Academic journal article Asia Pacific Law Review

Can Employers Lawfully ‘Opt out’ of Their Statutory Obligations? A Call for Reform of Fixed-Term Employment in Hong Kong

Academic journal article Asia Pacific Law Review

Can Employers Lawfully ‘Opt out’ of Their Statutory Obligations? A Call for Reform of Fixed-Term Employment in Hong Kong

Article excerpt


In 2016, a pastry chef, after 13 years' work in a restaurant, was 'lawfully' dismissed without severance pay.1 Such dismissal has caused outrage among employees and trade unions because the chef, while being completely unaware of the legal implications behind his employer's arrangement, had been demanded to enter into successive 18-month contracts with three different companies established by the shareholders of the same restaurant.2 Unfortunately, he is not the only victim of the unregulated use of fixed-term contracts as, over the past year, the Hong Kong Confederation of Trade Unions (HKCTU) has received almost ten similar complaints involving severance pay in fixed-term employment.3 The unpalatable truth is that such use of '18-month employment contracts' is a practice commonly seen in the restaurant industry and that some food companies today even recruit workers, on an extremely short-term contract of three months, to exploit their right.4

Despite the fact that Hong Kong labour legislation was initially enacted to confer employment protections, benefits and rights upon workers, many employers take advantage of key loopholes emanating from those inadequately drafted ordinances, thereby effectively thwarting the legislative intent.5 Unfortunately, under the existing statutory framework, Hong Kong employers can, and actually do, force their employees who have a service of nearly five years to resign first and later re-engage them in order to deprive the latter of any long service payment.6 Worse still, Hong Kong employers are perfectly entitled to change the contracts of employment to short-term contracts or successive fixed-term contracts, 'deliberately making the employees unable to meet the qualifying service for long service payment or severance payment'.7 While employers often find it easy to reduce the statutory rights of Hong Kong employees, they could hardly realise their plans in many European and some Asian countries where stricter regulation on employment contracts has been imposed. Indeed, Hong Kong courts are quite sympathetic to employees and often strive to extend the coverage of statutory benefits to most classes of workers. The question is, however, whether Hong Kong legislators, despite witnessing the continued exploitations of fixed-term workers, can really afford delaying its legislative agenda and keep relying solely on the judiciary.

This article will first analyse the adverse social consequences flowing from the landmark case of Lui Lin Kam v Nice Creation Development Ltd, where the employer was officially granted the right to evade statutory duties by resorting to artificial work arrangements, and then evaluate the gap-filling role entrusted to Hong Kong judiciary in the light of the slow progress of labour law reform. After justifying the need for a substantial labour law reform, this article will further propose two major changes in relation to the duration of fixed-term employment contracts and the employers' duty to provide objective reasons for concluding those contracts, with reference to other jurisdictions, Germany in particular.

II.The dispute in Lui case - continuously employed or not?

The case of Lui Lin Kam v Nice Creation Development Ltd (Lui) is an excellent example demonstrating how an employer in Hong Kong can adopt a stratagem to lawfully avoid making a statutory payment to his employees.8 In fact, the decision in Lui reflects a long-standing social problem, traceable earlier to the 1990s. As evident from the speeches delivered in the Legislative Council:

[nowadays] a lot of unscrupulous employers take advantage of the loopholes in the legislation to ... deprive [employees] of their benefits by changing the contract of employment... employers may sign non-consecutive short-term contracts of employment of less than two years with their employees to render the latter unprotected under the provisions concerning severance.9 (emphasis added)

The last sentence mirrors what exactly happened in the Lui case, which began life as a claim in the Labour Tribunal and was eventually decided by the Court of Appeal (CA). …

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