Deacons’ employment team wishes you a health and prosperous Lunar New Year of the Snake in 2025! We are delighted to announce that our employment practice has once again been recognized as Band 1 by Chambers Greater China Region and Legal 500 Asia Pacific. We have been listed as one of the Top 10 Employment Law Firms in APAC by Manage HR APAC. We have also been highly recommended by Benchmark Litigation and recommended as outstanding by AsiaLaw.
To wrap up the year, the below is a recap of the most significant developments in employment law in Hong Kong throughout 2024, and also the anticipated key changes which will occur in 2025.
Part One: Review of 2024
| March |
| Government’s New Capital Investment Entrant Scheme to attract talents and capitals to HK The Capital Investment Entrant Scheme had previously, since 15 January 2015, been suspended. On 1 March 2024, the Government launched the New Capital Investment Entrant Scheme (“New CIES”) which aimed at attracting new talents and capital to Hong Kong. An eligible applicant must invest at least HK$30 million in the New CIES, and if the application is successful, the applicant may apply to become a permanent Hong Kong resident upon at least 7 years of continuous ordinary residence in Hong Kong. |
| April |
| Court refused enforcement of 12-month worldwide non-compete restrictive covenant Restrictive covenants are generally considered as restraints on trade and unenforceable unless the employer can justify that it is reasonable in all the circumstances to protect a legitimate business interest. The Court of First Instance ruled that a 12-month worldwide non-compete restrictive covenant against a Chief Financial Officer of an insurance company was unenforceable. The covenant was overly broad, lacked geographical limits, and the employer failed to demonstrate that the covenant provided additional protection beyond the existing confidentiality clause. The Court weighed the significant harm that would be caused to the employee if he was prevented from joining a competitor under the non-compete restrictive covenant, against the minimal risk caused to the employer’s business if the employee joined the competitor’s business. Consequently, the Court refused to grant the injunction which prevents the employee from working for a competitor. Please click here to watch our Grab and Go episode on this judgment. Enhancing the review mechanism of statutory minimum wage The Government has committed to enhancing the statutory minimum wage review mechanism by (1) reviewing the statutory minimum wage annually; (2) adopting a formula (taking into account inflation and economic growth) in the annual review; and (3) reviewing the new annual review mechanism five to ten years after its implementation. The first statutory minimum wage derived under this new review mechanism is expected to take effect on 1 May 2026. |
| June |
| New diversity measures published by HKEX – no more single gender board issuers On 14 June 2024, the Hong Kong Stock Exchange (“HKEX”) published a consultation paper proposing improvements to corporate governance, including new measures to promote diversity. The consultation period ended on 16 August 2024. On 19 December 2024, the HKEX published its conclusions to the consultation paper on corporate governance code enhancements. With regard to diversity measures, amongst other things, all single gender board issuers should appoint at least one director of a different gender to their board before the transition period for single gender board issuers expires on 31 December 2024 pursuant to the new requirements. A failure to do so by 1 January 2025 will constitute a breach of the Listing Rules. |
| July |
| Launch of re-employment Allowance Pilot Scheme The Labour Department has launched the Re-employment Allowance Pilot Scheme to encourage elderly and middle-aged individuals to re-enter the workforce. The three-year scheme is open to Hong Kong residents aged 40 or above who have been unemployed for at least three consecutive months. Eligible participants can receive an allowance of up to HK$20,000 for completing full-time employment over 12 consecutive months, with part-time workers receiving half the amount. New China Travel Visa for non-Chinese permanent residents of Hong Kong or Macau Effective from 10 July 2024, non-Chinese permanent residents of Hong Kong or Macau are eligible to apply for a visa similar to the “Home Return Permit” used by Chinese permanent residents of Hong Kong or Macau. This new visa simplifies the visa requirements for short-term business trips in China by permitting travel to China for up to 90 days at a time, for purposes including investment, business, and seminars. This visa will benefit non-Chinese individuals who have already obtained permanent resident status in Hong Kong or Macau. |
| August |
| No one-size fits-all standard for post-termination restrictive covenants Some employers impose the same restrictive covenants of the same scope of restrictions across all of their employees. However, in a District Court case, the Court refused to enforce a two-year post-termination restrictive covenant against a junior employee who had left to join a competitor. The Court cited the company’s failure to prove any legitimate business interest in justifying the covenants, given the employee’s junior role and that her leaving would unlikely pose any threat to the interest of the business. Employers are reminded to check that their post-termination restrictive covenants are tailored to the specific employee and are genuinely necessary for protecting business interests. Please click here to watch our Grab and Go episode on this judgment. Employee liable for substantial damages for breach of fiduciary duties In an employment relationship, employees are typically bound by the implied duty of fidelity which they owe to their employers, while all directors owe fiduciary duties to their companies. The standard for fulfilling the implied duty of fidelity is much lower than that for fiduciary duties. In a Court of First Instance judgment, the Court awarded over HK$2 million to an employer for its former employee’s breach of contractual and fiduciary duties, as the former employee wrongfully diverted business opportunities away from the employer. The Court emphasized that fiduciary duties may be owed by an employee not merely because they arise from the employment relationship itself, but rather from specific contractual obligations where the employee has placed himself in a position requiring him to act solely in the employer’s interest. In this case, the employee was hired for the purposes of driving the company’s business expansion, his contractual role and responsibilities therefore did put him in a position of significant trust and responsibility towards his employer. The Court therefore determined the employee owed fiduciary duties to the employer even though he was not a director. |
