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					        by Stephen Powner

                                                                    Schedule 1 of the EO as employment which has lasted
                                                                    at least four weeks, during which time the employee has
         An important distinction must be drawn between the worked at least 18 hours per week. In practice the
         employee's entitlements under a contract of employment, employment of most employees who do not have any
         and those statutory safeguards which appear in the Employ- express notice agreement with their employers, will be
         metit Ordinance Cap 57 ('EO'. All sections quoted are deemed to be 'monthly renewable'. Employees will
         from this Ordinance). By and large, the latter are merely therefore be entitled to one month's notice on termina-
         'bare minimum' entitlements. Therefore the Ordinance will tion, as long as they have by the time they receive notice
         generally have no application where an employee enjoys of termination been employed for the requisite four
         more generous contractual entitlements.                    weeks. In calculating the proper notice period, any
                                                                    annual leave entitlement is not to be included.
                     to notice or wages in lieu                         The above provisions seem to have created an
                                                                    anomaly in the case of fixed term employment contracts.
         Questions often arise as to whether an employee is Although such employment will not be deemed to be
         entitled to receive notice when his employment is 'monthly renewable', it will be deemed to be 'continu-
        terminated and, if so, how much? Generally, notice ous' as long as the minimum criteria as to length of
        periods are stipulated in the contract of employment, employment (four weeks) and weekly working hours
        and so the contractual entitlement will apply, as long as (18 hours) are met. Hence 'continuous' fixed term
        the period required to be given by either party is at least contracts where the employee refuses to leave, would
        seven days (s 6). Hence contractual provisions purport- only appear to be lawfully terminable upon at least
         ing to allow less than seven days notice by either party, seven days notice, even once the fixed term has expired
        are generally unenforceable. Exceptions do exist, for (s 6(2)(c)).
        example in the case of an employee expressly 'on                Where proper notice is given (either under a contrac-
        probation'. Here no notice need be given by either party tual term or under the above statutory provisions), the
        to terminate the employment during its first month (s 6). employee must work out his notice, unless expressly
        Equally, the seven day minimum notice does not apply released by his employer. The employer may opt to
        where employment is not deemed to be 'continuous'. release the employee early, in which case the employer
            Where there is no express notice provision, (or a must pay 'wages in lieu of notice', ie the wages which the
        provision purporting to allow less than seven days employee would have earned if he had worked out his
        notice), then a statutory presumption arises, whereby notice period, but excluding any overtime payments (s 7).
        the employee's employment is deemed to be 'monthly If the employer dismisses the employee but fails to pay
        renewable', entitling both parties to receive at least one wages in lieu of notice, or the employee leaves early
        month's notice of termination, as long as the employee's without the employer's consent, then the defaulting party
        employment has been 'continuous'. This is defined in will be considered to have terminated the employment

Hong Kong Lawyer June 1995
                                                                                                                                                                  The Legal Eagle
                                                                                                                                                                        u     g

