Employment Law Update: 2015 Review and 2016 Forecast

Julia Gorham, Head of Employment Asia, DLA Piper Hong Kong

To get an overview of the major employment law-related developments in 2015 and a prediction of how the landscape may shift in 2016, Hong Kong Lawyer reached out to Julia Gorham, Head of Employment Asia at DLA Piper Hong Kong.

2015 Review

Hong Kong's recent legislative changes in the employment law space, including paternity leave and expansion of the sexual harassment legislation have not posed critical changes to most employers. However, recent consultation over further reaching reforms to the employment law framework, such as standardised working hours and reform of the discrimination laws, would potentially herald a much tougher legislative environment for employers, but with no certainty as to the implementation of any changes at this time. Other key employment law areas keeping employers and HR teams busy continue to be the most practical issues and, more crucially, in the investigations space.

Continued focus and use of internal management resources in relation to investigations is unsurprising as regulatory bodies around the world continue to take action against both individuals and organisations for high profile fraud or misconduct as well as systematic failings. With accountability for any such failings or fraud firmly at the door of senior management, at the first sign of potential misconduct employers are conducting thorough internal investigations and reprimanding wrongdoers before regulators take action. These can be investigations under whistleblowing reporting procedures, general misconduct/poor performance issues or, increasingly, investigations around sexual harassment.

Hong Kong employers are taking time to ensure that management understands what to do if an issue is reported to them and that complaints should be taken seriously. The importance of having a proper complaints handling/reporting procedure, and even whistleblowing procedure (despite the lack of a whistleblowing statute in Hong Kong, many businesses will still provide a mechanism for complaints reporting or follow overseas laws that may apply to their business overseas), has become even more crucial. Procedures should provide avenues to try and resolve issues internally before involving external parties – this is particularly important in cases of discrimination/harassment complaints or whistleblowing reports, in both cases where having procedures may provide some assurance to employees that if they make a report based on reasonable belief held in good faith, they will not be penalised for making the report. This will encourage employees to voice legitimate concerns and limit their concern about retaliation or stigmatisation. Training internal staff handling these complaints is essential to minimising risk from subsequent investigations that do not cover all the issues in the appropriate manner but also have the added benefit of driving more consistency, both in terms of the investigation process, but also in terms of any follow up staff action across the workforce regionally or globally. This tracking and monitoring can put pressure on management and Human Resources to communicate and coordinate with their peers across the organisation and many develop reporting tools to assist with this process.

Looking Ahead to 2016

Moving into 2016, internal investigations and whistleblowing will remain a relevant issue particularly with the introduction of the new Hong Kong Competition Ordinance, which we anticipate may lead to a new seam of conduct being investigated as businesses work through their obligations under the new law. The Ordinance prohibits behaviours that restrict competition in Hong Kong and businesses that are found to have infringed this law can be fined up to 10 percent of its Hong Kong turnover as well as potential directors' disqualification. Employers should provide adequate training on the new law as well as encouraging employees to escalate internally any potential issues that may amount to anti-competitive issues so that they can be addressed.

In line with this trend of businesses seeking to identify employee misconduct earlier and earlier, companies are increasingly expressing interest in the use of data analytics tools to bolster employee monitoring and detect early warning signs of potential fraud, misconduct, and other inappropriate or unethical behaviour. Although these analytics programmes can greatly benefit employers, there are a number of legal implications that need to be considered before implementation, most obviously use and storage of data, data privacy and employee consent to monitoring.

Although misconduct cases remain high profile, Asia is not immune to another key employment law issue and that is the need to restructure/right-size business models in the changing economic environment. There is an increased volume of restructuring and redundancy within Hong Kong and we foresee this will remain the case into the 2016 New Year. This is marked by a number of senior executive reorganisations with many companies streamlining their senior management teams and combining or replacing roles at lower levels. Executive exits need to be strategically planned to ensure appropriate risks are managed, both in terms of publicity and organisational reputation, as well as for the individual themselves. It is essential to ensure that any directorships or regulated roles are properly handed over and notified to the right authorities and that these processes are factored into the timeline for the restructure. Quite apart from the basic requirements of ensuring any senior executive exit covers off all payments due, issues with confidentiality and restrictive covenants as well as with public statements and announcements are key to avoid disputes and lengthy legal battles with disgruntled senior executives which will attract negative press.

Outside of the senior executive level, we anticipate continued redundancies across all workforce levels into 2016, requiring businesses to ensure they are aware of their legal obligations to staff in that scenario, particularly with difficult cases of staff on overseas contracts or staff on a statutory leave of absence. Other methods we are seeing of businesses streamlining and reducing costs are to review and alter their benefits schemes to remove or reduce additional enhancements as cost-saving measures to avoid redundancies and lower overheads. As employers are having to make difficult business decisions, it is still crucial to have a proper process for managing redundancies or the alteration of remuneration and benefits to minimise any risks which will incur extra cost further down the line.

It remains to be seen how the economic climate in 2016 will impact proposals for and progress of new employment legislation offering workforce more flexibility and enhanced rights.