Hong Kong High Court Reaffirms Employer’s Right to Fire Without Cause

On Dec. 29, 2023, the Hong Kong High Court handed down a decision that once again clarified and reaffirmed an employer’s unfettered right to terminate an employee by giving notice or payment in lieu in accordance with the employment contract, without giving any reason or cause.

In this case, the plaintiff, who had been employed by the defendant airline as a pilot since June 2005, was terminated in September 2019 by way of payment in lieu of notice. It is important to note that this was not a summary dismissal for misconduct. The plaintiff brought a claim against the airline at the labor tribunal that was subsequently transferred to the High Court, alleging that the airline’s decision to terminate his employment was in breach of the implied duty of trust and confidence, or wrongful dismissal, claiming substantial monetary compensation for loss of earnings of more than HK$13 million.

In addition, he raised claims for libel, defamation, dissemination of false information, reputational damage, damage to professional reputation and perjury. These claims were struck early in the proceedings upon application by the airline so the plaintiff could proceed only with his employment claim for wrongful dismissal.

The crux of the plaintiff’s complaint about his termination, relying on the case of Tadjudin Sunny v. Bank of America, National Association, was that the airline abused its power prior to terminating his employment and its actions in terminating his employment in bad faith amounted to a serious breach of its duties of trust and confidence. His allegations arose from certain findings by the airline regarding the quality, safety and security (QSS) regarding two flight incidents involving the plaintiff. He said the QSS data of the airline was wrong; that the airline allegedly fabricated the data in support of its QSS findings provided to the labor tribunal.

When the case was transferred to the High Court, the plaintiff sought leave from the court to adduce expert evidence to prove the falsity of the airline’s QSS data and that was the context in which the matter was heard before Justice Coleman in November 2023.

The airline’s position was that it was entitled to terminate the plaintiff’s employment by giving payment in lieu of notice and did so within the terms of the employment contract and in compliance with his statutory rights. Therefore, in light of the express terms of the employment contract, there cannot be an implied term that the airline cannot terminate the plaintiff’s employment unless it has a good reason or cause, or that it must allow the plaintiff some reasonable opportunity to demonstrate that no such cause existed.

While the subject of the interlocutory decision was whether or not the plaintiff’s application for leave to adduce expert evidence on the QSS data should be allowed (and the court refused to grant leave because the expert evidence was not relevant to the employment claim for alleged wrongful termination), Justice Coleman went to some length to examine the case law authorities pertaining to the issue of the implied duty of trust and confidence in an employment relationship.

He reaffirmed that “the now established existence of an implied obligation of mutual trust and confidence between employer and employee cannot be utilized to form the platform to allow an employee to recover damages for loss arising from the manner of his dismissal. This is essentially for two reasons being: 1) the obligation of trust and confidence is concerned with preserving the continuing relationship, which should subsist between employer and employee and thus is not appropriate for use in connection with the way the relationship is terminated; and 2) it would be an improper exercise of the judicial function to develop the common law to permit such claims to be made in the light of the evident intention of the legislature that they should be heard by a tribunal and the remedy should be limited in application and extent to that provided for in the statute.”

In distinguishing the Tadjudin case from the present one, the court noted that the Court of Appeal in the Tadjudin case had emphasized that “the implied anti-avoidance term was limited and specific to the facts, and it was not equivalent to a term that the employment could not be terminated without good reason.” So, it is now clear that the Tadjudin case cannot be used by claimants to assert that they were unfairly terminated without good cause or reason in contravention of the implied anti-avoidance term.

The court also repeated a point made by the airline’s counsel that the position between the employer and the employee is mutual. That is, “the circumstances in which an employer can terminate the employment are identical to those in which an employee can choose to leave. No one would seriously argue that an employee cannot resign from employment unless and until he or she has good or justified reasons for doing so, or could do so only in good faith. An employee can choose to resign for whatever reason he or she wants—including whether logical or illogical, or whether on a correct or mistaken belief of some wrong done to him or her by the employer—provided the employee serves out his or her notice or makes a payment in lieu of notice.”

Although much of Hong Kong law mirrors that in the U.K., one stark contrast is that there is no statutory protection against unfair dismissal under Hong Kong law, whereas in the U.K., the U.K. Employment Rights Act 1996 provides a “very comprehensive statutory regime of employment protection against unfair dismissal generally.” In Hong Kong, an employer has an unfettered statutory right pursuant to Sections 6 and 7 of the Employment Ordinance to terminate an employee by giving notice or payment in lieu without any reason or cause, and such entitlement cannot be watered down by any implied term of trust and confidence.

Richard Keady and Jenny Zhuang are attorneys with Dentons Hong Kong in Hong Kong. © 2024 Dentons Hong Kong. All rights reserved. Reposted with permission of Lexology.