High Court clarifies when workers might lose share awards after employment
Hong Kong's High Court recently dealt with a case where a worker challenged their employer's decision about share awards after their employment ended through payment in lieu of notice.
The case questioned whether receiving payment instead of serving a notice period counted as termination without notice under a share award scheme. The worker believed they should retain their share awards despite how their employment ended.
The interpretation of the termination method would determine if the worker could keep their previously granted share awards, highlighting how different ways of ending employment can affect employee benefits.
The employer ended the worker's contract on 31 December 2020. The contract required six months' notice, but the employer chose to make a payment instead of giving notice. This choice triggered a clause in their share award scheme, which was governed by German law.
The scheme's conditions stated: "If the employment relationship with the manager ends, the manager shall retain his/her claims to the payment of the value of already allocated Share Awards following expiry of the applicable vesting period, unless termination of the employment contract is based upon ... extraordinary cancellation without notice of [the manager's] employment contract by [the employer] or the subsidiary for reasons of conduct."
The Labour Tribunal initially found that this type of termination belonged to "termination without notice," noting that the employer chose to pay instead of providing the notice period.
The court examined how the Hong Kong Employment Ordinance treated different types of termination. The employer's counsel acknowledged distinctions between termination by notice, payment in lieu of notice, and summary dismissal.
Looking at legal precedents, the court cited Lord Browne-Wilkinson in Delaney v Staples, who explained: "The phrase 'payment in lieu of notice' is not a term of art. It is commonly used to describe many types of payment the legal analysis of which differs."
The court also referenced Gothard v Mirror Group Newspapers Ltd, where it was established that when someone is "dismissed without notice, but with money in lieu, what [they] receive[] is, as a matter of law, payment which falls to be set against, and will usually be designed by [the employer] to extinguish, any claim for damages for breach of contract."
The Labour Tribunal had found that the termination was based on the worker's conduct, specifically their failure to seek necessary written approvals.
The High Court noted it couldn't review these factual findings, citing the principle from Kwong Mile Services Ltd which stated: "If the fact-finding tribunal's conclusion is a reasonable one, the appellate court cannot disturb that conclusion even if its own preference is for a contrary conclusion."
The High Court ultimately determined that termination with payment in lieu was legally equivalent to termination without notice.
The court explained: "When [the employer] terminated the Contract by agreeing and making payment in lieu of the 6 months' notice required, it had terminated the employment without notice."
The court dismissed the worker's appeal, confirming that the termination method meant they had no claims to the share awards under the scheme.
