The Human Resource Challenge Launching Pinsent Masons’ HR Network in Hong Kong

Overview Pinsent Masons launched its HR Network in Hong Kong with a roundtable discussion with HR executives at the end of November 2014. At this inaugural event, we discussed the challenges that employment lawyers and HR professionals face in managing business workforce issues and in keeping up with the expectations and demands of senior executives and other employees. The resulting conversation highlighted the key concerns of businesses in relation to employment law and HR management issues and revealed the different approaches that companies are taking in response to workforce challenges. The headline viewpoints collected under the Chatham House Rule were: • Hong Kong legislation seems over-protective of employees’ rights in some areas (notably in relation to compensation for sickness/injury) whilst otherwise being pro-employer • Traditional, all-inclusive ‘expat’ packages for employing foreigners in Hong Kong and across Asia are disappearing; businesses increasingly hire non-permanent resident staff under ‘local contracts’, but these raise issues of their own • Companies are sensitive to the use of social media by employees – most organisations have social media policies in place – but employers should also be aware of potential issues arising from the increasing use by employees of mobile technologies and commercial ‘apps’ in the workplace.

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Pinsent Masons | The Human Resource Executive

Dealing with difficult or disruptive employees The HR professionals in attendance noted: • Employees can be difficult in many ways, from simply refusing to co-operate with reasonable requests to causing trouble in the workplace by antagonising other employees • Difficult employees are a fact of running a business, and can usually be dealt with through grievance or disciplinary procedures, but when an employee truly becomes disruptive a rapid response is required • Examples of disruption include harassment of other staff or customers (verbal or physical, or indeed via online means), making untruthful or disparaging statements about employers, fellow staff or customers, or making unwarranted complaints about an organisation or its activities • Disruptive employees are increasingly using the internet, often believing they can rely on anonymity as a result. This can be especially harmful to an organisation’s reputation as well as the well-being of fellow employees • There is always a reason why an employee is being difficult. Proper investigation is essential as it may reveal internal problems within a business that need to be addressed or psychological or behavioural problems with an employee. However some employees can be disruptive in the absence of any underlying issue with the individual or organisation • In most cases disruptive behaviour will be grounds for summary dismissal. However many organisations when fearful of a claim for wrongful or unlawful dismissal will terminate the employment of a disruptive employee by making a payment in lieu of notice and requesting the employee leave immediately, after signing a compromise agreement • Of course, dismissing a disruptive employee does not mean that they will stop being difficult! When dealing with difficult ex-employees, sometimes the best course of action is to ignore them, provided that you have investigated their grievances and have established that they are unsubstantiated. Paul Haswell Partner T: +852 2294 3315 E: [email protected]

“Every employee is unique, therefore every situation where one is dealing with a difficult or disruptive employee is unique. Often, finding the cause of the disruptive behaviour and dealing with it is sufficient to bring an end to the problem, and “dealing with it” may involve everything from making changes within an organisation, to addressing problems with staff, to ultimately dismissing the disruptive employee in question. Because of this, it’s essential that businesses react quickly but decisively in the face of disruptive behaviour. Simply firing a difficult employee will just create bigger problems if the employee was reacting to a problem within the business and, where difficult behaviour moves towards harassment of other individuals, the matter must be approached with sensitivity and an eye on the possible legal repercussions. Of course, there will occasionally be times when an employee remains disruptive even long after being dismissed. In such cases ignoring the behaviour may be the best course of action, but if that proves ineffective then organisations may be required to resort to taking legal actions, be they notices to cease and desist or seeking an injunction to restrain the employee.”

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Terminating an employment contract – best practice and pitfalls The HR professionals in attendance noted: • Hong Kong legislation seems over-protective of employees’ rights particularly in relation to compensation for injury at work in accordance with the Employees’ Compensation Ordinance. Businesses are also wary of falling foul of the Disability Discrimination Ordinance which defines ‘disability’ very widely • Hong Kong is a unique jurisdiction which allows both employer and employee to terminate an employment contract either by giving notice or payment in lieu. In many jurisdictions, early termination by an employer making a payment is not permitted by law (unless, perhaps, expressed in an employment contract) • Employers often find themselves facing claims at the Labour Tribunal for wrongful dismissal notwithstanding that termination is in accordance with the relevant legislation and all statutory termination payments have been made. Employers sometimes find themselves with “greedy” or “resentful” employees and, unfortunately, having to settle the claim at the Labour Tribunal for an amount beyond the employee’s statutory entitlement • The practice of following prescribed grievance and/or disciplinary procedures before termination is not required under Hong Kong laws but some companies may nonetheless have such policies in place in accordance with the company’s practice in other regions (e.g. in Europe). It is important for employers to consider whether its company policies are contractual or non-binding on the employer in Hong Kong • Employers in Hong Kong should be careful when it comes to renewal or termination of an employee’s employment contract so that it will not be construed as trying to deprive the employee from his statutory entitlements or from the continuity of his or her employment contract • In the event that a dispute arises from termination and the parties enter into legal proceedings, a company’s internal communications are subject to discovery. Sometimes a company can find itself having to settle a dispute because of embarrassing internal communications during the termination/decisionmaking process • Post-termination restrictive covenants can be difficult to enforce in Hong Kong. Often employers may find themselves in situations where ex-employees engage in activities that are in breach of their restrictive covenants, but there is little that an employer can do because the covenants have been drafted too widely to be held enforceable by the courts.

