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WHEN EMPLOYMENT ISSUES AND PUBLIC LAW CROSS…
Tan Shih Ying v City University of Hong Kong [2012] HKEC 1678

Factual background

Ms. Tan (the "Applicant") was employed by City University of Hong Kong (the "University") under a 3-year fixed term contract commencing on 8 December 2008 and ending on 31 December 2011. On 29 September 2011, the Provost recommended that the Applicant not be considered for re-appointment. Shortly after, the Applicant discovered the Policies and Procedures on Redundancy (the "Policies"). She believed that she was made redundant and should thus have been given the benefit of the procedural rights set out in the Policies which the University failed to do. Accordingly the Applicant applied for judicial review of the University's decision and also commenced proceedings in the Labour Tribunal.

The Labour Tribunal proceedings were brought to an end by the University which made a limited admission of liability and a redundancy ex-gratia payment of $142,618.85 to the Applicant. The judicial review application was dismissed by the Court of First Instance (the "CFI") on 7 December 2012.

The Applicant's main arguments in her judicial review application

The University is a statutory body created by the City University of Hong Kong Ordinance (Cap. 1132 of the laws of Hong Kong) (the "Ordinance"). Section 7 of the Ordinance grants the University the power to employ staff and such power can be delegated to the President. There are however restrictions on such delegation: sections 13(4)(a) and 15(2)(a) of the Ordinance respectively provide that the power to "approve the terms and conditions of service…" cannot be delegated.

The Applicant argued that the Policies formed part of her terms and conditions of employment; and since she was made redundant, the Policies should apply to her and the University was wrong not to have applied the Policies. She further argued that the University's decision was amenable to judicial review because the University has breached section 13(4)(a) or section 15(2)(a) of the Ordinance and the terms and conditions of her employment were regulated by the Ordinance giving her employment a statutory underpinning.

The Court of First Instance's decision

The central issue of the claim in the CFI was whether there was a "public law element" in the Applicant's complaint such that the University's decision was amenable to judicial review. In holding that the required public law element was absent, the CFI outlined three different tests for deciding whether or not a public law element is present.

The statutory underpinning test

To constitute a statutory underpinning necessary to satisfy the requirement of a public law element, there should in general be a statutory provision bearing directly on the right of an employer to dismiss its employee. The mere fact that the employer is a statutory body so that its exercise of power can ultimately be traced back to a statutory provision does not constitute sufficient statutory underpinning. On the facts, the Ordinance only required the University to approve the terms and conditions of the Applicant's employment and did not require the University to contract on specified terms. It follows that there was not sufficient statutory underpinning to satisfy the requirement of a public law element.

The nature of the function being discharged

Another test is to consider the essential nature of function being exercised by the public body (i.e. whether it is a public or private function). Since there was no case law to support the proposition that a public body's decision not to renew its staff's employment contract involved the exercise by it of a public law function, the CFI found that the University was making a purely private law decision not to renew the Applicant's employment contract, which is, though non-compliant with its own internal procedures, not in breach of any statutory provisions.

Breach of public duty

This test considers whether a public body, in making the decision complained of, was performing a public duty. The public duties of the University were set out by section 3(2) of the Ordinance and included "to provide for studies, training…in technology…and other subjects of learning." On the facts, a decision in respect of the Applicant on a matter relating to her employment with the University can hardly be said to be a decision of the University in discharge of its public duties.

Advice for employers

This case confirms that employment decisions of a public body are in general governed by private law and employees who are wronged by such decisions should seek private law remedies. If however a public body is required by its governing statute to act in a specified way when making employment decisions and the public body failed to do so or if such employment decisions involve the discharge of a public duty or public function, an employee may potentially have a claim under judicial review even though these decisions may otherwise seem to be a matter of contract more commonly governed by private law.

NEW AMENDMENT TO PRC LABOUR CONTRACT LAW

Due to the abuse and excessive use of the labour dispatch arrangement since the implementation of the PRC Labour Contract Law (which came into effect on 1 January 2008) and following the Draft Amendment to the PRC Labour Contract Law which was released on 6 July 2012, the Decision on Amending the PRC Labour Contract Law ("Decision") was recently released by the Standing Committee of the National People's Congress ("NPC") on 28 December 2012 and will come into effect on 1 July 2013.

