Hong Kong: Wrong Place At The Wrong Time – Managing Mobility Issues During Covid-19.

 

4 August 2020

 

 

With various degrees of lockdowns and border restrictions in place around the world, many organisations are wondering how to navigate the legal landscape and the practicalities resulting from employees or new hires being stranded in geographical locations outside their normal or anticipated places of work.  In addition to the mobility restrictions brought about by COVID-19, the current pandemic has altered the needs and wants of both employers and employees. 
 

In this article, we highlight some of the employment and immigration challenges that Hong Kong employers are facing in the pandemic landscape and we provide some guidance on how to navigate this new normal.
 

Risks and Challenges
 

Employment
 

In light of the restrictions on travel presented by COVID-19, many employers have adapted rapidly by implementing or permitting remote working arrangements to enable staff to work from locations outside Hong Kong, which is where they are contractually employed to work.   
 

However, prolonged working from a different jurisdiction could attract the application of labour laws in those overseas locations.  In some jurisdictions, performing services for an employer, regardless of the place of the employment contract, could trigger overseas local law entitlements to benefits and protections.  In the event of an employment dispute, employees may attempt to "cherry pick" their legal forum by arguing that their employment is covered by the jurisdiction which provides the most advantageous benefits and protections to them.
 

Regardless of whether there is any dispute, employers may still come under an obligation to comply with the employment laws of both Hong Kong and the overseas jurisdiction.  Some of the common obligations may include compliance with working hours and overtime restrictions, leave entitlements, termination rights and limitations on wage withholding and deductions.  For example, it may be a requirement to withhold taxes from employees' wages in the foreign jurisdiction in which an employee is physically located, but it is unlawful to make such deductions under Hong Kong law.  A failure to comply with labour law requirements in either jurisdiction may result in criminal sanctions.  Each case will therefore depend on its own facts in terms of the overseas location involved, the work that the employee is performing and the contractual arrangements in place.
 

If an employee is working from the office of an overseas affiliate, the overseas entity and its directors may be liable for any breaches of local labour laws.  If there is no overseas office from which the employee is working, liability may even extend to the Hong Kong entity, depending on whether the relevant legal requirements have extra-territorial effect.  This also presents a risk of the Hong Kong company being liable for corporate taxes in the overseas location.
 

For employers that have an overseas office from which the employee is working, there may be de facto employment concerns depending on the laws of the jurisdiction involved.  This may create a risk of dual employment where the employee is deemed an employee in both Hong Kong and the overseas location.
 

Separate contractual concerns arise in relation to the on-boarding of new hires, either due to border restrictions or delays in obtaining the necessary work visas.  This poses many issues from a business standpoint.  The Hong Kong organisation may be in urgent need of the talent to fulfil a critical business role, or the employee may have already commenced employment and be undergoing training in another jurisdiction, but may be unable to return to Hong Kong. 
 

Some organisations are managing financial losses and are restructuring their workforce, such that they no longer need to employ overseas individuals with whom they have signed employment contracts and who may have already resigned from their prior positions.
 

Immigration
 

For Hong Kong employees working overseas, employers need to consider the requirement for a working visa in the foreign location.  In many jurisdictions, an employee may conduct certain business-related activities (such as attending meetings or conducting site visits) without a work permit, but other types of activity (such as entering into contracts) would require the employee concerned to have a work visa in that jurisdiction. 
 

The breach of local immigration rules could have a significant impact for the employee, but may also hinder the ability of the employer to hire individuals on work visas in the future.  Such breaches typically incur criminal sanctions and may result in the employee being deported from the overseas jurisdiction.
 

Confidentiality
 

Remote working also comes with potential risks of data security and confidentiality breaches when employees are allowed to work outside of the secure office premises or where they log into unsecure wifi networks to access work files and systems.
 

When employees use their own devices to perform work, confidential information may also be exposed when sent to personal email addresses, printed on home devices or left unattended in unsecure environments such as a table top shared by an employee's family members.
 

Recommendations
 

Stranded workers and employees who have requested to work overseas
 

• Prior to allowing an employee to work remotely from an overseas location (and where cross-border travel is permitted), employers should holistically consider and balance the various risks involved, including assessing the applicability of foreign labour laws, immigration permissions and permanent establishment taxation risks.
   

• If the level of risk is acceptable, the employer may allow the employee to work temporarily overseas, subject to compliance with relevant legal restrictions which should be clearly communicated.
   

• Where an employee is working at the office of an overseas affiliate, there should be clear documentation in place to delineate the individual's work status (i.e. the employee is not employed by the overseas entity and remains subject to Hong Kong laws).There should also be clarity around the applicable labour benefits and entitlements.
   

• Alternative methods of engagement are another viable option.If relocation to a foreign jurisdiction is likely to be long-term, the company may consider placing the employee on secondment with the overseas entity or transferring the employee permanently to the overseas affiliate.
   

• If an employee is stranded overseas and is prevented from returning to Hong Kong or does not wish to return to Hong Kong for personal reasons, and the level of legal risk is high, the employer may seek to agree that the employee be placed on a period of unpaid leave.
   

• Where an employee is reluctant to work at a pre-agreed location, the employer should endeavour to understand the employee's concerns and to provide support where feasible.With that being said, in Hong Kong, the employer is entitled to request the employee to perform work where reasonable.If the employer has implemented appropriate health and safety measures, the employee may not unreasonably refuse to attend work.In certain circumstances where the refusal to work amounts to a breach of contract, the employer may consider disciplinary measures or even termination.
   

• To protect confidential information, organisations are recommended to put in place policies (and preferably contractual terms) on the proper usage of personal devices and the handling of company information.Where possible, employees should be equipped with company devices and applications that have the appropriate security protections installed.
   

New hires
 

• For new hires or potential hires who are unable to commence employment due to mobility restrictions or immigration issues, the employer may consider rescinding the contract or withdrawing the offer.Before doing so, it is important for the company to review the employment terms to understand its legal rights to do so and to mitigate any risks if this could give rise to a breach of contract.
   

• Ending the employment relationship is a measure of last resort.If possible, the employer may consider postponing the start date by agreement, or to on-board the individual in the foreign jurisdiction in which he/she is located on a temporary basis, or to place the individual on a temporary secondment with its overseas affiliate (if any) after evaluating the employment risks.
   

During these difficult and uncertain times, managing the talent pool is a balancing act between the operational needs of the company and providing support to employees.  Keeping communication lines open will go a long way in maintaining morale and resolving work tensions. Having said this, even with the best of intentions of providing flexibility to employees, companies can inadvertently fall foul of a miscellany of laws in providing cross-border employment solutions and unknowingly increase their potential costs.  It is therefore recommended that legal advice be taken to understand and navigate the risks prior to agreeing on any new remote working arrangements.