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Deacons' HR & Pensions Newsletter: October 2012

Submitted By Firm: Deacons

Contact(s): Cynthia Chung


Cynthia Chung

Date Published: 10/16/2012

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Employee Choice Arrangement -- Rights and Obligations on Employers and Employees

The Mandatory Provident Fund Schemes (Amendment) Ordinance 2012 which aims to regulate the MPF intermediaries was gazetted on 29 June 2012 and the long-awaited Employee Choice Arrangement ("ECA") will come into operation with effect from 1 November 2012.

Position before the introduction of the ECA

Since the implementation of the MPF regime in 2000, the employers are responsible for choosing the MPF scheme for their employees. Under the old regime, employees can only choose which investment funds to invest into within the employer's choice of MPF scheme.

Before the ECA, the accrued benefits derived from both employer mandatory contributions and employee mandatory contributions made during current employment have to stay in the MPF scheme of the employer's choice before cessation of employment. In case an employee has transferred accrued benefits derived from mandatory contributions relating to his former employment(s) or self-employment(s) to the contribution account under his current employment, such mandatory contributions cannot be transferred out also.

For the voluntary contributions (including both employer and employee contributions derived from current or former employment(s)), their transferability is subject to the governing rules of the relevant MPF scheme.

Position after the introduction of the ECA

With the introduction of the ECA, the employees will be provided with greater autonomy and flexibility in choosing the MPF scheme of his own choice. The employees will be allowed (but not obliged) to transfer the accrued benefits derived from employee mandatory contributions in their contribution account made during current employment to another MPF scheme of the employees' own choice.

Unless the governing rules of the original MPF scheme provide for more frequent transfers, the transfer can be carried out on a lump sum basis at least once every calendar year (i.e. from 1 January to 31 December).

In addition to the above, if the employees have transferred accrued
benefits derived from mandatory contributions relating to their former employment(s) or self-employment(s) to the contribution account under current employment, such mandatory contributions can also be transferred to another MPF scheme of their own choice in a lump sum at any time.

The accrued benefits which have been transferred out will be kept in the employees' own "personal account" in the MPF scheme of their choice and can thereafter be transferred at any time as in the same case for balances in a member's "preserved account" before the ECA.

There will be no change in terms of the transferability of employer mandatory contributions made during current employment and also voluntary contributions from current or former employment(s)/self-employment(s).

What are the obligations on the employees?

With the implementation of the ECA, the employees will be given the additional rights and flexibility to transfer their accrued benefits to the MPF scheme of their own choice. Of course, they are not obliged to do so and in fact, before they make any decision in relation to transfer out their accrued benefits, they should consider carefully all the relevant factors and seek professional advice, if necessary.

The key factors that the employees will need to consider include the following:

  • Services of the existing MPF scheme
  • Fees and charges
  • Investment performance
  • Choices and risk profiles of investment funds < >Employee's own personal circumstances

What are the rights and obligations on the employers?

The ECA has not provided additional legal rights nor has it imposed additional legal obligations on the employers. The employers will not be required to be involved in the transfer process nor will they be required to contact the new trustee which the employees have chosen.

From the employer's perspective, the employee mandatory contributions from current employment will continued to be made to the employer's MPF scheme and there will be no change to that. In case a transfer of employee mandatory contributions from current employment has been made and the employee wishes to transfer accrued benefits from subsequent employee mandatory contributions to another MPF scheme, he has to make another election in the next calendar year (or later in the same calendar year if the governing rules of the original scheme allow frequent transfers).

There will also be no change in the offsetting arrangement for statutory severance payment or long service payment. Any offsetting will be made from the accrued benefits derived from employer mandatory contributions made under current employment and this explains why those accrued benefits will not be transferable under the ECA and they must be kept in the contribution account of the employer's MPF scheme before cessation of employment.

Even though the employer will not be involved in the transfer process, the employers should be prepared that in practice, the employees may approach them on any enquiries regarding the ECA. Given the employees may have enquiries on the transfer, the employer should be prepared to answer enquiries from the employees and give the employees relevant information where possible and feasible to do so (including information on different MPF schemes). The employer should also provide the employees with the information for completing the transfer election form in case the employee is in doubt, e.g. employer's identification number.