The Decision intends to further protect dispatched staff's interests by strengthening the regulation regarding labour dispatch arrangement. The salient points are highlighted below:

1. The minimum registered capital of a labour dispatch services provider shall be RMB2,000,000.
2. The labour dispatch services provider shall have a fixed premise and facilities adaptable to its business and shall have a labour dispatch management system in compliance with laws and regulations.
3. The labour dispatch services provider shall apply for administrative licence with the relevant labour administrative department in accordance with laws and shall go through corresponding company registration procedures pursuant to the laws after being granted the licence.
4. Employment by way of labour contract shall be the basic way of employment in China while employment by way of labour dispatch shall be a supplemental way of employment which shall only be applied to temporary, ancillary or substitutable positions. Temporary position refers to position which lasts for not exceeding 6 months; ancillary position refers to position which provides services to the core business; and substitutable position refers to position which is in substitution of an employee who is not able to report to duty for a period of time for reasons like going on study or leaves etc.
5. The dispatched staff shall be entitled to receive equal pay to that of the employer's employees for the same work. An employer shall comply with the principle of equal pay for equal work and pay dispatched staff equal salary with that of the employees in the same position.
6. The employer should strictly control the number of dispatched staff which should not exceed a certain percentage of its total workforce. Such figure shall be set down by relevant labour administrative department.
7. Whoever violates the PRC Labour Contract Law and engages in labour dispatching business without licence and authorization shall have its business operation banned and illegal gains confiscated by the relevant labour administrative department and be subject to a fine of not less than one time but not more than five times of the illegal gains or a fine of up to RMB50,000 if there is no illegal gain.
8. Labour dispatch services provider or an employer that is in violation of the labour dispatch provisions of the PRC Labour Contract Law shall be ordered to rectify by the relevant labour administrative department and failing to make corrections within the prescribed time limit shall be subject to a fine ranging from RMB5,000 to RMB10,000 per dispatched staff and the labour dispatch services provider shall have its licence for operating labour dispatch business revoked. The labour dispatch services provider and the employer shall assume joint liability to compensate the dispatched staff if damage is caused.

It is advisable to pay attention to the latest developments of the PRC Labour Contract Law and start to review the current employment structure and prepare for changing the employment arrangement in order to comply with the latest legal requirements.

DAYS OFF FOR NEW DADS!

Latest development in Hong Kong

Many countries now have statutory paternity or parental leave which provides a father time off work to care for a child as well as to attend to his spouse before or after confinement. What about Hong Kong?

Currently, under the Employment Ordinance (the "Ordinance"), a female employee is entitled to 10 weeks' maternity leave. Such leave will be paid if the employee has completed at least 40 weeks' continuous employment with her employer by the commencement of maternity leave. There is however no provision for paternity leave under the Ordinance, although quite a sizable number of employers do provide paternity leave voluntarily.

Since 1 April 2012, all full-time government employees who have no less than 40 weeks' continuous service immediately before the expected or actual date of childbirth have become eligible for 5 days' paternity leave on full pay on each occasion of childbirth. In November 2012, the government has agreed to start drafting new laws to give Hong Kong fathers three days' paternity leave for the first time.

Drafting considerations

A bill to enact new statutory paternity leave provisions is currently being drafted. The key drafting considerations will mostly mirror those for maternity leave and will include: eligibility for paternity leave, whether paternity leave will be paid or unpaid, the length and timing of paternity leave.

Eligibility

Some key questions that law-makers may need to consider in relation to a father's eligibility to paternity leave include:

1. Will the benefit extend to a father who adopts a child?
2. Is being legally married a prerequisite to paternity leave entitlement? If yes, is there a date by which the parents must be married?
3. Does a father have to complete at least 40 weeks' continuous employment with his employer before he becomes qualified to take (paid) paternity leave?
4. Is any documentary proof of fatherhood (e.g. marriage certificate, doctor's certificate and birth certificate) required before paternity leave will be granted? If yes, when should such documents be produced?

Payment

Another important question that law-makers need to deal with is whether or not paternity leave should be paid, and if yes, the party to pay for that leave (employer or government) and the level of payment (i.e. full pay or reduced pay, and if reduced pay, the amount of reduction). The Labour Advisory Board has recommended that the rate of payment should be 80% of the daily average of the wages earned by the employee during the 12 months preceding the commencement of the paternity leave (i.e. the same rate as maternity pay).

Other questions in relation to payment include for example whether an employer should be required to make pension contributions during paternity leave.