wrongfully, and will be liable to pay to the other, the                                    employer 'continuously' for at least 26 weeks of the
amount which the employee would have received if he                                        relevant year (s 11F). For the purpose of pro-rata
had worked out his notice (s 8A). Hence defaulting                                         calculations, the 'year' will either be the period as
employees can sometimes end up paying their employers                                      provided for in the contract, or if not so provided, a lunar
when they leave early without permission.                                                  year (s 11D). Likewise, the amount of such payment, will
    Of course all the matters set out above, are subject to                                either be as provided for in the contract, or if not so
the right of either party to terminate employment                                          provided, the relevant proportion of a full month's
summarily (ie without notice) in the case of gross                                         wages (s 11C). No pro-rata entitlement arises, however,
misconduct by the other party. This common law right                                       on summary dismissal of an employee (s 11F(1)).
has now been confirmed by statute (ss 9 & 10). An
employer who summarily dismisses an employee for
good cause, need only pay the employee his accrued
entitlement to wages, up to the date of dismissal. No                                     This is an area which commonly gives rise to confusion.
notice or wages in lieu thereof need be paid, and most                                    As with other entitlements, an employee's right to paid
other entitlements will be lost. An employee who leaves                                   holidays, is often expressly agreed in the employment
summarily due to an employer's misconduct, may claim                                      contract, and therefore his pro-rata entitlement on
wages in lieu of the notice he would otherwise have                                       termination of employment will likewise be governed
been entitled to receive.                                                                 by the contract. It is only where the contract is silent, or
                                                                                          where the contractual entitlements fall below the 'bare
           to i                                                                           minimum' provided for in the EO, that the statutory
                                                                                          provisions will apply. These require all employees to be
Employers and employees are generally free to agree                                       granted public holidays, or days in lieu thereof (ss 39—
whatever they like regarding 'end of year'/thirteenth                                     41E)), and all employees in 'continuous' employment to
month' payments/bonuses, and indeed are free to                                           be granted 'rest days', ie one day off in every seven (ss
expressly exclude any such entitlements (s 11B(1)).                                       17-21E)). Hence, on termination of employment, an
However, they cannot agree to exclude an employee's                                       employee must be paid for any public holiday or rest day
right to a pro-rata payment on termination of employ-                                     which is due to him. In addition, employees who have
ment (s 11B(2)), and any attempt to do so will be                                         been in 'continuous' employment with an an employer
unenforceable.                                                                            for at least 12 months, are entitled to be paid 'annual
    Whenever a contractual (as opposed to discretion-                                     leave', calculated in the manner set out in s 41 EO. This
ary) entitlement arises (whether arising expressly in                                     contains a table (at s 41AA), setting out entitlements of
writing, orally or impliedly through the conduct of the                                   between seven and 14 working days, depending upon
parties), an employee should receive his end of year                                      the length of 'continuous' employment. Except in cer-
payment, or pro-rata proportion, upon termination of                                      tain special circumstances the length of employment is
employment as long as he has been employed by his                                         calculated from the date that an employee's employ-

                                                                                  MEDOC 1989
                   The red wines of the Medoc come from the northern part of the                           balanced, dry finish. 1989 was one of the best vintages from the
                   large stretch of vines situated on the left bank of the Gironde                         very successful years of the late 1980s, and although this wine is
                   estuary. Although the Haut-Medoc is more famous, as it                                  quite open now, it will last well. Drink with light meat entrees,
                   includes all the Grand Crus Classes, the fortunes of the Medoc                          and red or white meats.
                   have revived considerably in recent years. With the area under
                   vines doubling from 1972 to 1988 to a current total of almost
                   4000 hectares. The clayey-gravelly soils are perfect for both the                                                                 STEVEN SPURRIER*
                   Merlot and Cabernet grape varieties, which produce wines with
                   a fine colour and lightly perfumed aromas, firm fruit and a                             Available at the following locations at HK$166 per bottle.
                                                                                                           HEDIARD CORNERS
                    SOLE AGENT: SHIATOS LTD.                  Tel: 2521 2383 Fax: 2845 0271                The Coo, Food Hall, Seibu, Pacific Place, Hong Kong   Tel: 2869 4716
                                                                                                           Basement 2, Sogo, Causeway Bay, Hong Kong             Tel: 2574 2870
                    * The Wine Consultant of Hediard, Singapore Airlines, Delta Airlines and Christie's.   Shop 124, Ocean Terminal, Tsimshatsui, Kowloon        Tel: 2735 1077

