31 October, 2019
A recent Hong Kong Court of First Instance decision (Law Ting Pong Secondary School v Chen Wai Wah, [2019] HKCFI 2236) illustrates the difficulty in preventing an employee from backing out of the employment contract before the commencement date.
Background
The Claimant is a secondary school who made an offer to the Defendant teacher on 17 July 2017, which constituted an offer of appointment, a conditions of service and a letter of acceptance. The teacher signed on the conditions of service and the letter of acceptance. In the letter of acceptance, it was provided that: “I accept the appointment offered in your letter dated 17th July 2017 in accordance with the attached Conditions of Service for Teachers in Law Ting Pong Secondary School. I also understand that once I accept this contract, the conditions of the new contract will come to immediate effect e.g. I need to give three months’ notice to terminate my employment with the school.” However, the Conditions of Service did not make any reference to the letter of acceptance and it provided that the period of employment was “From 1st September 2017 to 31st August 2018”.
The Decision
The Defendant teacher backed out of the employment contract on 22 August 2017 and the Claimant school succeeded in the Labour Tribunal to recover from him payment in lieu of notice for his contractual notice period. The Defendant teacher appealed to the Court of First Instance, which overturned the Labour Tribunal’s decision. The Court of First Instance found that the letter of acceptance did not form part of the employment contract and thus the employment relationship did not commence until 1 September 2017. Thus there was no applicable notice period and no payment in lieu of notice was payable when the Defendant teacher backed out of the employment contract on 22 August 2017.
Analysis
This case takes a different approach to the English case law on point, Sarker v South Tees Acute Hospitals NHS Trust [1997] UKEAT 493. In that case, the Employment Appeals Tribunal held that although the employment had not yet commenced, the contract between the parties was valid. On that basis, the contract could be terminated in accordance with its terms, such as giving notice or payment in lieu, and an aggrieved party could seek damages for breach of contract.
What this means for employers
Employers should review their employment contracts and consider to ensure that all documents are aligned and cross-referenced accurately. Employers should also consider including a liquidated damages clause for the employee’s failure to show up for work on the commencement date to mitigate such risk. Liquidated damages must be a genuine pre-estimate of the employer’s loss.
Jennifer Van Dale, Partner, Eversheds Sutherland
jennifervandale@eversheds-sutherland.com
