Is a verbal promise binding? HK court looks into employer's obligation to extend
Hong Kong's Court of Appeal recently dealt with a worker who argued that his employer ended his employment too early.
He said the company had verbally promised him longer employment and claimed his fixed-term contract should have continued until his assigned project finished.
The worker sought nearly HK$4.7 million in compensation, saying the employer had broken promises made during settlement of an earlier dispute.
The case raised important questions about verbal promises in employment, contract renewal expectations, and whether project-based contracts should automatically extend until project completion.
Background of the case
In December 2018, the architecture firm hired the worker as a senior resident architect for a Macau resort development project. The initial contract was for 18 months starting January 2019. However, during the three-month probation period, the firm ended his employment in April 2019.
The worker then started proceedings at the Labour Tribunal. Both parties reached a settlement in August 2019, which included a new employment arrangement. Under this settlement, the worker accepted a position as technical manager in Hong Kong. The settlement agreement stated:
"We write to confirm that by agreement between the [employer] and your goodselves on the following terms, you have agreed that your claim on the termination of your appointment as Senior Resident Architect for the Galaxy Cotai, Mega Resort Lot 3 Macau shall deem to be fully and finally settled both in Hong Kong and Macau."
Worker’s second contract and dispute
The second employment agreement ran from April 2019 to July 2020. It assigned the worker to an office development project in Hong Kong with a monthly salary of HK$110,000.
The contract included an end-of-contract gratuity of 15% of the basic salary, subject to satisfactory performance and completion of the employment period.
In June 2020, the firm informed the worker that his employment would end on the contract's completion date in July 2020.
The worker then started new proceedings, claiming HK$4,718,450 for alleged wrongful deductions from his gratuity payment and additional salary claims.
Should the employment continue?
The worker argued that his employment should have continued until the office development project finished. He said the employer had promised during his initial interview that the employment would last for the project's duration. He also claimed the settlement agreement included an understanding of continued employment for 47 months.
The court disagreed with these arguments, stating:
"The 2nd Employment Agreement was a fixed term contract which expired on 27 July 2020, and the [worker's] employment with the [employer] had come to an end by effluxion of time. The [employer] was not obliged to renew the [worker's] employment."
Employment period as stated in the contract
The court emphasised that employment contracts would be interpreted based on their written terms, not industry practices or employee expectations. It stated:
"It is well-established that the contractual right to terminate an employment (on the part of either an employer or employee) can be exercised unreasonably or capriciously, so long as the right is exercised in accordance with the contract."
The court rejected all 13 grounds of the worker's appeal, finding:
"None of the grounds of appeal advanced by the [worker] to challenge the Judge's decision is reasonably arguable or has merit. Properly analysed, the [worker's] grounds of appeal are mostly based on a misreading of the Judgment, or misunderstanding of the law."
The decision confirmed that fixed-term contracts end on their stated completion date unless both parties agree to an extension.
The court also clarified that employers do not need to renew fixed-term contracts, even if a project continues beyond the contract's end date.
