Amendments to the Employment Ordinance ("EO") which strengthen the Labour Tribunal's ("LT") powers to make an order for reinstatement or re-engagement where an employee has been unreasonably and unlawfully dismissed have now been passed and are soon to take effect. On 17 May 2018, the Legislative Council passed the Employment (Amendment) (No.2) Ordinance 2018 ("EAO") which varies the current position whereby both the employer and employee must consent to an order for reinstatement or reengagement. The EAO will come into force on 19 October 2018. It is anticipated that, applications for reinstatement as a remedy will increase; including as a strategy used by employees to leverage greater settlement payments from an employer who is unwilling to take them back.
Key amendments to the EO
The EAO amends Parts VIA and IXB of the EO in the following ways:
Strengthening the power of the LT
Previously, the LT was only able to make an order for reinstatement or re-engagement with the consent of both the employer and the employee. Now, where the employee has been found to have been unreasonably and unlawfully dismissed under section 32A(1)(c) of the EO ("Unlawful Dismissal"), the employer's agreement will not be required for the LT to order reinstatement or re-engagement. Unlawful Dismissal will occur where an employee is dismissed without a valid reason and one or more of the following is present:
- the employee is pregnant or on statutory maternity leave;
- the employee is on statutory sick leave or is suffering from a work-related illness or injury where an assessment of compensation due under the Employees' Compensation Ordinance is pending;
- the dismissal is due to the employee being a member or officer of a trade union or having engaged in lawful trade union activities; or
- the dismissal is due to the employee having given or agreed to give evidence in relation to:
- an alleged breach of the EO, the Factories and Industrial Undertakings Ordinance or any work safety obligations; or a workplace accident.
In all other cases, an order for reinstatement or re-engagement will still require the consent of both parties.
Additional financial compensation and criminal liability
In the event the employer fails to comply with an order for reinstatement or re-engagement by the specified date, the employer must pay as compensation to the employee the lesser of HK$72,500 or three times the employee's average monthly wages.
Where it later becomes no longer 'reasonably practicable' for an employer to comply with a reinstatement or re-engagement order it can apply to the LT for relief against the payment of compensation. Relief will be granted if the circumstances making compliance 'no longer reasonably practicable' are 'attributable to the employee', or due to a 'change in circumstances beyond the employer's control'. Such an application must be made within seven days from the date by which the reinstatement or reengagement is ordered to occur.
While non-compliance with an order for reinstatement or re-engagement is not itself an offence, if the employer then fails to pay compensation due to the employee wilfully and without reasonable excuse, they will be guilty of a criminal offence and may, upon conviction, be subject to fine of up to HK$350,000 and three years' imprisonment.
The amendments to the EO do not have retrospective effect and will only apply to dismissals (or notice of dismissals) where the employee was informed of the dismissal prior to 19 October 2018..
As noted above, the ability for the LT to order reinstatement without the consent of the parties is limited to where the LT has found that an Unlawful Dismissal has occurred. Further, it is common that the events leading to and following from the dismissal of an employee mean the relationship between the employer and employee has irrevocably broken down. It is possible that former employees may pursue applications for reinstatement purely as leverage to achieve a greater settlement offer from their former employer as an alternative to having the LT order reinstatement. Accordingly, employers should take additional care when dismissing employees to ensure that they have a valid reason for doing so to reduce the risk of a claim the termination amounted to an Unlawful Dismissal.