F, Arsenal House, Police Headquarters, 1 Arsenal Street, Wan Chai, Hong Kong. Its telephone hotline is (852) 2860 3573. SO s.5 (1).

RIGHTS AND IMMUNITIES GRANTED TO TRADE UNIONS AND MEMBERS

711

registered under the SO, the individual trade unions forming these labour organisations are registered under the TUO. The Schedule to the SO expressly provides that the SO does not apply to any trade union or trade union federation which is registered under the TUO. (b) Afliated unions History of and unions afliated to the labour organisations. About half of the employees trade unions are afliated to the four major labour organisations.75 The FTU76 was founded in 1948 and has 179 afliated unions.77 The TUC78 was founded in 1948 and has 34 afliated unions.79 The CTU80 was established in 1990 and has 79 afliated unions.81 The FLU82 was established in 1984 and has 68 afliated unions.83 (c) Work of the labour organisations Promotion of interests. The four labour organisations act in the interests of workers and help to promote their interests in different ways. The mission of the FTU includes guiding labour movements, developing organisation of workers, ghting for workers interests and improving their livelihood.84 The CTU and its afliated unions engage in a wide range of activities, including organising workers in different industries, publicity campaigns, lobbying, workers education, legal assistance for workers, legal representation in labour disputes and retraining unemployed workers. The priority of the CTU is organising workers and ghting for workers rights.85 The FLU attempts to assist workers in various ways, such as helping them solve labour disputes and acting as the union representative for workers in Labour Tribunal cases.86 16.040 16.039

4. RIGHTS AND IMMUNITIES GRANTED TO TRADE UNIONS AND MEMBERS


(a) Legal status of a trade union A registered trade union is a body corporate. In Hong Kong, a trade union which is registered under the TUO may sue or be sued in its own name as registration will render 16.041

75 76 77 78 79 80 81 82 83 84 85 86

Hong Kong Yearbook 2009, fn 1, p 129. Website of the FTU (http://www.ftu.org.hk). Hong Kong Yearbook 2009, fn 1, p.129. The TUC does not have any ofcial website. The telephone number of the TUC is (852) 2384 5150. Hong Kong Yearbook 2009, fn 1, p 129. Website of the CTU (http://www.hkctu.org.hk). Hong Kong Yearbook 2009, fn 1, p 129. Website of the FLU (http://www.hku.org.hk). Hong Kong Yearbook 2009, fn 1, p 129. Website of the FTU (http://www.ftu.org.hk). Website of the CTU (http://www.hkctu.org.hk). Website of the FLU (http://www.hku.org.hk).

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it a body corporate by the name under which it is registered.87 Moreover, registration of a trade union triggers certain criminal and civil, including tort immunities on behalf of the trade union and its ofcers and members in respect of acts done in furtherance of a trade dispute.88 (b) Trade disputes 16.042 Meaning of trade dispute. Under the TUO, a trade dispute is any dispute or difference between employers and employees, or between employees and employees, connected with the employment or non-employment, or the terms of employment, or with the conditions of or affecting employment, of any person.89 Civil immunity. Where a registered trade union is involved in such a trade dispute, then the trade union is immune from civil action in respect of that trade dispute. Pursuant to s.43A(1) of the TUO, no suit or other legal proceeding shall be maintained in any civil court against an employer, an employee or a member or ofcer of a registered trade union, in respect of any act done in contemplation or furtherance of a trade dispute: (a) to which such employer or employee is a party, (b) to which such member is a party, or (c) in the case of an ofcer of a registered trade union, to which a member of that trade union is a party, on the ground only that such act induces some other person to break a contract of employment or that it is an interference with the trade, business or employment of some other person or with the right of some other person to dispose of his capital or of his labour as he wills.90 (c) Immunity from criminal prosecution 16.044 Immunity from criminal prosecution for conspiracy. The TUO provides immunity to trade union members from criminal prosecution for conspiracy. Section 40 reads: The purposes of any registered trade union shall not, by reason merely that they are in restraint of trade, be deemed to be unlawful so as to render any member of such registered trade union liable to criminal prosecution for conspiracy or otherwise. (d) Other rights given to trade union members 16.045 Range of rights given to trade union members under the TUO. Individual trade union members are given a range of other rights under the TUO. Pursuant to s.37 of

