Reinstatement or Just Re-Negotiation? The Employment Amendment Bill 2016

On 12 February 2016, the Government gazetted the Employment (Amendment) Bill 2016 (the “Bill”). The Bill will be introduced into the Legislative Council for first and second readings on 2 March 2016 but it is not clear when it may come into force.

The Bill empowers the Labour Tribunal to make an order for reinstatement or re-engagement if it is requested by an employee who has been dismissed unreasonably and unlawfully (ie, an employee who has been dismissed without a valid reason and in circumstances which are prohibited under the Employment Ordinance – for example, those on maternity leave or paid sickness leave).

Previously, such an order could only be made with both the employer’s and employee’s consent, which in practice meant that it would never happen. If enacted, the Labour Tribunal could order reinstatement or re-engagement where the employee agrees and the Tribunal considers it appropriate and practicable, notwithstanding that the employer has not consented.

The proposed amendments would not affect dismissals which are unreasonable but not unlawful. In those cases, consent of both parties will still be required.

When considering the practicality of an order, the Labour Tribunal will take into account various factors including the circumstances of the dismissal and the relationship between employer and employee. Each party will be given an opportunity to put forward their respective case as to whether or not an order should be made.

Similar provisions have been in place in the UK for some time. However, under the Employment Rights Act, any dismissal found to be unfair could result in a reinstatement or re-engagement order if requested by the employee. A stark contrast however is the higher penalty in the UK for failure to comply with an order of reinstatement or re-engagement: currently 26 to 52 weeks’ pay capped at £12,350 to £24,700. In Hong Kong, the proposed penalty is three times the employee’s average monthly wage, subject to a maximum of HK$50,000. This would be paid to the employee.

This sanction would punish an employer for failing to comply with an order for reinstatement or re-engagement and is on top of the monetary remedies payable to the employee as ordered by the Tribunal. An employer who wilfully and without reasonable excuse fails to pay the penalty would also be guilty of a criminal offence.

In practice, these proposals are unlikely to be game-changers. Hong Kong is an employer-friendly jurisdiction, but most employers try to avoid dismissing unlawfully because of the financial penalties and potential criminal liability under existing law. That said, the proposed HK$50,000 penalty is relatively low and employers may prefer to offer this to employees directly to avoid the hassle and cost of having to produce evidence as to the impracticability of the employee returning. Savvy employees may use the new rights and obligations to press for a higher settlement.

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Partner, Eversheds

Registered Foreign Lawyer, Eversheds