                                                                                                                                               Hong Kong Lawyer June 1995
The Legal Eagle

        ment first started. Hence, where employment is termi-       receivable by the employee will broadly be two-thirds
        nated, and the provisions of the EO apply, if an            of his monthly pay for each year of 'continuous'
        employee is owed annual leave for any completed year,       employment, subject to certain statutory limits, which
        he must be paid the relevant number of working days'        are amended and updated from time to time (see s
        pay, in accordance with the above-mentioned table           31G). Any contractual gratuity, or payment under a
        (even in the case of summary dismissal). However, an        retirement scheme, will be deducted from the amount
        employee who is summarily dismissed, is not entitled to     of severance pay receivable by the employee (s 31I).
        any pro-rata payment for any uncompleted year. In all           If, for some reason, an employee is not eligible for
        other circumstances, employees will only become enti-       severance pay, he may nonetheless be entitled to long
        tled to pro-rata annual leave pay, once they have           service pay, which is calculated in a very similar way,
        completed three months of the relevant year (calculated     and is subject to the same deductions for contractual
        from the date of commencement of employment, or the         gratuities or pension scheme payments. In order to
        anniversary thereof - s 41D).                               qualify, an employee must be at least 45 years old, have
                                                                    been 'continuously' employed for at least five years,
                             to                                     and be ineligible for severance pay. There are also
                                                                    specific provisions for employees who resign clue to ill-
        Again, express contractual provisions may govern the        health, or resign having reached 65 years of age. As
        entitlements of a pregnant employee whose contract is       before, employees who are summarily dismissed for
        terminated. As before, if the contract is silent or pro-    good cause, are denied both these entitlements.
        vides for less than the statutory 'bare minimum', the EO
        will apply.
            Female employees who have been 'continuously'
        employed for at least 26 weeks are entitled to ten weeks    Generally an employee's entitlements (whether contrac-
        unpaid maternity leave. Those 'continuously' employed       tual or statutory) should be paid at the time the employ-
        for at least 40 weeks are entitled to the same length of    ment is terminated but in any event within seven days
        paid maternity leave (ss 12 & 14).                          thereof (s 25(1)). However, before payment, the employer
            An employee may give written notice of an impend-       is entitled to make lawful deductions, eg of any sum due
        ing pregnancy to her employer, as soon as it has been       by an employee to his employer where the employee
        medically confirmed. Thereafter, it is a criminal offence   leaves before completing his notice (s 25(3)).
        for an employer to dismiss such an employee, as long            Where an employer or employee fails or refuses to pay
        as she has by the time of dismissal she has been            the entitlement of the other party, then generally a claim
        'continuously' employed for at least 12 weeks (s 15(1)A).   must be lodged with the Labour Tribunal within 12 months
            Employees who are dismissed in contravention of         of termination. However, care should be taken, because
        these provisions, are entitled to receive notice or wages   for some entitlements, eg severance or long service pay,
        in lieu thereof and either an extra one week's pay (in      the claim must at least be notified to the employer in
        cases of employees otherwise entitled to unpaid mater-      writing within three months of termination.
        nity leave) or their full ten weeks pay (in cases of
        employees otherwise entitled to paid maternity leave).
        These provisions do not apply to employees who are
        summarily dismissed for good cause.                         In determining entitlements on termination of employ-
                                                                    ment, look first at the contract of employment to
                                                                    ascertain the respective rights of the parties. If the
                                                                    contract is silent, or appears to exclude or fall below
       The right to severance pay accrues to all employees          minimum statutory entitlements, then the EO should be
       who have been 'continuously' employed by an em-              consulted to determine the position. In all cases, claims
       ployer for at least 24 months, and who are 'dismissed by     which cannot be settled amicably, should be quickly
       reason of redundancy'(s 31B). In practice this will cover    lodged with the Labour Tribunal, in order to ensure that
       most termination situations, except where an employee        they do not fall outside the relevant limitation period.
       voluntarily resigns or is summarily dismissed. Sever-
       ance pay entitlement may also be denied, 'where an              Stephen Powner is a partner of Stevenson, Wong &
       employee has been offered, but unreasonably refuses,         Co, and is a lecturer in Employment Law at the Hong
       suitable alternative employment (s 31C). The amount          Kong Institute of Human Resource Management. *•'

