Unreasonable and unlawful dismissal claims in Hong Kong: employee remedies

Hong Kong Unreasonable Dismissal Claims and Remedies

The Employment Ordinance (Cap. 57) gives employees two distinct categories of protection when their employment ends: unreasonable dismissal and unlawful dismissal. The difference matters. Available remedies and the burden of proof shift depending on which category the claim falls into.

Unreasonable Dismissal vs Unlawful Dismissal

An unreasonable dismissal happens when an employer terminates a continuous contract without a valid reason, or when the stated reason is not one of the statutory grounds for summary dismissal. Dismissing an employee simply because the employer prefers a different candidate, without any performance or conduct issue, may be unreasonable.

Unlawful dismissal is narrower and sharper. It occurs when the reason for termination is expressly prohibited by the Employment Ordinance. The Ordinance lists specific grounds that make a dismissal automatically unlawful: pregnancy, trade union membership or activities, exercising statutory rights such as taking paid annual leave or sickness allowance, or making a complaint about the employer's compliance with the Ordinance. Unlawful dismissal carries more severe consequences.

Hong Kong Unlawful Dismissal Remedies

Where a dismissal is unlawful, the Labour Tribunal may order remedies that go beyond compensation for lost wages. The primary remedy is reinstatement or re-engagement. The Tribunal can order the employer to take the employee back, either in the same position or in a comparable role. Reinstatement is rare in practice. It remains a statutory option.

If reinstatement is not ordered, the Tribunal may award up to HK$150,000 in additional compensation for the unlawfulness of the dismissal, on top of any other awards. This punitive element reflects the seriousness of dismissing an employee for a protected reason. The employee must also be paid any wages and benefits that would have accrued between the date of dismissal and the date of the Tribunal order.

Hong Kong Employment Ordinance Unfair Dismissal

"Unfair dismissal" is not a statutory phrase in Hong Kong law. Practitioners and employees use it to describe dismissals that are unreasonable under the Employment Ordinance. The Ordinance does not require an employer to have a "fair" reason for termination in every case, but it does prohibit dismissal for certain specified reasons. For dismissals that are not automatically unlawful, the employee must show that the termination was unreasonable in the circumstances.

An unreasonable dismissal claim typically arises where an employer terminates a continuous contract without giving notice or payment in lieu of notice, or where the employer gives notice but the reason is arbitrary or capricious. The Labour Tribunal will consider the employee's length of service. It will examine the employer's conduct. It will ask whether the employer followed proper procedures.

Hong Kong Wrongful Termination Claims

Wrongful termination is a separate concept under common law. A claim arises when an employer breaches the terms of the employment contract, for example, by failing to give the required notice period or by dismissing an employee in a way that violates the contract. This is distinct from a statutory claim under the Employment Ordinance.

An employee may bring both a wrongful termination claim and an unreasonable dismissal claim in the same proceedings. The remedies differ. Wrongful termination damages are calculated based on the loss caused by the breach of contract, typically the wages and benefits that would have been earned during the notice period. Unreasonable dismissal compensation is calculated under the statutory formula.

Hong Kong Labour Tribunal Dismissal Process

Claims for unreasonable or unlawful dismissal must be brought in the Labour Tribunal. The Tribunal has exclusive jurisdiction. The process begins with the employee lodging a claim at the Labour Department within the statutory time limit. The Labour Department will attempt conciliation. If conciliation fails, the case proceeds to the Labour Tribunal for adjudication.

The time limit is strict. An employee must bring a claim within three months of the date of dismissal. The Labour Tribunal has no discretion to extend this period. Miss the deadline, and the claim is lost permanently.

The Labour Tribunal hearing is relatively informal compared to the District Court or High Court. Legal representation is permitted but not required. The Tribunal will hear evidence from both sides and make a determination on the facts. It has wide powers to order remedies, including compensation, reinstatement, or re-engagement.

Awards and Compensation Limits

For unreasonable dismissal, the maximum award is 12 months' wages. The calculation uses the employee's monthly wages at the time of dismissal, multiplied by the number of months the Tribunal considers reasonable in the circumstances. The Tribunal weighs the employee's length of service, the likelihood of finding alternative employment, and the employer's conduct.

For unlawful dismissal, the maximum award is 12 months' wages plus the additional compensation of up to HK$150,000. The total award cannot exceed the statutory cap. The employee may also recover any outstanding wages, payment in lieu of notice, and accrued but untaken annual leave.

Reinstatement and Re-engagement

Reinstatement is available as a remedy for unlawful dismissal. It is rarely ordered. The Labour Tribunal will only order reinstatement if it considers it practicable and just in all the circumstances. A breakdown in the working relationship weighs against it. So does the employer's inability to provide suitable work, or the employee's own conduct.

Re-engagement, where the employee is offered a different but comparable role, is more common than reinstatement. The Tribunal may order re-engagement if it believes the employee can work effectively in a different position within the same organisation.

Practical Considerations for Employees

Act quickly. The three-month time limit is absolute. Gather all relevant documents: the employment contract, payslips, correspondence about the dismissal, and any witness statements. The Labour Department's conciliation service is free and can help assess the strength of the claim.

Consider whether other statutory entitlements are affected by the dismissal. An employee dismissed unreasonably may still be entitled to severance payment or long service payment if they meet the qualifying conditions. The employer cannot avoid these payments simply by dismissing the employee.

Practical Considerations for Employers

Have a valid reason for any termination. Follow proper procedures. Dismissing an employee for a prohibited reason, pregnancy or trade union membership, carries significant financial risk. The employer may face a claim for unlawful dismissal and be ordered to pay up to 12 months' wages plus additional compensation.

Maintain proper records of all employment decisions, including performance reviews, disciplinary actions, and the reasons for termination. The Labour Tribunal will examine the employer's conduct. It may draw adverse inferences if the employer cannot produce adequate documentation.

Interaction with Other Statutory Entitlements

A successful unreasonable or unlawful dismissal claim does not affect the employee's entitlement to other statutory payments. The employee may still claim severance payment or long service payment if they qualify. Outstanding wages, payment in lieu of notice, and accrued annual leave remain recoverable.

The employer must continue to comply with other statutory obligations. Maintain employees' compensation insurance under the Employees' Compensation Ordinance (Cap. 282). Make MPF contributions up to the date of termination. The abolition of MPF offsetting from 1 May 2025 means that employers can no longer use accrued benefits from mandatory contributions to offset severance or long service payments for service on or after that date.