16.043

87

88 89

90

TUO s.13. By comparison, in England, a trade union is not a body corporate but it is capable of suing and be sued in its own name whether in proceedings relating to property or founded on contract or tort or any other cause of action: TULRCA 1992 (c.52) s.10. TUO ss.42, 43 and 43A. TUO s.2. The denition of a trade dispute in England is similar to that in Hong Kong but is more specic. Under section 244(1) of the TULRCA, a trade dispute is dened as a dispute between workers and their employer which relates wholly or mainly to a list of items including the terms and conditions of employment and the physical working conditions of any workers. See Practice note on Industrial action which can be obtained from the website of the Practical Law Company (http://employment.practicallaw.com/9-384-6916). For an example of the application of the comparable civil immunity provision in England in respect of economic torts, see Anglian Windows Ltd v GMB [2007] EWHC 917 (QB), 27 Apr 2007.

RECOGNITION OF COLLECTIVE BARGAINING AND COLLECTIVE AGREEMENTS

713

the TUO and reg.4 of the Trade Union Registration Regulations,91 any member of a registered trade union may inspect the accounts of the union and other documents of the union which are led with the Registrar at the Registry of Trade Unions. Pursuant to s.49 of the TUO, individual trade union members have the right to take legal action against any ofcer of the union for wilfully withholding or misapplying union funds or property.

5. RECOGNITION OF COLLECTIVE BARGAINING AND COLLECTIVE AGREEMENTS


(a) Historical background Private member bill passed before the handover. Before Hong Kongs reunication with China in 1997, Mr Lee Cheuk-yan, the General Secretary of the CTU and an elected member of the Legislative Council, put forward a private members billa bill for the Employees Rights to Representation, Consultation and Collective Bargaining Ordinancewhich was successfully passed on 26 June 1997.92 The Ordinance was designed to implement the Conventions of the International Labour Organisation, particularly those providing for collective bargaining rights.93 However, in July 1997, the Ordinance was suspended for review by the Provisional Legislative Council and was ultimately repealed under the ELRO in October 1997,94 leaving Hong Kong without a collective bargaining law. Related legislation. On 26 June 1997, the Legislative Council also passed the Employment (Amendment) (No. 4) Ordinance 1997 and the Trade Unions (Amendment) (No. 2) Ordinance 1997. The Employment (Amendment) (No. 4) Ordinance 1997 attempted to strengthen the law regarding dismissal for reason of trade union activities by entitling such dismissed employees to re-instatement in the employment or fair compensation. The Trade Unions (Amendment) (No. 2) Ordinance 1997 attempted to remove various TUO restrictions including those on the use of funds, on the formation of cross-sectoral unions, on the requirement for Government approval for international afliations, and lowered the age limit for membership from 21 to 18. However, in July 1997, the Provisional Legislative Council also suspended these ordinances. The EO and TUO were ultimately amended under the ELRO in October 1997, with many of the major pre-handover reforms repealed.95 Complaint made to the International Labour Organisation. Subsequently, in November 1997, the CTU made a complaint to the International Labour Organisations 16.046

16.047

16.048

91 92

93 94 95

Cap.332A. Report No.311 (Vol. LXXXI, 1998, Series B, No.3) of the Labour International Organisations Committee on Freedom of Association, para 248. Website of the CTU (http://www.hkctu.org.hk/english/rights/turights/htm). Website of the CTU (http://www.hkctu.org.hk/english/rights/turights/htm). In the ELRO, the lowering of the age limit was retained, and cross-sector union federations as well as association with overseas trade unions were allowed.