Hong Kong Lawyer June 1995
 by the Labour R e l a t i o n s D i v i s i o n (1) of the Labour Department
This article seeks to highlight the intrinsic rigour of the existing conciliatory role of the Labour
Department in resolving industrial conflicts in Hong Kong,

Unique Features of the Hong Kong Industrial Relations       The Conciliation Process
                                                             Voluntary conciliation is the intervention by a third party
 The most striking characteristic of the industrial          in a labour dispute to encourage and help the parties to
 relations scene in Hong Kong is its extremely low           negotiate, to compromise, and to adjust their demands
 level of industrial conflicts in terms of the recorded      or concessions until they find common ground for
 incidence of work stoppages and the number of               settlement. Unlike the Advisory, Conciliation and. Arbi-
 working days lost in trade disputes. Conducive to this     tration Service (ACAS) of the United Kingdom and many
 general state of industrial harmony arc sonic salient       other agencies in places where labour disputes are
 features in the labour processes particularly relevant      resolved outside the government machinery, the La-
 to Hong Kong, In the first place, the great majority        bour Relations Division (LRD) of the Labour Department
 of establishments in Hong Kong are small, and the          operates within the government: bureaucracy. It is
 rale of labour mobility is high. "This has rendered the    responsible for providing free voluntary conciliation
 organisation of collective industrial actions relatively   sendee to employers and employees for speedy settle-
 difficult compared to that of the Western world.           ment of their conflicts in an informal manner. For the
Trade union development in Hong Kong is also                past decade or so, an annual average of over 17,000
characterised by its ideological division, fragmenta-       cases, including labour disputes of a collective nature
tion and hence not conducive to efforts made by             and wage claims of individual employees were handled
 unions seeking recognition and collective bargaining       by the LRD by way of conciliation. About 70 per cent of
rights. Given the above characteristic features of          all the cases handled were successfully settled in this
industrial relations in Hong Kong and the prevalence        speedy manner without recourse to judicial proceed-
of the traditional Chinese attitude of 'harmony' in the     ings,
cultural context, large-scale labour disputes involv-            At present, the LRD offers its conciliation service to
ing work stoppages or collective industrial actions         the public from 10 locations, As the service is a voluntary
are relatively few in number. Industrial conflicts are      one, the success or otherwise of the conciliation efforts
predominantly concerned with conflicts of rights            of the LRD officials depends very much on the goodwill
from individuals claiming statutory or contractual          and consent of the parties to co-operate and compro-
benefits rather than conflicts of interests expressed       mise at conciliation meetings in which the conciliation
through organised labour groups or collective bar-          officers act as a neutral intermediary assisting the parties
gaining. Above all, underpinning the harmonious             in dispute to resolve their differences. In order to
industrial relations is a well-established mechanism        perform his job effectively, the conciliation officer must
whereby labour disputes of all sizes are promptly           be above suspicion of bias or prejudice and be seen to
resolved. This mechanism of voluntary conciliation          be maintaining his impartial stand at all times. Vigorous
and related services rendered by the Labour Rela-           efforts are made to ensure that these conciliation officers
tions Division (LRD) of the Labour Department has           are well-trained and fully equipped to perform their
significantly contributed to the maintenance of good        duties.
labour-management relationship and hence social                 In view of the enormous number of cases handled
stability and economic prosperity in Hong Kong.             each year and the increasing complexity in these cases

