Do Employers Have to Give a Reason for Termination – Myth or Fact [ENG/CHI] By Michael Szeto, Partner at ONC Lawyers

Facts

In the decision of Lam Siu Wai v Equal Opportunities Commission (2021) HKCU 4949, the Court of First Instance (CFI) heard that Lam has been working for the Equal Opportunities Commission (EOC) for over two decades since 1996. The last renewal of her employment with the EOC was for three years from 1 March 2016. Prior to her dismissal, Lam was a Chief Equal Opportunities Officer. Lam’s employment contract provided that the EOC may terminate her employment by giving three months’ notice or by paying three months’ salary in lieu of notice.

On 15 May 2018, the EOC gave notice and informed Lam that her employment had been terminated with immediate effect. The letter of termination stated that:

“…We come to this decision after full consideration given to your job requirements, including personal attributes needed of your Chief Equal Opportunities Officer post. Our conclusion is that your recent attitude and behaviour do not closely match with the requirements of this senior position and hence it is regrettable that we have to terminate your employment contract with the Commission.”  Upon her dismissal, the EOC paid Lam three months’ wages in lieu of notice and all benefits due to her.

Lam commenced proceedings in the Labour Tribunal, alleging that her employment was wrongfully terminated in bad faith and in doing so, the EOC had breached its implied duty of mutual trust and confidence of the employment contract. Lam claimed loss and damages, including loss of her income, the EOC’s MPF contributions, and the remaining gratuity for her remaining period of employment.

The Tribunal decided that the implied duty of mutual trust and confidence applies to the termination of an employment. The Tribunal held that the EOC bore the burden to prove that the “reason of termination” was a good and valid reason to terminate. By failing to discharge such burden, the EOC breached the implied duty of mutual trust and confidence.

The EOC appealed against the Tribunal’s decision on the grounds that it was entitled to terminate Lam’s employment without cause (by payment in lieu of notice) upon exercise of its contractual right, and the implied duty of mutual trust and confidence does not apply to the termination of employment.

Decision

The CFI noted that the implied duty of mutual trust and confidence applies to both the employer and the employee. In respect of the employer, the implied duty requires an employer not to, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between the employer and employee.

Upon considering case authorities, the CFI took the view that the fundamental purpose of the implied duty of mutual trust and confidence is to maintain the relationship between the employer and the employee and it was inappropriate to apply this implied duty to the termination of an employment. The Labour Tribunal was wrong in applying the implied duty of mutual trust and confidence to the termination of Lam’s employment. The CFI made the following important clarifications:

Clarification on the contractual right to terminate

It has been a well-established contractual right that termination of an employment can be exercised unreasonably or capriciously, as long as it is in accordance with the employment contract and, therefore, the court is not concerned with the “rightness or wrongness of a dismissal”. If the EOC was entitled to dismiss Lam without cause in accordance with the employment contract, it would also be unnecessary for the EOC to give any reason of termination at all from the beginning.

Clarification on the case authority

The CFI considered and distinguished Tadjudin Sunny v Bank of America, National Association [2016] HKCU 1193. In Tadjudin Sunny, the Court of Appeal (CA) upheld an implied term in the employment contract that required the bank not to exercise its right to terminate by giving one month’s notice or by paying one month’s salary in lieu of notice, where the CA found that such termination was intended to avoid the employee from being eligible for a performance incentive programme.

The CFI considered that Tadjudin Sunny was not an authority for the general proposition that the right to terminate without cause was qualified by an implied duty to exercise such right in good faith. Instead, Tadjudin Sunny, at the highest, was only an authority opening “the door for further development in the common law in this regard”. The CFI commented that implying a duty of good faith in the termination of employment without cause would bring about a too far-reaching effect since the reason(s) for termination may then be subject to scrutiny by the Labour Tribunal and the judiciary, which will in turn complicate the matter with more time and costs. Such a change of law, if needed, should be performed by the legislature. The CFI allowed the appeal.

Takeaway points for HR professionals

The CFI’s decision made it clear that an employer is entitled to terminate an employment by giving notice or payment in lieu of notice in accordance with the employment contract and sections 6 (Termination of contract by notice) and 7 (Termination of contract by payment in lieu of notice) of the Employment Ordinance (Cap. 57), without the need to give any reasons of termination. The common conception that employers have to give a reason for termination is a myth.

An implied duty of mutual trust and confidence applies to both the employer and the employee. Under this duty, an employer may not behave in a manner calculated and likely to destroy or seriously damage the relationship of trust and confidence between the employer and employee. An employer could be in breach if it unreasonably and unnecessarily suspends an employee from work, bullies an employee, or behaves in any abusive manner. Be that as it may, in Lam Siu Wai, the CFI has made it clear that the implied duty of mutual trust and confidence does not apply to the termination of an employment contract.