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TRADE UNIONS

Committee on Freedom of Association.96 In its complaint, the CTU contended that the Hong Kong government violated the International Labour Organisations Convention Nos. 87 and 98 through the amendment and repeal of the three labour Ordinances mentioned in paras 16.046 and 16.047 through its enactment of the ELRO. In the conclusion of its investigation,97 the International Labour Organisations Committee on Freedom of Association criticised the Hong Kong Government for the inadequacy of its laws in respect of collective bargaining and requested the Hong Kong government to give serious consideration to the adoption of appropriate provisions which respect freedom of association principles in the near future.98 (b) No statutory recognition 16.049 Normal contractual principles as to the incorporation of any collective bargaining agreements prevail. Notwithstanding the International Labour Organisations request, at present, there is no statutory recognition of collective bargaining agreements in Hong Kong. Normal contractual principles as to the incorporation of any collective bargaining agreements, therefore, prevail. What this means in practice is that even if a trade union enters into an agreement with the employer, the employee can only rely on the terms of the agreement if it is drafted in such a way that it becomes part of an individual employees contract of employment. Further, there are no collective consultation obligations with regard to terminations, varying terms of an employment contract or acquisitions and mergers. (c) Terms must indicate intention to create legal relations 16.050 Collective agreement not legally enforceable if no intention to be legally bound. In Hong Kong Aircrew Ofcers Association v Cathay Pacic Airways Ltd,99 a staff association100 of airline pilots sought to enforce the provisions of a collective agreement. The collective agreement established a new basings system for ight engineers and other employees who have their home country outside Hong Kong. The plaintiff staff association brought proceedings alleging that the defendant airline was in breach of the agreement, and sought enforcement of the terms of the agreement. The court held that in the absence of an express provision in the agreement to indicate that the parties intended to be legally bound by the agreement, it was necessary to look at the circumstances to see if such an intention could be inferred.101 The court came to the view that the circumstances did not support such a nding and hence, that the collective agreement was not legally enforceable. The agreement was binding in honour only.102

96

97 98

99 100

101 102

Case No.1942 of the Labour International Organisation (Cases of the Committee on Freedom of Association) (complaint presented by the CTU on 1 Nov 1997). The case is now categorised as closed by the International Labour Organisation. Report No.311 (Vol. LXXXI, 1998, Series B, No. 3) of the International Labour Organisations Committee on Freedom of Association, para 270. [1994] 2 HKLR 367. Although the case report does not make it clear, it is assumed that the association was a registered trade union. The courts analysis seems to proceed on that footing. Ibid, p 371. Ibid, p 373.

RECOGNITION OF COLLECTIVE BARGAINING AND COLLECTIVE AGREEMENTS

715

A broadly similar approach was followed and a similar result reached in Cable & Wireless (Hong Kong) Ltd Staff Association v Hong Kong Telecom International Ltd103 The plaintiff trade union and the employer had entered into a procedural agreement whereby the employer agreed to consult the trade union in the event of the need to terminate staff. The employer did terminate staff without consulting the trade union, triggering an action in which the union argued that the employer should have conducted collective negotiations in accordance with the agreement. However, the court held that the terms of the collective agreement did not clearly show an intention to create legal relations by the parties, and that the surrounding circumstances did not assist the plaintiff.104 The court viewed the climate of opinion held by persons concerned with industrial relations in Hong Kong to be that collective agreements were generally unenforceable.105 Thus, the court held that the collective agreement in question was not a binding contract. Rather, it was a gentlemans agreement binding in honour only.106 (d) Collective agreement incorporated into an employment contract Collective agreement can be incorporated into an employment contract. Although a collective agreement is generally not enforceable at the instance of the trade union, it or some of its provisions can be expressly incorporated into the individual contract, in which case, it will be treated as an express term of the contract, enforceable in the usual way. Moreover, even if not expressly incorporated, incorporation will be generally implied from the universal observance of the collective agreement in the workplace, even where the individual employee is not a member of the union that negotiated it.107 In Murray Alan Gardner v Cathay Pacic Airways Ltd,108 the court enforced a term of a pilots rostering agreement which had been collectively negotiated and agreed between the airline company and the airline pilots trade union, treating it as incorporated into the pilots individual employment contracts.109 In the case of Paquito Lima Buton v Rainbow Joy Shipping Ltd Inc,110 although the main issue in dispute was not related to collective agreements,111 the court held that the contract of employment and the collective agreement could properly be read together as constituting the contract of employment governing the parties under Hong Kong law because there was no inconsistency between the two documents and evidence showed that the parties intended to incorporate the terms of the latter into the former. 16.051

103 104 105 106 107 108 109

110 111

[2001] 2 HKLRD 809. Ibid, p 830. Ibid, p 831. Ibid. Gray Dunn & Co v Edwards [1980] IRLR 23. (unrep., HCA 3390/2001, [2003] HKEC 462). See also Lajom v Cathay Pacic Airlines Ltd (unrep., HCA 6733/1999, HCA 3377/2003, [2005] HKEC 324) for the incorporation of salary increment terms in collectively negotiated conditions of service into ight attendants individual contracts of employment. (2008) 11 HKCFAR 464. This case concerned employees compensation.