Length

How long should the statutory paternity leave be? The government's current proposal to grant 3 days' paternity leave has been criticised by some as ridiculous given the government has allowed its own employees to take 5 days' paternity leave on full pay. Also, should adjustment be allowed in special circumstances, e.g. in the case of difficult birth or birth resulting in the death of the mother?

Timing

Law-makers will also need to consider when paternity leave should be taken. Possible options include, for example, during maternity leave or within 1 month before and after the child's birth.

Note to employers

It appears that employers will soon have an obligation to provide paternity leave to their employees and should therefore start planning for the ways to implement paternity leave. For example, employers should start thinking about procedures for taking paternity leave and create systems to facilitate supervisors and human resources staff to take note of the leave period and also to deploy manpower to relieve the male employees. Employers should also communicate details of such procedures and systems to their employees through circulars or other simple means. Proper arrangements for providing paternity leave will not only assist employers in ensuring compliance with the statutory requirements but will also make it easier for both employers and employees to agree on the work arrangements in advance.

MONITORING EMPLOYEES' SOCIAL MEDIA POSTINGS

Use of social media for business purposes is becoming more prevalent nowadays. Social media sites therefore often present themselves as a convenient medium for an employer to explore its employees' work ethics. Further, an employer may have an interest in knowing what its employees are posting on social media sites as it might potentially be vicariously liable for its employees' postings there although at present, there has not been case law in Hong Kong that addresses the extent to which an employer may be held vicariously liable for its employees' social media postings.

The good news for employers in Hong Kong is that there is no general prohibition against an employer monitoring its employees' social media sites in Hong Kong as long as the employee monitoring measures comply with the Personal Data (Privacy) Ordinance (the "PD(P)O"). The question is therefore how and to what extent an employer can go about monitoring the social media postings of its employees.

The position under the PD(P)O

The information obtained from an employee's social media sites would satisfy the definition of personal data under the PD(P)O. When monitoring employees' social media sites, an employer must comply with the Data Protection Principles (the "DPP") in the PD(P)O which regulate the purpose and manner of personal data collection. In particular, an employer should:

• Obtain consent from an employee to use his/her personal data obtained from social media sites throughout the employment;
• Ensure that the data are collected for a lawful purpose that relates directly to its business and the collection of the data is necessary for and not excessive in relation to that purpose; and
• Ensure that the means by which it collects the data is lawful and fair in the circumstances of the case.

Evaluating the appropriateness of employee monitoring

The Privacy Commissioner has issued a set of guidelines for employee monitoring and personal data privacy (the "Monitoring Guidelines") which set out a number of factors that an employer should take into account when assessing the appropriateness of implementing employee monitoring:

Assessment

When assessing the risks that employee monitoring (including monitoring employees' social media postings) seeks to manage, the key question an employer should have regard to is whether the undertaking of employee monitoring can be justified as reasonable and fair. This means that an employer should:

• Justify the existence and extent of the risks and have well founded and legitimate reasons for the monitoring which must be related to and align with its business needs; and
• Evaluate the likely adverse impact that the monitoring may have on the personal data privacy of its employees.

Alternatives

An employer should also give careful consideration to realistic alternatives to employee monitoring. When considering this issue, an employer may reflect upon questions such as whether the monitoring can be restricted to certain personnel rather than conducted on a universal basis and whether selective or random checking as opposed to continuous monitoring is sufficient for its purpose.

Accountability

Once an employer has decided that employee monitoring is appropriate, it must be accountable for the proper conduct and operation of its monitoring activities and ensure that the monitoring is carried out by the least intrusive means. For example:

• The monitoring measures must be necessary to meet the purpose of employee monitoring and are confined to employees' work.
• The personal data collected in the course of the monitoring must be kept to the minimum necessary to protect the employer's interest.

It is important for an employer to be aware that its legal obligation extends to the acts undertaken by those employees/agents charged with the responsibility of handling the personal data collected in the course of conducting employee monitoring.

Obtaining employees' consent and designing employee monitoring policies

An employer should obtain express consent from its employees to use their personal data obtained from social media sites. This can be done, for example, by incorporating the consent into the employer's standard data collection statement and/or the employment contract.

Further, an employer should implement clear and comprehensive employee monitoring polices and social media policies that are in compliance with the requirements of the PD(P)O. These policies may help to set guidelines on an employee's use of social media and also to protect an employer's interest against potential legal liability as well as harm to its reputation from the use of social media sites.

