It is very common for Hong Kong employers to incorporate internal disciplinary procedures in their Official Manual or Handbook to deal with employee’s conduct, ethics issues and disciplinary hearing etc. These procedures will usually set out guidelines on how and when these matters will be dealt with. However, what if an employer decides to terminate an employee without reference to its own internal procedures ? A recent Hong Kong judgment discussed the question.
Lam Chun Choi v Standard Chartered Bank (Hong Kong) Ltd  HKCFI 320
Mr Lam Chun Choi (“Mr Lam”) was formerly employed by Standard Chartered Bank (Hong Kong) Ltd (“the Bank”) as the Bank’s group legal counsel from 29 January 2007 to 5 November 2010. After an interim review in 2010, Mr Lam was put on a performance improvement plan (“PIP”). At the end of the PIP, Mr Lam was assessed to have failed to achieve the expected performance target and was summarily dismissed with wages in lieu of notice.
Mr Lam filed a claim for damages for wrongful dismissal against the Bank in the Labour Tribunal on the ground that the Bank did not follow their “Hong Kong Employee Discipline Procedures” (“HKEDP”) before dismissal which was part of the employment contract between Mr Lam and the Bank. It was argued inter alia that the HKEDP required that an investigation and a disciplinary hearing to take place before he can be summarily dismissed.
The Labour Tribunal agreed with the Bank’s assessment of Mr Lam’s performance and the manner in which the Bank dismissed him. The Labour Tribunal was of the view that the procedures and guidelines in the HKEDP were only intended to apply to misconduct or conduct related performance issues but not poor performance in general and therefore need not be considered or followed in relation to Mr Lam’s case which was termination for poor performance.
Mr Lam appealed to the Court of First Instance. Mr Lam argued that the Labour Tribunal was wrong in finding that the HKEDP did not apply to poor performance in general and therefore did not need to be considered in relation to Mr Lam’s termination. The Bank argued that the Labour Tribunal was correct in holding such view and even if the Labour Tribunal applied the HKEDP in its judgment, the Labour Tribunal would have still reached the same conclusion.
The Court of First Instance found the appeal in favour of Mr Lam.
The HKEDP provided that “formal disciplinary process” should be commenced in situations including :-
1. “where conduct or performance fails to improve to required standards despite informal improvement processes”; and
2. “where the concerns about conduct or performance are sufficiently serious to warrant immediate disciplinary action”.
Therefore, the Court of First Instance held that the HKEDP was intended to cover both :-
(1) “conduct” (involving misdeeds such as wilful disobedience, dishonesty or conflict of interest); and
(2) “performance” (involving behaviour such as incompetence, neglect of duty or general sloth or indolence).
The Court of First Instance consequently held that the Labour Tribunal had committed an error in construing whether the HKEDP could apply to poor performance in general; instead, the Labour Tribunal should have applied the HKEDP and consider whether the dismissal was wrongful. The Labour Tribunal also should have considered the dismissal within the framework of the HKEDP such as whether the Bank should have firstly investigated and conducted a disciplinary hearing before summarily dismissing Mr Lam. Therefore, it was held that the Labour Tribunal was not entitled to come to the view in relation to Mr Lam’s dismissal without first considering the HKEDP.
The matter was therefore directed for a retrial in the Labour Tribunal.
Based on the above judgment, before dismissing an employee through summary dismissal, an employer should carefully consider if it has proper grounds to do so and if all its internal procedures leading up to the dismissal have been followed. If an employer’s guidelines in relation to performance improvement should allow summary dismissal of an employee, the guidelines should be reviewed to ensure that they do not conflict with general summary dismissal procedures.
If you have any queries regarding the above eNews or any other questions relating to drafting employment contracts, formulating employment handbooks, terminating or dismissing employees or other employee stock options or compensation matters, experienced lawyers in our Employment Department would be happy to assist you.