716

TRADE UNIONS

6. PROTECTION OF TRADE UNION MEMBERS AGAINST DISCRIMINATION


(a) Right to trade union membership 16.052 Trade union membership rights protected. Individual employees have their rights to trade union membership protected under Pt IVA of the EO.112 The anti-union discrimination provisions of the EO apply to all employees, including those classes of employees expressly excluded by s.4(2) of the EO.113 Individuals have the right to become a member of a registered trade union, to participate in its activities and to associate with others for the purpose of forming a trade union. This protection is limited to Hong Kong residents and to those who are engaged in the trade or industry in which the trade union is concerned.114 Part IVA of the EO generally gives effect to the provisions of art.18(1) of the Hong Kong Bill of Rights, and art.27 of the Basic Law, both of which guarantee that Hong Kong residents have freedom of association and the right to form and join trade unions. They are also intended to ensure Hong Kongs compliance with its obligations under ILC 87 and 98. (b) Right to become a member of a registered trade union 16.053 Right of an employee to become a member of a registered trade union. Section 21B(1) of the EO guarantees the right of an employee to be or to become a member of a registered trade union and to participate in its activities. It is an offence for an employer to interfere with that right.115 Moreover, termination on the basis of trade union membership triggers civil remedies under Pt VIA of the EO. (c) Right to take part in the activities of a trade union 16.054 Right of an employee to take part in the activities of a trade union at an appropriate time. Where an employee is an ofcer of a trade union, the EO gives the right to that employee to take part in the activities of the trade union at any appropriate time.116 Appropriate time is dened as time which is outside the employees working hours or within the employees working hours if the employer consents, and working hours is dened as the time during which an employee is required to be at work.117 Employers consent is required if trade union activities take place during working hours. It is important that employees obtain their employers consent to take part in any trade union activities if those activities take place during working hours.

16.055

112 113

114 115 116 117

Cap.57. Those classes of employees are individuals who are a member of the family of the proprietor of the business in which they are employed and who dwell in the same dwelling as the proprietor, individuals who enter into an employment contract in Hong Kong but the performance of the contract is outside Hong Kong or individuals who are serving under a crew agreement: Cap.57 s.4(2) (b), (c) and (d). TUO s.17(1). Section 21B(2). The offence is punishable by way of ne at level 6. EO s.21B(1). Ibid.

PROTECTION OF TRADE UNION MEMBERS AGAINST DISCRIMINATION

717

In Liu Kin Yip v Jackel Porter Co Ltd,118 the issue in dispute was whether a group of employees who had been summarily dismissed under s.9 of the EO for holding a stop work meeting for a day had been wrongfully dismissed by their employer. The court held that the dismissals were lawful on the basis that the employers deliveries had been seriously affected by the employees meeting. The court did not specically consider s.21B of the EO. However, even if the court had considered these provisions, it would appear that the conduct of the employees would not be capable of being regarded as having been carried out at an appropriate time because the stop work meeting was not agreed by the employer. It is important to note that as participation in a strike is no longer a lawful basis for summary dismissal under the EO,119 the case of Liu Kin Yip would almost certainly not be decided in the same way today. Civil remedies available for dismissal based on trade union membership. In March 1999, the Labour Tribunal ruled in favour of four employees of a cinema chain who claimed that they were dismissed for being members of a trade union. The Tribunal found that the UA Cinema Circuit had unreasonably and unlawfully dismissed120 the four employees for trade union membership and activities under the EO and awarded the four employees the sum of HK$274,000.121 The UA Cinema Circuits appeal was unsuccessful.122 Dismissal of Cathay Pacic pilots. A signicant occurrence of termination of employment by making a payment in lieu of notice in the context of alleged participation in trade union activities was the dismissal of 50 (later reduced to 49)123 Cathay Pacic pilots in July 2001 in Hong Kong. The dismissals followed a long running industrial dispute between the Hong Kong Aircrew Ofcers Association and the affected pilots. After the dismissals, a number of the affected pilots brought proceedings at the High Court against Cathay Pacic and its subsidiary and claimed that they were dismissed on the ground that they took part in trade union activities.124 The pilots claims were made pursuant to s.21B and Pt VIA of the EO.125 The airline defended on the basis that they were not obliged to give reasons for termination as a matter of employment law and denied that, inter alia, the affected pilots contracts of employment were terminated for taking part in trade union activities.126 Reyes J gave judgment on 11 November 2009127 16.056