It would also be good practice for an employer to consult its employees in the process of designing an employee monitoring policy as this may help to prevent any unpleasant surprise to the employees when the policy is put into force. Efforts should also be made to communicate the polices to employees and to inform employees of any revisions to the same.

Conclusion

With the growing popularity of the use of social media for business purposes, the need for employers to control the information placed on these sites by its employees may become more pressing. Employers may address this issue by monitoring their employees' social media postings provided that the monitoring measures are compliant with the requirements under the PD(P)O and by implementing suitably drafted social media and employee monitoring policies.

WILL WE HAVE THE 5^TH ANTI-DISCRIMINATION LAW?

The current law

Hong Kong has up to now 4 anti-discrimination ordinances including the Sex Discrimination Ordinance, the Family Status Discrimination Ordinance, the Disability Discrimination Ordinance and the Race Discrimination Ordinance. Employers are required to comply with these ordinances in formulating and implementing their human resources and recruitment policies. There is however currently no legislation banning sexual orientation discrimination and accordingly it is not unlawful for employers to discriminate against a potential employee or an employee based on his/her sexual orientation.

Background and recent developments

The question of whether or not to legislate to ban sexual orientation discrimination has been discussed for more than a decade. In 1996, the administration published a consultation paper on sexual orientation discrimination which revealed that a large majority of the community opposed to legislation in respect of sexual orientation discrimination. Some sectors considered such legislation to be a form of reverse discrimination against the rights of the majority who choose not to accept non-heterosexuality. There was however unanimous support for use of non-legislative measures to address sexual orientation discrimination.

In its report to the United Nations Human Rights Committee in September 2011, the government pointed out that in light of the International Covenant on Civil and Political Rights, self-regulation and education (as opposed to legislation) are the best means of addressing sexual orientation discrimination in Hong Kong then but the government will monitor public opinion closely.

Recently, there has been increasing open-mindedness towards homosexuality and the younger generation appears to have a higher level of tolerance for people with different sexual orientations. A few renowned local figures also proudly proclaimed their homosexuality and urged lawmakers to legislate to ban sexual orientation discrimination.

In November 2012, the matter was again brought to the discussion table in the Legislative Council which voted down a motion to launch a public consultation on whether to legislate to prohibit sexual orientation discrimination. Despite this, the debate between supporters and opponents of legislating for sexual orientation discrimination continues and it remains to be seen how the government will react.

Code of Practice*

Employers should note that although there is no law regulating discrimination based on sexual orientation, the government has published the Code of Practice against Discrimination in Employment on the Ground of Sexual Orientation (the "Code") to promote equal employment opportunities among all persons irrespective of their sexual orientation. Whilst the Code is not strict law, employers are encouraged to familiarise themselves with and comply with the Code.

The Code has made a number of recommendations to employers in relation to their human resources policies. For example:

1. Applying consistent selection criteria in all aspects of employment (e.g. recruitment, promotion, training and redundancy);
2. Adopting consistent terms and conditions of employment without giving consideration to sexual orientation;
3. Issuing a clear policy statement that discrimination and harassment at work will not be allowed on any grounds;
4. Establishing internal grievance procedures to deal with complaints concerning sexual orientation discrimination and harassment; and
5. Providing training to enhance employees' sensitivity to and knowledge of issues in relation to sexual orientation.

Conclusion

Legislating to ban sexual orientation discrimination is no doubt a highly controversial matter and there will continue to be divergent views towards it. Unless and until laws banning sexual orientation discrimination have been enacted, employers in Hong Kong are not by law prohibited from making employment decisions that take into account sexual orientation of a potential employee or an employee although it is the government's hope that employers will comply with the Code and foster a culture of greater tolerance and respect for those who are homosexuals.

* Readers should note that the government has also issued other similar codes of practice, such as the codes of practice on employment under the Sex Discrimination Ordinance, Family Status Discrimination Ordinance, Race Discrimination Ordinance and Disability Discrimination Ordinance, as well as guidelines for employers on eliminating age discrimination in employment.

