Employment Update HK November 2006

22 November 2006

Darren FitzGerald

New Legislation

Ban on smoking in the workplace
The Smoking (Public Health) (Amendment) Ordinance 2006 was passed by the Legislative Council on 10 October 2006 and will come into force on 1 January 2007. It prohibits smoking in any indoor area in a workplace. The person who is responsible for the management, or who is in charge or control of, an indoor workplace area will be under a duty to place, in a prominent position, a sufficient number of signs in English and Chinese indicating that smoking in that area is prohibited. Penalties apply. Employers in Hong Kong should now examine their no smoking policies, educate their employees as necessary and have the necessary no smoking signs in place by 1 January 2007.

Quality Migrant Admission Scheme
Since 28 June 2006 the Immigration Department has started receiving applications under the Quality Migrant Admission Scheme. The scheme is aimed at attracting talented people from Mainland China and overseas to develop their careers in Hong Kong. The scheme has an initial annual quota of 1,000, and operates on a points-based system. Applicants are required to choose to be assessed under either the General Points Test (factoring in such matters as one’s age, academic/professional qualifications, working experience, language proficiency and family background) and the Achievement-based Points Test (designed for individuals with exceptional talent and skill and who have outstanding achievements). Successful applicants will initially be granted a 12-month stay in Hong Kong. In order to be considered for a grant of further extension of stay, applicants must be able to demonstrate that they have taken steps to settle in Hong Kong by securing gainful employment or establishing a business.

Lifting of employment restrictions for dependants of expatriate workers
From 15 May 2006 dependants of persons admitted for employment in Hong Kong or as capital investment entrants can freely take up employment in Hong Kong without prior permission by the Department. This concession does not, however, apply to dependants of persons admitted to Hong Kong on student visas, who will still have to seek the Department’s prior permission if they wish to work during their stay in Hong Kong.

Case Update

Is agreement required to buy out the notice period under an employment contract?
Section 7(2) of the Employment Ordinance provides that either party to an employment contract may at any time terminate the contract without notice by agreeing to pay to the other party a sum equal to the amount of wages which would have accrued to the employee during the notice period. In Kao, Lee & Yip v Lau Wing & Tsui Wai Yu (7 March 2006), the employer plaintiff contended that there must be agreement between the employer and the employee for the employment contract to be terminated by payment in lieu of notice. The Court of First Instance held that “agreeing to pay” in section 7(2) does not mean that there must be agreement between both parties before an employment contract can be validly terminated. The phrase should be understood to mean “by agreeing to pay to the other party” instead of “by agreeing with the other party to pay”. Mutual agreement is unnecessary and either party to an employment contract can terminate unilaterally and immediately by payment of wages in lieu of notice.

Monthly commission excluded in calculation of annual leave and statutory holiday pay
In Lisbeth Enterprises Limited v Mandy Luk (28 February 2006), the Court of Final Appeal (“CFA”) decided that contractual commission calculated on a monthly basis should not be included in the calculation of annual leave pay and statutory holiday pay. Annual leave and statutory holiday pay should accrue and be calculated on a daily basis. Since the specific type of commission in question was one in which the amount cannot be finally determined until the end of the month, this commission should be excluded for the purpose of calculating the amount of annual leave/statutory holiday pay.

Working on statutory holidays
In Tam Wai Mei v Cathay Pacific Airways Limited (7 October 2005), the issue arose as to what “alternative holiday” employees will get after working on a statutory holiday. The Employment Ordinance provides that where an employee has worked on a statutory holiday, an alternative holiday needs to be granted. The Court of Appeal (“CA”) decided that employers are entitled to use extra days off which are over and above the statutory minimum “rest days” (i.e. one rest day in every period of seven days) to compensate for statutory holiday days on which their employees have worked. This ruling is clearly a welcome one to employers who ordinarily grant more than one day off per week to their employees. However, according to the CA, in order to comply with the “alternative holiday” requirement of the Ordinance, an employer must, whenever it intends to use a day off (which is over and above the statutory minimum) to compensate for a statutory holiday worked by an employee, give notice to the employee to this effect.