Employers should review and communicate with their existing MPF service provider to understand if the transfers have been running smoothly for their employees and if there is any way the employers can help the employees in achieving their purposes. 

Cantor Fitzgerald Europe vs. Boyer [2012] HKCU 478

Cantor Fitzgerald took a number of its former employees to court alleging breach of employment contracts and fiduciary duties with respect to team move.

A summary of the important rulings of this case has already been set out in our Litigation & Dispute Resolution Newsletter: Issue 2 of 2012 (April) (

In this article, we wish to highlight two employment related issues: the first one being the application of the Employment Ordinance to those employment contracts expressly governed by foreign law, and the second one being the enforceability of those provisions which restrict the time when the contracting party may serve termination notice.

A. Application of the Employment Ordinance on contracts governed by foreign law

In Hong Kong, it is common for multi-national companies to enter into employment contracts with their senior officers, which are governed by the laws of their head office rather than Hong Kong law. This is particularly the case if the senior officers are in fact transferred from the head office. This is to ensure that senior officers enjoy the same level of benefits, and are subject to the same level of restrictions.

It has long been the understanding that parties have freedom to choose the governing law of their contracts provided that it is not a sham to deprive the benefits of the employees. If the employment contract is not governed by Hong Kong law, the Employment Ordinance shall not apply and shall have no effect.

The above understanding is supported by the case HSBC Bank plc v Wallace [2008] 1 HKLRD 613. This case was heard in the Court of First Instance.

In the HSBC case, the defendant employee was employed by HSBC Bank plc, a company incorporated and based in the UK. Their employment contract was governed by English law. He was then seconded to work for HSBC Markets (Asia) Limited, a company incorporated and based in Hong Kong.

Under the UK contract, the defendant employee had the right to terminate the employment with HSBC Bank plc by serving six months' written notice. There was no provision giving him the right to make payment in lieu of notice in the contract, and under UK law, he did not have such right unless the contract provided otherwise.

The defendant employee purported to terminate his employment with HSBC Bank plc with immediate effect by making payment in lieu of notice relying on section 7 of the Employment Ordinance. The court was asked to determine whether the Employment Ordinance applied in such case.

It is expressly set out in the judgement that:-

"….parties to contracts including employment contracts are entitled to choose the governing law; in this case English law. Thus there is a presumption that English and not Hong Kong laws are to be applied in establishing the parties' rights. This presumption is capable of being overridden if the statutory law of the land says so; in other words that the statute is an overriding statute……The Employment Ordinance has no similar provision; thus the Employment Ordinance is not, an overriding statute; this statutory exception does not arise."

Therefore, it was decided in the HSBC case that in case the governing law of an employment contract was not governed by Hong Kong law, the Employment Ordinance should not apply.

However, the judge in the Cantor case did not agree with the judge's reasoning in the HSBC case, and since the HSBC case was not binding on him, the judge in the Cantor case decided not to follow the same.

In the Cantor case, the 1st Defendant's employment contract with his employer CFE (a company incorporated overseas) was stated to be governed by English law. That contract had been varied by a secondment letter, which stated that his employment was governed by English law "save for any mandatory laws of Hong Kong."

As set out above, under English law, an employee does not have a right to terminate his employment by making payment in lieu of notice unless the employment contract provides otherwise. However, under section 6 of the Employment Ordinance, either party to an employment contract may at any time terminate the employment contract by giving to the other party notice of an intention to terminate. The requisite length of notice is the agreed period in the employment contract. The agreed period as stipulated in the contract with CFE was 4 months. Section 7 of the Employment Ordinance further provides that either party to an employment contract may at any time terminate the contract without notice by agreeing to make payment in lieu of notice.

The judge in the Cantor case considered that one could not attempt to get around the protection afforded by the Employment Ordinance to employees working here through the expedient of choosing a foreign law. Such attempt would be struck down by section 70 of the Employment Ordinance which prohibits parties from contracting out of the Employment Ordinance.