16.057

118 119 120

121

122

123 124 125

126

127

(unrep., HCLA 53/1993, [1994] HKEC 242). EO s.9(2). Also refer to paras 16.082 to 16.084 for reference. For a discussion of what constitutes unreasonable and unlawful dismissal under Pt VIA of the EO, see Chapter 7 above. Sam Yung, Cinema four win unfair dismissal case, The Standard, 10 Mar 1999. Note that in Hong Kong, Labour Tribunal rulings are not available to the public as they are not reported or published. Hence, references are made to newspaper reports. Kai Peter Yu, UA management gave contradictory and bafing evidence, rules Labour Tribunal; Triumph for sacked cinema workers, South China Morning Post, 21 May 1999. The affected pilots are sometimes referred to as 49ers. Warham v Cathay Pacic Airways Ltd (unrep., HCA 2822/2002) on 1 Apr 2003 (Sakhrani J). Part VIA, introduced in 1997, entitled Employment Protection, provides a civil remedy to employees dismissed unlawfully, including those dismissed for reason of the membership or participation in trade union activities. See Chapter 7 above for a full consideration of employment protection under Part VIA. Note that in 2005, Cathay Pacic and a number of pilots reached a settlement; 19 of them applied for new jobs at the bottom of the seniority list with vastly reduced pay but in the event only 12 of those were offered jobs. Others continued with legal action against Cathay Pacic or opted for 10 months salary as settlement A report issued by the IHLO in Dec 2006. The report can be obtained from the IHLOs website (http://www.ihlo.org/ HKM/141206_1.html). The IHLO is the Hong Kong Liaison Ofce of the international trade union movement which was founded in 1997 after the handover. Warham v Cathay Pacic Airways Ltd (unrep., HCA 2822/2002, [2009] HKEC 1848) on 11 Nov 2009 (Reyes J).

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TRADE UNIONS

and found, amongst other issues, that the predominant reason for the termination of the pilots by Cathay Pacic was the pilots perceived participation in union activities. The sum of HK$150,000 was awarded to each affected pilot under Pt VIA of the EO. 16.058 Criminal liability for interference with trade union membership. In September 2005, British Airways pleaded guilty at the Eastern Court and was ned HK$5,000 for breaching s.21B of the EO, representing the rst successful prosecution of its kind in Hong Kong.128 In October 2005, a major government service contractor, Wai Hong Clearning & Pest Control Company Limited, was found guilty of three charges of trade union discrimination against three female former employees and, according to press reports, 129 was ned several hundred thousand dollars.130 (d) Right of association to form or register a trade union 16.059 Right of an employee to form or register a trade union. Section 21B(1) of the EO guarantees the right of association for all employees to form or register a trade union in accordance with the provisions of the TUO. (e) Employer must not prevent or deter employee from exercising his/her trade union rights 16.060 Criminal offence to deter or do any act calculated to deter an employee from exercising his/her trade union rights. Pursuant to s.21B(2) of the EO, an employer who prevents, deters or does any act calculated to deter an employee from exercising his/her trade union rights or penalises an employee for exercising his/her trade union rights commits a criminal offence and on conviction is subject to a ne at level 6.131 (f ) No offer of employment may be made conditional on avoidance of trade union afliations and activities 16.061 No offer of employment may be made conditional on agreeing to avoid trade union afliations and activities. Section 21C of the EO provides that no offer of employment may be made conditional upon the offeree: (a) not being a member of a trade union, (b) giving up existing membership of a trade union, or (c) not associating with persons for the purpose of forming a trade union. Section 21A of the EO provides that s.21C of the EO applies to every individual to whom an offer of employment is made, is about to be made and even to a prospective employee. Any individual who contravenes s.21C of the EO commits an offence and on conviction is subject to a ne at level 6.132Any individual who contravenes s.21C of the EO commits an offence and on conviction is subject to a ne at level 6.133

128 129 130 131 132 133

Felix Chan, Court slams laws in second victory for citys workers, South China Morning Post, 19 Oct 2005. Felix Chan, Court slams laws in second victory for citys workers, South China Morning Post, 19 Oct 2005. This was the second successful prosecution of its kind in Hong Kong. A level 6 ne is currently set at HK$100,000: Criminal Procedure Ordinance (Cap.221), Sch.8. A level 6 ne is currently set at HK$100,000: Criminal Procedure Ordinance (Cap.221), Sch.8. A level 6 ne is currently set at HK$100,000: Criminal Procedure Ordinance (Cap.221), Sch.8.

