Asia-Pacific employment law bulletin 2025

Hong Kong

Guidance on implied terms of employment contract

The Court of first instance (Court) dismissed the claim of a banker (who was also the Head of China and Chairman of the Investment Banking Division of his employer) against his former employer for allegedly breaching the implied terms of the employment contract by not granting him a discretionary bonus and terminating his employment, seeking total damages of over USD 4 million comprising a bonus award, annual base salary and loss of certain unvested bonus awards.

The Court reaffirmed that regarding the decision to not award a discretionary bonus, the employer has both (a) an implied duty of mutual trust and confidence, and (b) an implied duty to exercise contractual discretion in good faith, rationally and for proper purposes (the Braganza duty). For the decision on termination of employment, the only implied duty that applies is the anti-avoidance terms where the employer should not exercise its right to terminate the employee’s employment in order to avoid the employee being eligible for or receiving a bonus.

Well-established principles on enforceability of restrictive covenants

In Moxie Communications Limited v Lai Cheuk Lok [2024] HKDC 1323, the District Court (District Court) rejected a former employer’s attempt to enforce a two-year non-compete clause and a non-solicitation clause with unlimited duration against a former entry-level employee. The District Court reiterated the well-established principles on the enforceability of restrictive covenants, namely, that:

• restrictive covenants are prima facie unenforceable for being in restraint of trade, unless they go no further than is necessary to protect an employer’s legitimate interests;
• an employer cannot use restrictive covenants to protect itself against competition, but it can use them to protect itself against unfair exploitation of its trade secrets, trade connections, and to protect the stability of its workforce; and
• in assessing the reasonableness of a restriction, the courts will consider factors such as seniority of the employee, the duration of the restricted period, the geographical scope of the restriction and the nature of any restricted activities.

This case serves as a reminder that enforceability of restrictive covenants will be assessed at the point at which the parties entered into an agreement (as opposed to when the employment ceases), so it is important for employers to keep updating restrictive covenants as employees are promoted to more senior roles.

First court case on classification of gig workers

In a recent case, the District Court offered some insight as to whether gig workers should be regarded as employees or independent contractors.

In this case, the applicant was a rider for a delivery platform, who applied for compensation under the Employees’ Compensation Ordinance against the platform, following a traffic accident during one of his deliveries. The District Court applied the ‘overall impression’ test and considered various indicia of employment, including control, provision of equipment, ability to delegate work, financial risk, and integration into the business, in assessing whether the applicant was an employee or independent contractor of the platform.

In contrast with the Labour Tribunal’s decision in another case in May 2023, which classified gig workers who were couriers for another delivery platform as employees, the District Court ruled that the applicant was an independent contractor (as opposed to an employee) as he had significant freedom in his work, provided his own equipment, and was not integrated into the platform’s business as an employee would be. Consequently, the District Court struck out the claim as it was unsustainable and an abuse of process, and the applicant was ordered to pay the platform’s costs for the proceedings.

This case underscores the challenges in classifying gig workers as the status of gig workers in each case will likely depend on its unique facts and circumstances. Employers should therefore properly structure their relationships with employees or workers under both the contract and the actual work arrangement to minimise the risk of disputes.

Looking ahead

Looking ahead in 2025, two material changes are anticipated.

Proposed change in ‘continuous contract’ requirement

The Labour Advisory Board has reached a consensus on reviewing the so-called ‘418’ or ‘continuous contract’ requirement under the Employment Ordinance.

Under the existing requirement, an employee would qualify for employment rights and benefits (such as paid annual leave and statutory maternity / paternity leave) only if they have worked at least 18 hours per week for four or more consecutive weeks with the same employer. The new proposal aims to slightly relax these thresholds, extending coverage to all employees who work at least 68 hours over four consecutive weeks for the same employer.

This change, which is expected to be included in an Amendment Bill that will be introduced in 2025, will particularly impact part-time workers, as it is expected to include a broader group of employees, including casual workers, under the ‘continuous contract’ rule.

Abolition of the offsetting mechanism for statutory severance and long service payments

The abolition of the offsetting mechanism for statutory severance and long service payments against an employee’s accrued Mandatory Provident Fund benefits is set to take effect on 1 May 2025, for which the Government plans to introduce a 25-year subsidy scheme worth approximately USD 33.2 billion to share employers’ expenses on severance payments or long service payments and to assist them through this transition.