| September |
| What amounts to “confidential information” post-employment The level of legal protection concerning an employee’s unauthorized use of confidential information differs significantly during and after employment. In a District Court case, an employee left his job, forwarded work-related emails to his personal email account, and reached out to a former client in an attempt to redirect business opportunities. The employer, in response, sought an injunction to prevent the improper use of this information. However, the District Court declined to issue the injunction, asserting that the emails and client communications forwarded were not deemed confidential within a post-employment context. The Court stressed that for information to be considered confidential, it must be specific to the trade, not readily accessible to the public, and clearly distinguishable. This case serves as a reminder that the protection of confidential information following termination of employment is reserved for confidential information akin to trade secrets, while the threshold for information to be classified as confidential during employment is much lower. To adequately protect employer interests, the inclusion of post-employment restrictive covenants in employment contracts could be very helpful. Please click here to watch our Grab and Go episode on this judgment. Former employee’s claims for discretionary bonus dismissed Disputes over discretionary bonus payout are very common. In a Court of First Instance case, an employee faced internal investigations and was made redundant after a bonus dispute. He claimed that the employer, in refusing to grant a discretionary bonus and terminating the employment, had breached the implied duties of trust and confidence. The Court ruled in favour of the employer, affirming the principle that the implied duty of mutual trust and confidence is only applicable during the course of an employment relationship and does not apply to the exercise of the right of dismissal by an employer. The Court further held that the employer’s actions were justified, as there were valid reasons for the warning letter and bonus denial, and proper procedures were followed for termination. The takeaway is that as long as employers make decisions that are reasonable and supported by valid reasons, particularly when it involves bonuses and termination, they would be able to do so under the law. A written record documenting the rationale of such decisions is also highly recommended, as it would come in handy for an employer when faced with employee disputes. Please click here to watch our Grab and Go episode on this judgment. |
| October |
| Court emphasized the Labour Tribunal’s statutory duty to investigate cases inquisitorially A dispute that arose out of an oral agreement was appealed to the High Court. The Labour Tribunal originally found in favour of the employee who alleged that he was entitled to certain bonuses and allowances at the end of his employment under an oral agreement with the then shareholder and director of the employer, despite the absence of the key witness. The employer appealed and the Court allowed the appeal, finding that the Labour Tribunal’s failure to call a key witness to testify constituted a breach of the Labour Tribunal’s statutory duty to investigate, which undermined the fairness of the proceedings. The case was remitted to the Labour Tribunal for re-trial. |
| November |
| Court clarified legal status of platform delivery workers In a District Court case, a food delivery platform rider sought employees’ compensation following a traffic accident. The rider argued for compensation under the Employees’ Compensation Ordinance, while the platform contended he was an independent contractor based on their Supplier Agreement, and was therefore not entitled to compensation. The Court found that the rider was not an employee since he had (1) great autonomy in accepting and declining orders; (2) provided his own equipment, including using his motorcycle and phone to take orders; and (3) bore financial risks, such as motorcycle maintenance and fuel costs. The platform’s provision of voluntary insurance, rather than employees’ compensation insurance, further supported this conclusion. This case offers some clarification on the unclear legal status of platform delivery workers. It also highlights the importance for employers to distinguish between employees and independent contractors and to ensure compliance with the obligation to purchase employees’ compensation insurance whenever necessary. Importance of a comprehensive written contract It is not uncommon for employers and employees to conclude employment contracts orally and not put it into writing. In a Court of First Instance case, the employee began working as a CEO with the expectation of a guaranteed US$500,000 bonus based on an oral agreement. He started working immediately due to urgency, signing the finalized written contract later, which did not mention the bonus. After a fallout, he was terminated and claimed there was a binding oral agreement for the bonus. The Court rejected the claim since the written contract stated bonuses were at the board’s discretion, based on performance and profitability. The Court found it unlikely that the guaranteed bonus, being a material