RESOLUTION OF TRADE DISPUTES

719

7. RESOLUTION OF TRADE DISPUTES


The purpose of the Labour Relations Ordinance. The handling of trade disputes in Hong Kong in the private sector is governed by the LRO.134 The purpose of the LRO is to provide for the improvement of labour-management relations and the settlement of trade disputes and matters incidental thereto.135 Under the LRO, trade dispute is dened as any dispute or difference between employers and employees, or between employees and employees, connected with the employment or non-employment, or the terms of employment, or with the conditions of or affecting employment, of any person.136 The denition of trade dispute under the TUO and the LRO are identical. The LRO sets out the avenues for resolving trade disputes through conciliation,137 mediation,138 arbitration,139 hearing by a board of inquiry140 and a cooling-off period.141 These procedures are explained at paras 17.113 to 17.117 of Chapter 17. 16.062

8. RIGHT TO STRIKE
(a) Meaning of strike Meaning of strike. The Public Order Ordinance (POO) itself does not provide a denition of the term strike. However, reference can be made to the use of the term in other legislation. The TUO denes strike as the cessation of work by a body of persons employed acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons employed, to continue to work for an employer in consequence of a dispute, done as a means of compelling their employer to accept or not to accept terms or conditions of or affecting employment.142 The EO expressly provides that it adopts the denition of strike in the TUO.143 The denition of strike in the LRO144 is also identical to the one in the TUO but the relevant LRO provision is not yet in operation. The ILO has its own denition of the term strike, which varies slightly from that in the TUO.145 16.063

134 135 136 137 138 139 140 141

142 143 144

145

Cap.55. LRO, Long title. LRO s.2. LRO Pt II (ss.3 to 11). LRO Pt IIA (ss.11A to 11E). LRO Pt III (ss.12 to 21). LRO Pt IV (ss.22 to 34). LRO Pt V (ss.35 to 37). These provisions relating to a cooling-off period are not yet in operation. They will operate at a time appointed by the Chief Executive in Council by notice in the Gazette. TUO s.2. EO s.2. LRO s.35(4) (not yet in operation) which belongs to Pt V of the LRO governing a cooling-off period. Part V will operate at a time appointed by the Chief Executive in Council by notice in the Gazette. A strike is dened as a temporary work stoppage effected by one or more groups of workers with a view to enforcing or resisting demands or expressing grievances, or supporting other workers in their demands or grievances: http://laborsta.ilo.org/. LABORSTA is an International Labour Ofce database on labour statistics operated by the International Labour Organisation Bureau of Statistics.

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TRADE UNIONS

(b) Frequency of industrial action 16.064 Comparison between Hong Kong and other regions. If the frequency of industrial activity is a reliable indicator, Hong Kong enjoys a relatively harmonious industrial relations climate when compared with many other jurisdictions. In Hong Kong, there were four strikes146 and lockouts147 in 2008.148 By way of comparison, in 2008, there were 177 and 144 strikes and lockouts in Australia and United Kingdom, respectively.149 Large scale strike activities in Hong Kong. However, while modest in total number, a greater than usual number of strike activities took place in 2008. In July 2008, two hundred Vitasoy transport workers took part in a strike demanding an increase in their base salaries and commissions.150 This was followed by strikes by three hundred transport workers of Watsons Water151 and two hundred Nestle employees152 who also demanded a rise in their basic salaries and commissions. On 28 December 2008, the airport ground staff employed by Hong Kong Airport Services held a three-hour strike in protest against their employers decision to cut their annual bonus.153 The strike involved 1,000 employees and caused delays in baggage handling and affected a total of 83 ights. Representatives of the employer and the employees ultimately compromised on an annual performance bonus equivalent to 18-days pay plus a HK$1,000 red packet.154 (c) The relevant freedoms (i) Basic Law 16.066 Freedom of association and freedom to strike. Article 27 of the Basic Law guarantees freedom of association and freedom to strike and provides that Hong Kong residents shall have freedom of speech, of the press and of publication; freedom of association, of assembly, of procession and of demonstration; and the right and freedom to form and join trade unions, and to strike. The entrenchment of the freedom of association and the freedom to strike in the Basic Law shows that these are fundamental rights in Hong Kong. As stated in para 16.068 below, a strike may take the form of a public procession.

