Many companies in Hong Kong adopt disciplinary procedures to deal with perceived employee misconduct or performance-related issues. Generally, if an employment contract expressly states that the disciplinary procedure is of a contractual nature, then the employer must follow its procedure before carrying out any disciplinary action (including, terminating an employee's employment). However, if a disciplinary procedure is non-contractual, the employer does not have to comply with it.
In the recent case of Lam Chun Choi v Standard Chartered Bank (Hong Kong) Ltd  HKCU 460, an employee appealed against the Labour Tribunal's decision that the bank did not have to follow its own disciplinary procedure before it decided to summarily terminate his employment.
The employee was the bank's group legal counsel between 2007 and 2010. Following an interim review in 2010, the employee was put on a performance improvement plan ("PIP"). At the end of the PIP, the bank assessed that the employee had failed to achieve the expected performance level required. As a result, the bank summarily terminated the employee's employment by making a payment of wages in lieu of notice.
The employee commenced proceedings in the Labour Tribunal claiming that he had been wrongfully dismissed on the ground that the bank had failed to comply with its Hong Kong Employee Discipline Procedures ("EDP"), which provided that a formal process involving a disciplinary hearing should have taken place prior to the bank's termination of the employee's employment.
The Tribunal determined that whilst the EDP formed part of the employee's terms of employment, it was not applicable to the employee's specific situation. The Tribunal's view was that "the proper interpretation of the disciplinary procedures is that they indeed apply only to conducts or conduct related performance issues but not poor performance in general".
On appeal, the Court of First Instance was asked to interpret the EDP to determine whether the requirement of a disciplinary hearing was applicable to the employee.
Upon examination of the terms of the EDP, the High Court held that EDP references to "conduct" and "performance" intended to cover "misdeeds such as wilful disobedience, dishonesty or conflict of interest" and "behaviour such as incompetence, neglect of duty or general sloth or indolence", respectively. Consequently, the Tribunal had committed an error concerning a point of law; namely that it had erred in its construction of whether the EDP could apply to the poor performance in general.
- If the employer's disciplinary procedure is of a contractual nature, it is important that the employer adheres to it before taking any disciplinary action.
- Definitions of the conduct and/or performance matters that fall within the scope of disciplinary procedures should be refined to prevent an overly wide scope of applicability.
- Employers may wish to include alternative procedures, for example, performance improvement plans, which may be applied to an employee, instead of its disciplinary procedure, which may entitle the employer to bypass its disciplinary procedures before terminating an employee's employment for poor performance-related issues.