term, would not be documented if agreed upon. Please click here to watch our Grab and Go episode on this judgment. Government’s measures to enhance talent admission schemes In Hong Kong, there are two talent admission schemes, namely the Top Talent Pass Scheme (“TTPS”) and Quality Migrant Admission Scheme (“QMAS”). On 1 November 2024, the Government launched measures to enhance the aforesaid schemes. In relation to TTPS, 13 top Mainland and overseas universities and institutions have been added to the list of eligible universities and institutions under the TTPS, and the said list would now be updated annually. Furthermore, the validity period of the initial visas of Category A applicants under the TTPS (i.e., those with an annual income of at least HK$2.5 million in the year before the application) has been extended to three years (which could be further extended upon application). In relation to the QMAS, the assessment criteria of applicants have been enhanced, and the application and selection process has been streamlined. |
| December |
| Additional Statutory holiday The first weekday after Christmas Day (i.e., 26 December for 2024) has been added as a statutory holiday in Hong Kong, increasing the total number of statutory holidays in Hong Kong to 14. The number of statutory holidays in Hong Kong will continue to progressively increase to 17 days, i.e. become equivalent to general holidays (also known as bank holidays) by 2030, with one new statutory holiday to be added in each of 2026 (Easter Monday), 2028 (Good Friday) and 2030 (The day following Good Friday). |
Part Two: Outlook for 2025
| Changing rules for continuous contract |
| Changing rules for continuous contract Many benefits and protections under the Employment Ordinance are exclusive to employees employed under a “continuous contract”. Currently, only employees working for four straight weeks or more for at least 18 hours each week are considered to be hired under a “continuous contract”, entitling them to benefits such as paid annual leave, paid maternity / paternity leave, and severance payment. This is commonly referred to as the “418 rule”. The Government has announced that for the purpose of defining continuous employment, the “418 rule” will be replaced by the “468 rule”, under which the total number of working hours will be calculated based on a four-week period instead of one week, with a threshold set at 68 hours over the four-week period. It is anticipated that a large number of workers (especially casual or part-time workers) who do not benefit from statutory entitlements and protection under the Employment Ordinance under the 418 rule, would now fall within the new 468 rule and therefore become entitled to the statutory entitlements and protection. Further details of the amendment bill will be released in the first half of 2025. Abolition of MPF Offsetting Arrangement Currently, employers can offset statutory severance and long service payments payable to employees under the Employment Ordinance against the accrued benefits in the employee’s MPF account derived from the employer’s mandatory and voluntary contributions. The long-awaited abolition of MPF Offsetting Arrangement will take effect on 1 May 2025 (also known as the “transition date”). From this transition date onwards, employers can no longer use the accrued benefits derived from employer mandatory contributions to offset statutory severance or long service payment of employees for the years of service accrued since the transition date. With the aim to share out employers’ additional expenses under the new regime, the Government has introduced a 25-year subsidy scheme for employers to claim reimbursement of their post-transition severance and long service liabilities, up to a prescribed limit. It is expected that more details of the subsidy scheme will be announced in the coming months. Employers should keep track of updates from the Government. Implementation of Phase 2 of Mandatory Reference Checking Scheme On 5 May 2022, the Hong Kong Monetary Authority (“HKMA”) announced the launch of the Mandatory Reference Checking Scheme (“MRC Scheme”). The MRC Scheme seeks to address the “rolling bad apples” phenomenon in the banking sector in Hong Kong, i.e. situations where individuals who engage in misconduct during their employment in one institution are able to obtain subsequent employment in another institution without disclosing their misconduct to the new employer. We previously wrote about the MRC Scheme, but in short the MRC Scheme requires Recruiting Authorised Institutions seeking to recruit individuals in specified positions to obtain references as part of their measures in evaluating the fitness and propriety of the prospective employee. Obligations are therefore placed on Reference Providing Authorised Institutions to report any misconduct information of the relevant individuals, including any incidents which involve the breach of legal or regulatory requirements, cast doubt on an individual’s honesty and integrity, misconduct reports filed with the HKMA, and internal or external disciplinary actions arising from conduct matters, etc. Phase 1 of the MRC Scheme was rolled out in May 2023, and phase 2 of the MRC Scheme is expected to be launched in mid-2025 after a review of the MRC Scheme. It is expected that the covered personnel of the MRC Scheme in Phase 2 would be expanded to: all personnel already covered in Phase 1 (including specific officers under the Banking Ordinance, and the Responsible Officers approved under the Mandatory Provident Fund Scheme Ordinance and the Insurance Ordinance); staff licensed to carry out securities-related regulated activities under the Securities and Futures Ordinance; staff licensed to carry out insurance-related regulated activities under the Insurance Ordinance (i.e. Technical Representatives licensed by the IA under Section 64Y or Section 64ZC of the Ordinance); staff registered to carry out regulated activities under the Mandatory Provident Fund Scheme Ordinance (i.e. subsidiary intermediaries registered with the MPFA under Section 34U(4) of the Ordinance). |