The judge made reference to section 4 of the Employment Ordinance:-

"4(1) Subject to subsection (2) and section 69, this Ordinance applies to every employee engaged under a contract of employment, to an employer of such employee and to a contract of employment between such employer and employee.

4(2) Subject to Part IVA, this Ordinance does not apply:-

  1. Repealed;
  2. To a person who is a member of the family of the proprietor of the business in which he is employed and who dwells in the same dwelling as he proprietor;
  3. To an employee as defined in the Contracts for Employment Outside Hong Kong Ordinance;
  4. to a person who is serving under a crew agreement within the meaning of the Merchant Shipping (Seafarers) Ordinance, or on board a ship which is not registered in Hong Kong.
  5. Repealed."

The judge considered that section 4(1) provides for the application of the Employment Ordinance to every employee engaged here under a contract of employment, to an employer of such employee, and to a contract of employment between such employer and employee. Section 4(2) then carved out an exception to the wide ambit of section 4(1). Under that exception, the Employment Ordinance was not to apply to"a person who is serving….. on board a ship which is not registered in HK". Since crew on board a ship which was not registered in HK were unlikely to be employed under contracts governed by Hong Kong law. Therefore the deliberate carving out of their contracts as an exception to section 4(1) suggested that the Employment Ordinance was intended to apply to all employments in Hong Kong, including employments governed by laws other than Hong Kong law.

Since the HSBC case and theCantor case were both heard in the Court of First Instance, they do not have overriding effect on each other. This means that we now have two conflicting cases on the issue of the application of the Employment Ordinance in those employment contracts for performance of service in Hong Kong which are expressly governed by foreign law, and the legal position remains unclear.

B. Enforceability on those provisions which restrict the time when either party may serve termination notice

The 2nd Defendant's employment contract began on 18 January 2002. It expressly provided for a narrow window for giving notice of termination. After an initial period of 2 years, the contract was automatically renewable for successive periods of 1 year. It was stated in the contract that notice to terminate must be given "on any date within the last 2 weeks of the final month of …. a Renewal Period". Such notice would then terminate the employment "on the expiry of 3 months from the latest date notice could have been given".

Section 6 of the Employment Ordinance provides that either party to a contract of employment may at any time terminate the contract by giving to the other party notice of his intention to do so. Section 6 further provides that the length of notice required to terminate a contract of employment shall be (i) in the case of a contract which is deemed to be a contract for 1 month renewable from month to month and which makes provision for the length of notice required to terminate the contract, the agreed period, but not less than 7 days; or (ii) in every other case, the agreed period, but not less than 7 days in the case of a continuous contract.

The judge in the Cantor case considered that the 3-month period was the agreed period as stipulated in section 6. In addition, section 6 provides that either party to a contract of employment may at any time terminate the contract by giving to the other party notice. Therefore, the contractual provisions restricting the time when the employee might serve notice was unenforceable.

C. Appeal

Cantor Fitzgerald has served notice of appeal, challenging the judge's decision on a number of issues. However, the issue of the application of the Employment Ordinance on employment contracts governed by foreign law is not one of the grounds of appeal. The appeal has been set down for hearing in April 2013.

Minimum Wage Commission Reaches Consensus on Recommended Statutory Minimum Wage Rate

On 25 September 2012, the Minimum Wage Commission (whose function is to report to the Chief Executive in Council its recommendation on the statutory minimum wage rate), reached a consensus that the recommended statutory minimum wage rate should be raised to HK$30 per hour ("New Rate"). The statutory minimum wage rate currently in force is HK$28 per hour.

It is expected that the Minimum Wage Commission will complete the preparation of the recommendation report for submission to the Chief Executive in Council by 31 October 2012, upon which the recommendation will then be tabled before the Legislative Council.

If the New Rate is approved by the Legislative Council, it is expected that the New Rate will come into force in May 2013 at the earliest. 