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Pinsent Masons | The Human Resource Executive

Rachel Cheng Associate T: +852 2294 3352 E: [email protected]

“Terminating the employment of an employee is never easy – whether it is someone who has underperformed during their probation period or a long-time senior employee. The laws of Hong Kong allow both the employer and employee to terminate an employment contract by giving the required notice or payment in lieu of notice. The employer does not need to obtain any union approval or issue any mandatory warnings as may be required in other jurisdictions before termination. We note that many companies have adopted global policies which contain strict grievance and disciplinary procedures. There have been decisions by the Hong Kong Courts that such procedures are a “gentleman’s agreement”, binding in honour only. Other decisions suggest that these procedures can be contractually binding. Much depends on how policies and procedures are worded and incorporated into the contract of employment. It is a matter for the company to decide whether to have these policies in place in Hong Kong which are consistent with the company’s global policies, but it is in the employer’s interest to maintain flexibility when it comes to disciplinary and grievance procedures. Employers should also take note of the various anti-discrimination legislation in Hong Kong and ensure that termination does not fall foul of any prohibitions. Statutory termination payments should be made within the required statutory period. When in doubt, employers should seek legal advice to ensure that termination payment calculations are correct, to avoid any unnecessary claims from an employee made before the Labour Tribunal. Employers should be mindful of internal communications during the decision-making process on termination. In the event that legal proceedings are commenced, all of the company’s internal communications may be subject to discovery (i.e. disclosure to the employee and the courts). When deciding on the length of an employee’s restrictive covenants, employers should be careful about adopting a standard approach for all of its employees. The length of a restriction should depend on an employee’s seniority and the nature of their role. Employers should carefully decide on the appropriate length and scope of the restrictions that they intend to impose on a departing employee at the employment contract drafting stage. It is also a good practice to enter into a compromise agreement with a departing employee, if possible, to safeguard the employer’s position from any future dispute arising out of the termination.”

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Employment offers to local and expatriate employees The HR professionals in attendance noted: • Businesses are moving away from traditional, all-inclusive ‘expat’ packages when hiring expatriate employees in Hong Kong and across Asia, preferring to use local contracts where possible (even if they only have one employee working in a particular country, which can be time-consuming and costly to arrange) • The gap in the terms and conditions of employment between (i) local employees and (ii) expatriate employees – who work within the same company and territory – has diminished over recent years and this gap continues to diminish • When sending employees to work abroad – whether on short-term assignments or for an open-ended term – there is a lack of consistency in how companies document the changes to the rights and obligations of their employees as a result of working abroad. Some employers use tailored secondment agreements, some establish separate company policies relating to short- and long-term assignments, whereas others have no documentation in place at all. Employers should look to standardise their approach internally and ensure that they have relevant written documentation in place • Both employers and employees are skeptical over whether employment law proposals governing maximum working hours in Hong Kong will be passed, especially as the proposals appear contrary to the widely accepted culture of long working hours in Hong Kong. Jolene Reimerson Senior Associate T: +852 2294 3310 M: +44 7500 608863 E: [email protected]

“When sending an employee to work abroad – whether for a short-term assignment, a four-year secondment or an open-ended term – it is always important to consider which mandatory employment laws apply to that employee whilst they are working abroad. This could be relevant for the purposes of calculating employee benefits or when looking at whether the termination of an employment contract is effective if the employee is abroad at the time of termination. For example, employees from England who are temporarily working in Hong Kong may have the right to terminate their employment whilst in Hong Kong by agreeing to make a payment in lieu of notice, even if they have no such right to make a payment in lieu under their English-law employment contracts. Employers should ensure that they document how their employees’ rights and obligations may change when they send employees to work abroad, even if it is only intended to be a short-term change.”

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Pinsent Masons | The Human Resource Executive

Protecting your organisation’s confidential information and using mobile technologies in the workplace The HR professionals in attendance noted: • Multinational organisations in particular are using internal information systems/platforms to encourage employees to share and develop ideas and to openly discuss issues that may be affecting the business. In Asia, employees have tended to use these information systems to anonymously undermine others (colleagues; stakeholders; employers) whilst they would rarely speak out openly. This can be compared to the Western approach of outspoken resistance where employees are dissatisfied with the business’ methods or policies • Most organisations have social media policies in place but, with the increasing use of mobile technologies and commercial ‘apps’ in the workplace, employers need to be aware of potential issues arising from employees using such mobile technologies in their dayto-day work, whether done with or without the employer’s knowledge, and ensure that the company’s policies and procedures are kept up-to-date • Only one organisation at the roundtable dinner had a BYOD (Bring Your Own Device) policy in place, which had been running for a year without apparent incident/risk. Peter Bullock Partner T: +852 2294 3438 M: +852 9104 5966 E: [email protected]

“The move to embrace digital technologies in the workplace, whether to assist with work delivery processes, to harness the brand enhancement potential of the workforce, or simply to keep employees happy, is bringing with it a change to workers’ relationship with their employers, as well as an increase in legal risks. These can be grouped amongst: platform; content; and software. The platform issues are best seen in the move to a BYOD environment. At first blush this looks like a cost saving idea, with employees using their own IT devices and only recharging connectivity charges. The total cost of (non) ownership soon mounts up, though, as IT support needs to master numerous different devices and their interactions with the in-house software suite. Content issues occur whenever employee generated content is capable of being disclosed outside the confidentiality envelope of the enterprise, without moderation or editing. Recent (unnamed) examples include: a senior banking executive’s ill-thought through comment on social media concerning Occupy Central; a junior lawyer’s personal blog, that was seen by her employer law firm as improperly mixing business with pleasure; and comments disparaging a competition made in internal emails which found their way into public view. Finally, software and service terms and conditions can be transgressed when companies seek to make use of messaging and social networking tools for business use – perhaps to keep track of job completion or customer feedback. Often, such tools have inadequate privacy and confidentiality tools for safe use across the enterprise, as well as prohibiting use for business purposes.”

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