EMPLOYERS MAY NO LONGER USE MPF TO SET OFF LONG SERVICE AND SEVERANCE LIABILITY

Under current Hong Kong law, the accrued benefits derived from employers' contributions under the Mandatory Provident Fund ("MPF") Scheme can be used to offset long service payments ("LSP") and severance payments ("SP"). This mechanism has long been criticised and it has been said that such a set-off arrangement will defeat the purpose of the MPF scheme which is to provide employees with retirement protection. Also, the set-off arrangement means that employees who are entitled to LSP or SP upon termination of employment often receive a very small amount of LSP or SP after deduction of employers' MPF contributions which further undermines employee protection.

A lot of people may wonder why there is such an offsetting arrangement at the beginning. It is actually due to historical reasons. Before MPF, Hong Kong did not have a mandatory system for providing retirement benefits. In order to induce employers to set up voluntary retirement schemes, the government needed to give the employers "sweetener" and thus proposed this set-off arrangement. This may make sense when running voluntary retirement schemes but there is now loud voice against this as the system becomes mandatory.

On 9 January 2013, some Legislative Council members moved the motion "Comprehensively reviewing the MPF Scheme" and urged the government to abolish the set-off arrangement and retain employees' rights to SP or LSP under the relevant provisions of the Employment Ordinance so as to provide employees with better retirement protection. This is particularly so if the MPF system is to move towards a full employee choice arrangement whereby employees will be given the choice to choose their own service provider not just on their employee's contributions but also employer's contributions.

It was not surprising that the motion was not carried as the cost of labour will significantly increase for employers. However some Legislative Council members and the MPFA will be pushing for this mechanism to be removed and so employers will need to be aware of this possible change in the future.

NO MORE LONG HOURS IN HONG KONG?

The current law

Under the Employment Ordinance, there is no general statutory provision for standard working hours in Hong Kong. Employers and employees are free to negotiate the terms and conditions of employment in relation to working hours as well as overtime work arrangements (which can be paid or unpaid, although if the employment contract provides for overtime pay, such pay is included in the calculation of various employee's entitlements and is protected by the Employment Ordinance against unlawful deductions).

There are however specific regulations under the Employment Ordinance to regulate the working hours of children aged under 15 and also young persons aged between 15 and 17 who are working in industrial undertakings. Further, some types of work are subject to working hours regulations, such as security personnel, franchised bus captains and green minibus drivers.

Recent development

In the 2010 – 2011 Policy Address, the then Chief Executive announced that with the enactment of the Minimum Wage Ordinance, the government would start a policy study on standard working hours (the "Study"). The Study was completed in June 2012 and a report was released on 26 November 2012.

Most recently, at the meeting of 17 October 2012, some Legislative Council members moved the motion "Legislating for the regulation of working hours" and urged the Government to introduce a bill on the regulation of working hours within the 2012 – 2013 legislative session. The motion was not carried at the meeting. The administration explained that introducing standard working hours before a consensus had been reached may seriously undermine labour relations and it was too early to discuss any draft bill on the regulation of working hours.

Pros and cons of regulating working hours

Regulation of working hours is a complex subject involving a myriad of social-economical issues. Whilst labour unions are concerned about the long working hours faced by many employees in Hong Kong, employers on the other hand are worried (understandably) that implementation of standard working hours will undermine flexibility of business and increase operational costs, especially for small-to-medium enterprises which are still adapting to the changes introduced by the Minimum Wage Ordinance. Accordingly, as has been revealed by the Study, it is not possible at this stage to ascertain whether regulation of working hours will be beneficial to Hong Kong as a whole and it is essential that the public is aware of its implications.

Key drafting considerations

Even when an agreement in favour of legislating for standard working hours has been reached, the design of a working hours regime that fits the needs of Hong Kong will still require further examination of many issues, including for example:

Definition of working hours

With the advancement of technology, employees may often be able to access work emails even when they have left office, making it difficult to ascertain what should be considered "working hours". Specifically, should "on-call" time or any time at which an employee is at the disposal of the employer be counted as working hours? How about meal breaks and rest breaks?

The approach to regulating working hours

Should the regime adopt limits on standard working hours (e.g. 8 hours a day) or introduce a cap on the maximum working hours instead? How should the thresholds be set (i.e. weekly or daily limit)?

Exemptions

It is important for the effective provision of certain services that exemptions from the working hours limits are included in the regime. But what are the criteria for exemption? Should exemption be based on occupation or job responsibility, or salary levels?

The way forward

Given the highly controversial nature of standard working hours, it may still take some time before our community will reach consensus as to how the issue of long working hours should be addressed. Hong Kong will be looking for an effective working hours policy that will balance the interests of both employers and employees.