In Lengler Werner v Hong Kong Express Airways Ltd  HKCFI 1333 (the “Decision”), the Court of First Instance confirmed that a suspension of duties during employment was not a suspension from employment under Section 11 of the Employment Ordinance (EO), which permits an employer in certain circumstances to suspend an employee from employment without notice or pay in lieu. In addition, the Court also held that just because the employee pilot was suspended from flying duties and did not receive overtime/productivity bonus associated with flying duties, it did not mean that the employer had constructively dismissed the employee.
The Respondent employee was employed by the Appellant employer as a pilot. On 3 November 2017 there was a dispute between the parties and the employer then carried out an internal investigation in respect of the employee. The Respondent was suspended from flying duties between 10 November and 28 December 2017 pending the outcome of the investigation.
While the internal investigation was still ongoing, the employee resigned on 28 December 2017, claiming that the employer had constructively dismissed him by suspending him and “completely [leaving the employee] in the dark with no communications at all from the employer” for 14 days since 15 December 2017.
The employee lodged a claim against his employer at the Labour Tribunal seeking arrears of wages, wages in lieu of notice and overtime pay. The employer counterclaimed for wages in lieu of notice. The Labour Tribunal allowed the employee’s claim, finding that he was entitled to rely on Section 11(2) of the EO to terminate the contract of employment without notice or pay in lieu; and that he had been constructively dismissed. The employer appealed to the Court of First Instance (CFI).
The key issues on appeal were:
- Whether the Labour Tribunal erred in law by considering and applying Section 11 of the EO to the suspension of the employee’s duties and by erroneously concluding that the employee was entitled to terminate his employment without notice under Section 11(2); and
- Whether the Labour Tribunal had erred in law in deciding that the employer had repudiated the employment contract and constructively dismissed the employee.
Discussion and Decision
Issue (1): Suspension from Employment without Notice or Pay in Lieu
There are limited circumstances under which an employer may suspend an employee’s employment under Section 11(1) of the EO without notice or payment in lieu. They are: (a) as a disciplinary measure for any reason for which the employer could have terminated the contract of employment under Section 9 of the EO by way of summary dismissal; (b) pending a decision by the employer as to whether or not it will exercise the right to terminate the contract of employment under Section 9; or (c) pending the outcome of criminal proceedings in relation to the employee’s employment.
Under Section 11(2), an employee who is suspended under Section 11(1) may at any time during the period of suspension terminate the contract of employment without notice or payment in lieu.
In considering whether Section 11(1) was applicable to this case, the judge drew a distinction between a partial suspension of some duties of the employee (in this case, the pilot’s flying duties) and a “suspension from employment”. To qualify for a “suspension from employment”, the employee would not be required to do any work and the employer would not be required to pay the employee. In other words, the employee would be “suspended from his functions as an employed person”. In the present case, it was decided that the pilot employee was not suspended from employment, but only partially suspended of his flying duties.
Next, the judge considered the legislative intent of Section 11 and took the view that because it concerns suspension in the circumstances of potential Section 9 summary dismissal and/or criminal prosecution, it most probably deals with “suspension from employment” as opposed to a mere suspension from partial performance of duties (e.g., in circumstances where a summary dismissal may not be justified).
The judge then considered the contractual documentation between the parties. In particular, the judge noted that the Employee Handbook provided that “[p]ending disciplinary action, the employee may be suspended from part of his duties, and may or may not be required to perform other duties.” As such, the employer had a contractual right to partially suspend the employee from his duties – and this right was exercised against the employee in this case.
In view of the above, the judge decided that Section 11 did not apply in the present case and the employee was not entitled to rely upon Section 11(2) to terminate his employment without notice or pay in lieu.
Issue (2): Constructive Dismissal
The law in this area is well established in the decision of Chen Xiang（陈翔）v. China Daye Non-Ferrous Metals Mining Limited （中国大冶有色金属矿业有限公司） HKCA 212. When an employer does a repudiatory act, causing an employee to reasonably believe that it is impossible to continue to work for the employer, the employer’s act may constitute ‘constructive dismissal’.
In the Decision, the court considered that a reduction in employee’s income cannot be considered in isolation when determining whether there has been a repudiatory breach on the part of the employer. It was held that the drop in income had to be considered in conjunction with the issue of whether the employer was entitled to suspend part of the employee’s duties. Having regard to both the EO and the Employee Handbook, the judge took the view that as the employer was entitled to suspend the employee from part of his duties (i.e. flying duties), there was no repudiatory breach on its part. The claim for constructive dismissal could therefore not be supported.
Lesson for Employers
When suspending an employee, employers should be clear as to whether they are suspending the employee from their duties or from employment under Section 11(1) of the EO.
A suspension under Section 11(1) is only available in limited circumstances – and for a limited period of up to 14 days – if the suspension is not pending the outcome of criminal proceedings.
While one advantage of a suspension under Section 11(1) is that the employer will not be required to pay wages or provide benefits under the contract of employment, a downside is that an employee can terminate the contract of employment at any time during the period of suspension without notice or payment in lieu under Section 11(2). As such, most employers will perhaps opt to suspend an employee from their duties, even when they may have grounds to suspend under Section 11(1).
However, a suspension from duties will need to be permissible under the contract of employment. To avoid dispute, employers should ensure that they expressly set out the right in the contract of employment to suspend the employee from their duties.
The judgment is available in the following link: https://legalref.judiciary.hk/lrs/common/search/search_result_detail_frame.jsp?DIS=135779&QS=%24%28lengler%7Cwerner%29&TP=JU