Hong Kong: Govt double-hatting and deemed employment dangers | Lexology

Hong Kong: Executive double-hatting and deemed employment risks | Lexology

Having executives work throughout group corporations is frequent as it could possibly enable operational and price efficiencies whereas holding the underlying employment relationships easy. In its latest resolution in Yung Wai Tak Abraham William v Pure Every day (NZ) Holdings Ltd [2020] HKCFI 2067, the Courtroom of First Occasion of the Excessive Courtroom (“CFI”) discovered a gaggle Record Co responsible for employment claims made by the worker of its subsidiary regardless of there being no written employment contract between the worker and the Record Co. Corporations ought to revisit any group resourcing preparations to make sure they’re correctly structured and documented to keep away from comparable deemed employment dangers.


The Appellant (“Worker”) was employed as an organization secretary by the second Defendant, Nation Assets Ltd. (“Subsidiary”), pursuant to a written employment contract with the Subsidiary (“Employment Contract”). The Subsidiary is a completely owned subsidiary of the primary Defendant, Pure Dairy (NZ) Holdings Ltd. (“Record Co”), an organization listed on the Hong Kong Inventory Trade. The Worker was dismissed shortly after the liquidation of each corporations commenced. The Worker filed a declare within the Labour Tribunal in opposition to the Subsidiary and the Record Co as joint employers for a sum of almost HK$1 million, together with unpaid wages, statutory severance cost, cost in lieu of discover and a wage adjustment cost.

Employment preparations

Throughout the recruitment course of, the Worker responded to a job commercial issued by the Record Co and was interviewed by the Record Co at an workplace shared between the Record Co and the Subsidiary. After his employment commenced, the Worker exchanged emails along with his colleagues and had enterprise playing cards made stating his place because the Record Co’s Firm Secretary. When the Worker’s wage was reviewed, it was confirmed by a letter issued by the Record Co. Solely only a few paperwork have been issued by the Subsidiary, particularly the Worker’s tax demand notes, MPF information, and pay slips.

It was not disputed that the Worker’s main duties have been to function the Firm Secretary of the Record Co. The Subsidiary didn’t have any substantial enterprise or operations. There was no employment contract signed with the Record Co, though the Itemizing Guidelines recommend that as a matter of greatest apply, an organization secretary needs to be an worker of a listed firm. The Employment Contract didn’t require the Worker to carry out duties for the Record Co or some other group corporations. As well as, no secondment settlement or different outsourcing paperwork have been in place to doc the association of the Worker’s work for the Record Co.

The CFI’s resolution on enchantment from the Labour Tribunal

The Worker appealed to the CFI in opposition to the Labour Tribunal’s resolution that the Record Co was not his employer. The CFI overruled the Deputy Presiding Officer’s resolution based mostly on the next:

1.The Employment Contract didn’t ponder duties for the Record Co so a separate employment relationship with the Record Co should exist. The CFI examined two clauses generally present in employment contract templates (as summarised under) and held that the Worker was not contractually obliged to be seconded to carry out duties for the Record Co. Accordingly, the truth that the Worker labored considerably for the Record Co within the absence of such phrases within the Employment Contract, means that he was employed by the Record Co below a standalone employment contract. The CFI didn’t touch upon any phrases of this separate employment contract.

a. The primary clause states that the Worker was to “report back to and take instruction from the Board of Administrators or any individual or individuals designated by them…serve the [Subsidiary] as a [company secretary]…and carry out “such different duties because the Firm might assign to or vest in [the Employee] every now and then.” The CFI held that “any individuals” referred to senior executives or exterior consultants authorised by the Subsidiary however couldn’t be inferred to increase to the Board, administrators or senior administration of the Record Co or one other group firm. As well as, the time period “such different duties” needs to be learn along side the contractual place (i.e. the Firm Secretary position for the Subsidiary) and can’t be inferred to imply duties for the Record Co or different group corporations.

b. The second clause states that “…the [Employee has] no different agreements or undertakings, written or oral, with the [List Co and its subsidiaries] concerning compensation or your employment.” The CFI held that this clause merely operated to stop the Record Co or different group corporations from being sued by the Worker for liabilities owed by the Subsidiary. However, this might not function to cease the Worker from straight claiming the Record Co below a standalone employment contract, which was discovered after adopting the “total impression check” as set out under.

2. The totality of proof confirmed that the Record Co was an employer of the Worker. Making use of the check laid down in Poon Chau Nam v Yim Siu Cheung [2007] 10 HKCFAR 156, the CFI held that the general impression was that the Record Co was the Worker’s employer, as proven by plentiful contemporaneous proof all through the employment relationship (as summarised within the Employment Preparations above).

3. There was inadequate proof that the Worker was seconded by the Subsidiary to the Record Co. As a matter of reality, there was no supporting paperwork (akin to, secondment settlement, Board resolutions and assembly minutes) or any oval proof from witnesses that proved the existence of a secondment association of Worker from the Subsidiary to the Worker.

4. The absence of an employment relationship with the Record Co didn’t align with regulatory necessities. Paragraph F.1.1 of Appendix 14 Company Governance Code and Company Governance Report of the Predominant Board Itemizing Guidelines states that the corporate secretary needs to be an worker of a listed firm. There was no report or disclosure from the Record Co that this rule had not been complied with. The CFI thus held that there was a rebuttable presumption that the Worker was the Record Co’s worker, and that it has not been rebutted by any opposite proof.

Key takeaways

Group corporations ought to assessment their intra-group resourcing preparations in mild of the choice to make sure that the sensible preparations and underlying employment paperwork replicate the meant authorized relationships.

Care should even be taken that the contemporaneous information all through the employment relationship, akin to, the recruitment notices, interview information, gives and contracts of employment, wage critiques or bonus letters, enterprise card, pay slips, MPF, and tax information replicate the underlying employment relationships.

Additional, when an employer seconds its workers to a member of its group corporations, the employment contract or ancillary documentation, akin to a secondment letter, has specific phrases setting out the secondment preparations together with the duties carried out as a part of the secondment, reporting strains and the events’ settlement as to the underlying authorized relationships (i.e. no employment relationship between the host entity and the secondee).

Lastly, corporations ought to assessment any regulatory requirement or presumptions concerning the employment of key executives or officers and, if these could also be deviated from, the choice to take action needs to be documented or reported appropriately.

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