[中文版本]

撰文：司徒肇基，柯伍陳律師事務所合夥人

• 原訟法庭（原訟庭）最近審理的一宗案件中，法庭最後裁定僱主無須提供任何終止僱傭關係的原因，意指僱傭關係隱含的互信責任並不涵蓋解僱情況。

• 本案件深入剖析，只要符合僱傭合約所訂的條款，僱主可以隨意行使合約權利來解僱員工。

案件詳情

原訟庭最近就Lam Siu Wai v Equal Opportunities Commission [2021] HKCU 4949一案進行審理。案中林女士自1996年起在平等機會委員會（平機會）服務超過20年。她最後一次與平機會續約的生效日期為2016年3月1日，為期三年。林女士被解僱前擔任平機會總主任一職，所簽署的僱傭合約訂明，平機會可向她發出三個月通知或支付相等於三個月薪金的代通知金，以將她解僱。平機會於2018年5月15日通知林女士已被解僱，即時生效。解僱信說明：

「…… 本會經充分考慮閣下的職務要求而作出此項決定，包括閣下擔任平等機會總主任一職所需要的個人特性和素質。本會的結論是，閣下近期的態度和行為未能完全符合此高級職位的要求，於是決定終止閣下與本會的僱傭合約。本會對此深表遺憾。」林女士被解僱時，平機會向她支付了相等於三個月薪金的代通知金，以及她應得的所有福利。

林女士透過勞資審裁處（審裁處）展開訴訟程序，指控平機會不當及惡意將她解僱，違反了僱傭合約隱含的互信責任。她追討的損失及損害賠償包括收入損失、平機會的強積金供款損失，以及其僱傭合約剩餘年期的薪金。

審裁處裁定，隱含的互信責任適用於解僱情況，並堅持平機會有責任證明「解僱原因」屬於合理和恰當。平機會未能履行此項責任，故違反了隱含的互信責任。

平機會就審裁處的決定提出上訴，理由是 (1) 平機會有權行使其合約權利，支付代通知金以解僱林女士而無須說明原因，及 (2) 隱含的互信責任不適用於解僱情況。

裁決結果

原訟庭指出，僱傭合約隱含的互信責任同時適用於僱主和僱員。就僱主而言，這項責任要求僱主不得在沒有合理和恰當的原因下，蓄意及可能摧毀或嚴重破壞僱傭雙方的互信關係。

原訟庭經參考案例後，認為上述互信責任的基本目的是維持僱傭雙方的關係，而將這項責任用於解僱情況並不適合。審裁處將僱傭合約隱含的互信責任用於林女士被解僱的情況，是犯了法律上的錯誤。原訟庭特別澄清以下各點：

終止僱傭關係的合約權利

法律上早已確立，只要符合僱傭合約所訂明的條款，便可無理或隨意行使終止僱傭關係的合約權利。因此，法院不會考慮有關解僱「孰是孰非」。如果平機會有權根據僱傭合約解僱林女士而無須說明原因，一開始就不必說明解僱原因。

援引案例

原訟庭引用Tadjudin Sunny v Bank of America, National Association [2016] HKCU 1193為案例，並指出該案與本案的分別。Tadjudin Sunny一案中，上訴法庭（上訴庭）堅持維護僱傭合約所隱含的一項條款，就是要求僱主不得行使其權利，藉發出一個月通知或支付一個月代通知金以開除僱員。上訴庭認為Tadjudin Sunny案中，所涉僱主是意圖避免合資格僱員享有績效獎勵計劃。

原訟庭認為，Tadjudin Sunny一案不能用來支持「開除僱員而無須說明原因的權利是以真誠行使此權利的隱含責任為前提」的一般法律觀點。盡其言，該案例最多只是「為普通法的未來發展打開一扇門」。原訟庭認為，假如開除僱員而無須說明原因的權利是以真誠行使此權利的隱含責任為前提，那將帶來非常深遠的影響，因為勞資審裁處及司法機構需要耗費更多時間和費用仔細研究解僱的原因。如此重大的法律變更（如果需要）應透過立法程序處理。因此，原訟庭裁定上訴得直。

給予人力資源專才的啟迪

原訟庭在本案中清楚指出，僱主有權根據香港法例第57章《僱傭條例》第6條（以通知終止合約的情況）及第7條（以代通知金終止合約的情況），藉著發出通知或支付代通知金終止僱傭關係，而無須說明終止原因。一般人以為「僱主開除僱員必須說明原因」，實屬誤解。

僱傭關係隱含的互信責任同時適用於僱傭雙方。這項責任要求僱主不得蓄意及可能摧毀或嚴重破壞僱傭雙方的互信關係。如果僱主無理及不必要將僱員停職、欺凌僱員或作出任何濫權的行為，便會違反這項責任。即使如此，就林女士一案，原訟庭清楚指出，僱傭關係隱含的互信責任並不適用於解僱情況。