                                                                                                  Hong Kong Lawyer June 1995
 The Legal Eagle

         brought about by changing circumstances and the              involved work stoppages of bus drivers in 1989. Should
         intricate web of statutory employment benefits, concili-     special conciliation still fail, a report on the trade dispute
         atory work is undoubtedly onerous. In spite of the           together with recommendations may be submitted by
         difficulties, the success rate in the settlement of labour   the Commissioner for Labour to the Governor-in-Coun-
         disputes and wage claims by the LRD has been consist-        cil. The Governor-in-Council may, with the consent of
         ently high, which must be seen as an indication of the       the parties concerned, refer the dispute to arbitration, or
         general acceptability and effectiveness of the concilia-     to a Board of Inquiry, or take such other action as
         tion service as the mechanism for dispute settlement.        warranted by the circumstances of the dispute. Inde-
             For trade disputes and claims remaining unsolved         pendent of conciliation and other efforts, Part V of the
         despite the efforts at conciliation, the aggrieved parties   LRO (to be effective upon the consent of the Governor)
         may seek judicial adjudication of their disputed claims      also empowers the Governor-in-Council to order a
         either in the Labour Tribunal or the Minor Employment        cooling-off period of 30 days (which may be extended
         Claims Adjudication Board (MECAB) depending on the           by another 30 days) where the trade dispute is likely to
         amount of claims and the number of claimants in-             be seriously injurious to the economy, public order or
         volved. Other cases involving insolvency of the em-          internal security of Hong Kong.
         ployers will be referred to the Legal Aid Department for
         bankruptcy or winding-up proceedings and to apply for        An integrated Approach to Industrial Relations
         ex-gratia payments from the Protection of Wages on
         Insolvency Fund.                                             Conciliation by the LRD does not operate in a vacuum.
                                                                      Alongside the conciliatory role in resolving labour dis-
         The Legal Framework of Conciliation                          putes, the LRD is also actively engaged in other related
                                                                      services with a view to bringing forth good labour-
         Officially recorded labour disputes are categorised into     management relationship, thus preventing the occurrence
         trade disputes and claims. Wage claims are grievances        of trade disputes. First, education programmes for and
         over contractual or statutory benefits involving individu-   close liaison with labour and management and their
         als or small groups of workers. Trade dispute, as defined    associations through various media and communication
         under the Labour Relations Ordinance (LRO) and the           channels help to foster communication and improve
          Trade Unions Ordinance (TUO), refers to any dispute or      mutual understanding and trust between the two parties
         difference between employers and employees, or be-           and with the government. Secondly, constantly reviewing
         tween employees and employees, connected with the            and making improvement to labour legislation will keep
         employment or non-employment, or the terms of em-            such provisions abreast of social needs. Thirdly, in enforc-
         ployment, or with the conditions of or affecting employ-     ing the minimum employment standards laid down in the
         ment, of any person. While the overwhelming majority         Employment Ordinance, punitive measures will be taken
         of disputes belong to the former category, the major         where education and persuasion have proved ineffective
         causes for both wage claims and trade disputes were          to deter employers from failing to observe statutory
         concerned with disputes of statutory rights rather than      provisions. The LRD has played its role of bridging the gap
         disputes of interests. Even where large-scale trade          between employers and employees and fostering their
         disputes involving work stoppages or supports from           relationships through both remedial and preventive
         organised labour groups has taken place, conciliation        measures.
         has proved to be extremely effective in bringing forth
        amicable settlement under the existing legal framework.       Conclusion
             The Labour Relations Ordinance (LRO) provides the
        legal basis for the machinery of settling trade disputes      Given the special characteristics of the local trade
        involving large numbers of employees or work stop-            union movement, the general lack of formal collec-
        pages of a massive scale. Where a trade dispute is not        tive bargaining procedures, and the prevalence of the
        settled by ordinary conciliation, the Commissioner for        Chinese attitude of 'harmony' of the Hong Kong
        Labour may appoint a special conciliation officer to          people, the predominance of individual claims of
        continue conciliation. There has only been one occa-          statutory rights vis-a-vis disputes of a massive scale
        sion on which the Commissioner for Labour had to              is the unique feature of industrial conflicts in Hong
        invoke the LRO provisions by appointing the Chief             Kong. The great majority of these individual claims
        Labour Officer as a special conciliator who successfully      have been speedily and successfully settled by way
        resolved the impasse. That massive labour dispute             of voluntary conciliation. *

Hong Kong Lawyer June 1995