16.065

146

147

148

149 150 151 152

153

154

A strike is dened as a temporary work stoppage effected by one or more groups of workers with a view to enforcing or resisting demands or expressing grievances, or supporting other workers in their demands or grievances: http://laborsta.ilo.org/. A lockout is dened as a total or partial temporary closure of one or more places of employment, or the hindering of the normal work activities of employees, by one or more employers with a view to enforcing or resisting demands or expressing grievances, or supporting other employers in their demands or grievances: http://laborsta.ilo.org/. Website of LABORSTA (http://laborsta.ilo.org/) which is an International Labour Ofce database on labour statistics operated by the International Labour Organisation Bureau of Statistics. The latest statistics available on the LABORSTA website are those in 2008. http://laborsta.ilo.org/. Joyce Man, Striking workers reject Vitasoys offer, South China Morning Post, 12 July 2008. Carol Chung and Gloria Lai, Bottled water strike hits home, The Standard, 22 July 2008. Colleen Lee and Agnes Lam, Strike to go on after Nestle staff reject offer, South China Morning Post, 28 July 2008. Airport staff wont strike over holidays, e-newsletter of the Hong Kong Institute of Human Resources Management, 29 Dec 2008; Donny Kwok, Hong Kong airport strike causes baggage delays, Reuters report, 27 Dec 2008. Nickkita Lau, Airport strike off as bosses agree to pay bonuses, The Standard, 7 Jan 2009.

RIGHT TO STRIKE

721

(ii) Bill of Rights Ordinance The right of peaceful assembly and the freedom of association. The Hong Kong Bill of Rights Ordinance155 (BORO) is the domestic enactment of the International Covenant on Civil and Political Rights (ICCPR) as applied to Hong Kong. Art.39 of the Basic Law156 has entrenched the ICCPR as applied to Hong Kong. In the context of employees right to strike, the most relevant rights are found in arts.17 and 18(1) of the BORO which provide for the right of peaceful assembly and the freedom of association, respectively. Assemblies that are not peaceful or that lose their peaceful status through the use of force do not fall within the protective scope of art.17 of the BORO.157 The right to freedom of opinion and expression, under art.16 of the BORO, is a right that has close association with the right to peaceful assembly. (d) Right to strike and the Public Order Ordinance (i) Obligations to observe before going on strike Forms which a strike may take. If a strike takes the form of a public procession,158 a public meeting,159 an unlawful assembly160 or a riot,161 there are certain provisions under the POO162 that must be observed. Police may control all public gatherings and specify the route by which any public procession may pass. Pursuant to s.6 of the POO, the Commissioner of Police may control all public gatherings and specify the route by which any public procession may pass. A public gathering is a public meeting, a public procession and any other meeting, gathering or assembly of 10 or more individuals in any public place.163 A public place is dened as any place to which the public are entitled or permitted to have access whether on payment or not.164 A meeting is any gathering or assembly of individuals organised for the purpose of the discussion of issues of concern but subject to certain exceptions such as for the purpose of a funeral.165 A public meeting is any meeting held or to be held in a public place.166 A procession is dened as a procession organised as such for a common purpose, and includes any meeting held 16.068 16.067

16.069

155 156

157

158

159 160 161 162 163 164 165 166

Cap.383. Article 39 of the Basic Law provides that the provisions of the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and international labour conventions as applied to Hong Kong shall remain in force and shall be implemented through the laws of the Hong Kong Special Administrative Region . See 16.004. Para 4 of the Guidelines on the approach to the Public Order Ordinance in relation to public meetings and public processions issued by the Hong Kong Police. The Guidelines can be located at http://www.police.gov. hk/hkp-home/english/forms/index.htm#procession. Public Order Ordinance (Cap.245) (POO) Pt III (ss.6 to 17G). The Court of Final Appeal has commented that a procession is a potent method of expression and is a common phenomenon in democratic societies including Hong Kong: Leung Kwok Hung v HKSAR [2005] 3 HKLRD 164 at para 3. POO Pt III (ss.6 to 17G). POO Pt IV (ss.18 to 26). POO Pt IV (ss.18 to 26). Cap.245. POO s.2. POO s.2. See para 16.070 for further details. POO s.2. POO s.2.

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in conjunction with such procession.167 A public procession is any procession in, to or from a public place.168 (ii) Public place 16.070 Meaning of public place. The denition of a public place under the POO was considered in the case of HKSAR v Pearce.169 During an international horserace meeting at the Hong Kong Jockey Club (HKJC), the defendant, dressed in a horse costume and a shirt with the word democracy, jumped the fence from the public enclosure