It is very common for large organizations to arrange one or some group companies to be the employing entities, such that the employees shall provide services not only to their employers but also to other group companies. It is intended that only the employing entities shall be treated as the sole employers. In Shiu Ming case, whilst the Employee mainly provided her services to the Parent Company of the group, she only signed an employment contract with a Subsidiary company. The Court of First Instance held that not only the Subsidiary (being the contracting party under the written employment contract), but also the Parent Company should be treated as the employers, and both companies shall be liable for the termination payments. When reading the contract as a whole, the Court considered that the parties’ intention was for the Employee to be employed by the Subsidiary as its manager and not as a manager of the Parent Company, and therefore, her contractual duties could not be extended to include duties to the Parent Company. As a result, when the Employee rendered her services to the Parent Company, she was actually carrying out her duties under another employment contract. The Court also considered facts including the discussions between the parties before and during employment, and concluded that the overall impression showed that the Employee was also employed by the Parent Company. Take away points:-
If your intention is for the Employing Entity to be the sole employer, it is important to make sure that:-
- The contract should be clearly drafted to show this intention;
- It should be clearly communicated to the employee at all times that the Employing Entity is his sole employer.
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