Implementation Timetable of the Personal Data (Privacy)(Amendment) Ordinance 2012

The Personal Data (Privacy)(Amendment) Ordinance 2012, which was passed by the Legislative Council earlier in June this year, came into effect progressively from 1 October 2012. The amendments will be introduced in three phases as follows:-

  1. Amendments unrelated to direct marketing and the provision of legal assistance by the Privacy Commissioner to aggrieved persons ("Legal Assistance Scheme") came into force on 1 October 2012;
  • Amendments relating to direct marketing will come into force on a day to be appointed by the Secretary for Constitutional and Mainland Affairs by notice published in the Gazette, though tentatively it is scheduled to come into force on 1 April 2013;
  • Amendments relating to the Legal Assistance Scheme will come into force on a day to be appointed by the Secretary for Constitutional and Mainland Affairs by notice published in the Gazette.

Privacy Commissioner Releases New Information Leaflets on the Personal Data (Privacy)(Amendment) Ordinance 2012

Offence for disclosing personal data obtained without consent from the data user

Under the Personal Data (Privacy)(Amendment) Ordinance 2012 ("Amendment Ordinance"), with effect from 1 October 2012, a person commits an offence if he discloses personal data of a data subject obtained from a data user without the data user's consent (i) with the intent to obtain gain for himself or another person, or cause loss to the data subject or (ii) irrespective of his intent, the disclosure causes psychological harm to the data subject.

To explain the scope of these new offences, the penalties, and the types of defences recognized under the Amendment Ordinance, the Privacy Commissioner released an information leaflet on 27 September 2012. The information leaflet is written in a question and answer format and covers the following topics:-

  1. What kind of acts will be caught under the offence?
  2. Is monetary gain or loss required for the offence?
  3. What if the act is not intended to lead to gain or loss but the data subject was humiliated as a result of the disclosure of his personal data?
  4. Will normal journalistic activities be affected by the offence?
  5. Will normal and innocuous browsing activities of web-users be affected?

In addition, the information leaflet also provides two hypothetical scenarios and suggests the courses of actions which can be taken in those situations.

The information leaflet can be found on the Office of the Privacy Commissioner for Personal Data's website at the following link:

Outsourcing the processing of personal data to data processors

The Privacy Commissioner recognizes that nowadays the trend of outsourcing and entrusting personal data processing work by data users to their agents is becoming increasingly common. The Amendment Ordinance contains amendments enhancing the protection of personal data in these circumstances by requiring data users who engage a data processor, whether within or outside Hong Kong, to process personal data on the data users' behalf, to adopt contractual or other means to (i) prevent personal data transferred to the data processor from being kept longer than is necessary for processing of the data; and (ii) prevent unauthorized or accidental access, processing, erasure, loss or use of the data transferred to the data processor for processing. These amendments have come into force on 1 October 2012.

To provide data users with information on their new obligations when entrusting personal data to third parties for processing and how to comply with the new requirements, the Privacy Commissioner released an information leaflet on 27 September 2012.

The information leaflet covers the following main topics:-

  1. The meaning of "data processor"
  2. Obligations of data users
  3. How to comply with the requirements
  4. Good practice recommendations
  5. Redress of data subjects

The information leaflet can be found on the Office of the Privacy Commissioner for Personal Data's website at the following link:

Top Five Questions to Ask When You Hire or Fire An Employee in Thailand

by Andrew Wynne (,
Partner of Price Sanond Prabhas & Wynne Lawyers


1. Will it be regarded as the commencement of a new employment, and if so is the employer obliged to recognise accrued rights of the employee from earlier employment elsewhere?

2. What are the pros and cons of fixed-term employment vs. indefinite employment for the position to be filled?

3. What (if any) particular or non-standard provisions may be desirable for inclusion in the employment contract?

4. Is the employee free from restrictive covenants to take up the job?

5. If the employee is not a Thai national, will a work permit be obtainable? If the employee will additionally require a long stay visa, will it be obtainable?


1. What is the contractual position?

2. As concerns the statutory position, are there grounds for termination for cause?

3. If not, what termination payments, e.g. payment in lieu of notice, annual leave pay or severance pay, will have to be given, and what will be the employment commencement date for calculation of severance?

4. Will/can restrictive covenants be enforced?

5. Is the termination likely to be construed as unfair, giving the employee a potential claim for additional damages? If so, can the risk be excluded by securing the resignation of the employee against an ex gratia additional payment?  

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Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

Stephen HirschfeldAs an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel


Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.


We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel