Hong Kong: Are Employees Who Work Flexibly Covered By The Provisions Of The Employment Ordinance (EO)? (Hong Kong Family Friendly Bitesize Collection)

Keywords: flexible working arrangements, flexitime, compressed hours, remote working

Scope of the Hong Kong Family Friendly Bitesize series

Do you think your organisation is family friendly? A 2013 Community Business Survey on Work-Life Balance in Hong Kong found that, of those who responded:

• 63 percent indicated that a family-friendly working environment is one of their top considerations when they choose to join, stay with or leave a company;
• 56 percent would be willing to leave their current job for a new job if doing so would allow them to spend more time with their family;
• 35 percent have considered leaving or have left a job to spend more time on family life.

That said, there is little guidance for employers in Hong Kong on how to deal with the legal issues which underpin flexible working arrangements; or, for that matter, on what flexible working actually means.

The Family Friendly Bitesize series considers the nature, risks and benefits of flexible working, with particular focus on the following arrangements:

• Part time working – where an employee works between 1 and 4 days per week;
• Flexitime – where an employee is required to be at work during a specified core period, but can otherwise arrange his or her hours to suit themselves;
• Compressed hours – where employees work the same hours as full time employees but over fewer days;
• Annual hours – where employees agree to work a given number of hours during the year, but the pattern of work can vary from week to week;
• Staggered hours – where employees are able to start and finish work at different times. Employees may also take time off in lieu;
• Job sharing – where a job is shared between two or more people. They may wish to work alternate days, half weeks, or alternate weeks; or one person may work in the morning and one in the afternoon;
• Remote working – where an employee may work from home or from another location.

Family Friendly practices and the Employment Ordinance

Are employees who work flexibly covered by the provisions of the Employment Ordinance (EO)?

Not all employees have the same entitlements under the EO. Basically an employee needs to satisfy the "418" rule before he or she becomes entitled to the vast majority of payments under the EO.

This "418" rule is satisfied where an employee works at least 18 hours a week ("week" means a week ending with Saturday) for four consecutive weeks.

When is an hour an hour "worked"?

Where an employee is at work then that time will be an hour "worked". That is the easy part.

However, paragraph 3 of Schedule 1 of the EO provides for certain circumstances where an hour not worked will still be deemed to be an hour worked. This includes where an employee is "absent from work in circumstances such that, by law, mutual arrangement or the custom of the trade, business or undertaking, he is regarded as continuing in the employment of his employer for any purpose....then....that hour shall count as an hour in which he has worked".

So, it is quite possible that an employee employed under a family friendly flexible work arrangement which appears not to satisfy the "418" rule (due to, say, the employee taking every second week "off") could nonetheless be entitled to full benefits under the EO.

There have been several cases over the years where employers have sought to take steps to break continuous employment and the impacted employees have complained. All of these cases relate to circumstances where the employees work more than 18 hours a week for a number of months and then the employer seeks to impose a "break" (by means of a termination and subsequent re-engagement).

The courts have been aggressive in taking steps to ensure that "sham" arrangements for breaking continuity of employment fail. To this end, the courts have adopted the concept of a 'global contract' to maintain continuity of employment where there is a gap between one contract and another. Such a global contract will be held to exist where there is a "mutuality of obligation" in the intervening period between contracts.

The court will look at all the circumstances to determine if the "break" period is sufficient to stop the "continuous" employment. Each case will be determined on its own facts.

In the last Bitesize we established that there were circumstances where an employee working less than 18 hours for 4 consecutive weeks could satisfy the "418" rule. These include where time not spent at work should nonetheless be deemed to be an "hour worked" due to the provisions of Schedule 1 of the EO.

Schedule 1 provides that an absence from work "in circumstances such that by law, mutual agreement or the custom of the trade, business or undertaking" the employee is to be "regarded as continuing in the employment of his employer" shall be treated as an hour worked.

This begs the question as to when is an employee to be "regarded" as continuing in employment due to:

• law
• mutual agreement, or
• custom?

There will be few (if any) circumstances where there is a requirement "by law" for there to be continuity of employment. In addition, circumstances where employment continues due to "custom" are also rare.

However, the concept of a "mutual arrangement" is one which has been seized upon by the courts who have been looking to infer a global contract. Courts have become quick to assume that parties are treating a period of non work as a period during which the employment continues.

This is naturally a concern for employers as they may find that arrangements which on their face quite clearly do not satisfy the basic requirements of the "418" rule, are deemed to satisfy such requirements by virtue of the imposition of a global contract (and the deeming of the "break" to include "hours worked"). This could have serious consequences for the employer, including the accidental failure to pay statutory benefits which could in turn result in criminal prosecution.

Avoiding the "global contract"

We have seen in earlier Bitesizes that in order to try to avoid an employee being entitled to EO benefits an employer must be able to demonstrate that:

• the employee did not work more than 18 hours for at least one week in any four continuous weeks, and
• that in any "light" week there was no arrangement in place for his absence (for example, an agreement that the contract continues, or some other reason for absence) which would enable a court to treat the employee's absence as being a "mutual arrangement" amounting to a "global contract" and therefore the employee being deemed to have worked in that "light" week.

One way of potentially avoiding the "mutual arrangement" implication is by setting out expressly in the contract what the arrangement actually is. So, for example, the contract could provide:

"notwithstanding any other provision in this contract it is agreed that the employee will not work more than 18 hours per week for 4 consecutive weeks."

This provision could then be used to challenge any suggestion that there was a "mutual agreement" (as required by paragraph 3(2) of Schedule 1 EO) that any time not spent working should be treated as "hours worked".

The obvious downside of including such a provision is that it will make what the employer is doing perfectly clear and, therefore, could be used against the employer from an employee relations perspective.

Do employees have a right to family friendly work?

Why should an employer be careful when a request for flexible working is made?

Do employees have a right to family friendly work?

There is no provision under the Employment Ordinance (EO) or at common law granting employees in Hong Kong the right to work flexibly. However, any employer who simply ignores a request to work flexibly or dismisses such request out of hand is putting itself at risk. Read on for the reasons why.

Why should an employer be careful when a request for flexible working is made?

The various discrimination ordinances in Hong Kong all operate to make unlawful any practice which disproportionately prejudices one category of persons with a particular "protected attribute" when compared with a category of persons with a different "protected attribute".

For example, the Sex Discrimination Ordinance provides that a female employee can bring a claim for indirect sex discrimination if that employee can show that any condition or requirement imposed by an employer has a greater adverse impact on women than men.

The discrimination ordinances in Hong Kong cover:

• sex
• marital status
• pregnancy
• disability
• family status
• race

Therefore, where an employer has a simple policy of never permitting flexible working and an employee can show that:

• such policy has a disproportionate effect on a particular group of persons with one of the protected attributes set out above (e.g., women or married persons or persons with a disability), and
• the application of such policy operates to the employee's detriment

then, unless the employer is able to "justify" such policy, the employee will have a claim for indirect discrimination under the appropriate discrimination ordinance. It is not easy to "justify" a refusal to allow part time or flexible working, especially for large employers with substantial resources.

Any claim for discrimination can be made very easily by an employee by a simple letter to the Equal Opportunities Commission. This will always result in pain for the employer. It is therefore best avoided.

Problems arising from a refusal to grant flexible working

The last Bitesize considered the risks to employers of refusing a request for flexible working. This Bitesize considers the leading UK case where the employer got it all horribly wrong.

The leading English law case on indirect sex discrimination is London Underground Ltd v. Edwards (no.2) [1998] IRLR 364. The plaintiff, Mrs. Edwards, claimed indirect sex discrimination in respect of a new roster/shift system for train drivers on the basis that it adversely affected her, a single female parent with a young child.

Under the old roster/shift system Mrs. Edwards was able to work hours which were compatible with her parental responsibilities. The new rostering arrangements were a requirement or condition with which Mrs. Edwards could not comply.

At that time there were 2,044 train drivers in total. Of the 2,044 train drivers, 21 were women. Only Mrs. Edwards (i.e., 1 out of 21) could not comply (i.e., 95.2 percent of women could comply) with the new roster. All 2,023 men could comply (i.e., 100 percent) with the new roster.

The key question before the Court of Appeal was whether 95.2 percent was "considerably smaller" than 100 percent. (This would indicate that the new policy had a disproportionately adverse impact on women as opposed to men.) The Court of Appeal held that it was "considerably smaller" if the numbers were looked at in terms of 4.76 percent of women could not comply whereas there were no men that could not comply. As such London Underground was held to have unlawfully discriminated against Mrs. Edwards notwithstanding that she was the only driver (out of 2,044 train drivers) who could not comply with the new policy.

Since the case of London Underground Ltd v. Edwards the English courts have tended to accept the assumption that women generally have a greater burden of childcare. The cases in this area have largely, therefore, turned upon whether or not an employer's refusal to allow flexible working is justified.

Other cases where a refusal to allow flexible working was held to be unlawful

The last Bitesize considered the UK case of London Underground Ltd v. Edwards in which a small percentage of women could not comply with a new roster mechanism. However, the risk of being sued for unlawful discrimination for failing to consider or grant flexible working is certainly not limited to requests by women.

A man could bring a claim of direct sex discrimination if, for example, his request to work flexibly was not considered seriously in circumstances where a similar request made by a woman would have been given proper consideration. Although claims such as this are less common, precisely this question arose in the English case of Walkingshaw v. John Martin Group where a man was denied the right to work part-time following his wife's maternity leave. Mr. Walkingshaw successfully claimed direct discrimination because women in the firm were regularly allowed to work part-time.

This is not just a sex issue. If an employee who requests to work flexibly has the responsibility for the care of an immediate family member then the employee would be protected from any act of discrimination on the grounds of their family status under the Family Status Discrimination Ordinance. Similarly, if an employer absolutely refuses to allow, say, a Jewish person to leave early on Friday (strict Judaism dictates that the Sabbath runs from nightfall on the Friday) then this could amount to unlawful race discrimination under the Race Discrimination Ordinance.

Although there have not been any cases on this aspect of the discrimination legislation in Hong Kong the framework is in place for a claim and the Equal Opportunities Commission is always looking for targets. Employers beware!

What would constitute an unlawful refusal to permit an employee to work flexibly?

We have already established that a refusal to permit an employee to work flexibly may be unlawful if the refusal cannot be justified. This Bitesize considers the meaning of "justification".

Although there is no statutory guidance on this point in Hong Kong, when considering the meaning of "justification" the courts will try to put themselves in the shoes of the employer and consider the commercial rationale. In this regard, it is likely that the courts would consider the following factors:

• Additional costs;
• Detrimental effect on the ability to meet customer demand;
• Inability to re-organise work among existing staff;
• Inability to recruit additional staff;
• Detrimental impact on quality;
• Detrimental impact on performance;
• Insufficiency of work during the periods the employee proposes to work;
• Planned structural changes.

The lengths to which the English courts will go to challenge an employer's reasons for a refusal are borne out by the case of British Airways Plc v. Starmer [2005] IRLR 862. In this case a commercial pilot with British Airways (Ms. Starmer) sought to work 50 percent of full-time. British Airways offered Ms. Starmer to work 75 percent of full-time but refused her request to work 50 percent of full-time due to the:

• burden of additional costs which British Airways would face;
• inability for British Airways to re-organise work amongst existing employees;
• detrimental effect on quality and performance; and
• British Airways' inability to recruit extra employees.

The Employment Appeal Tribunal (EAT) upheld the Employment Tribunal's decision that British Airways' refusal of the request was not justified. The EAT analysed each of British Airways' purported grounds for justifying the refusal to allow Ms. Starmer to work 50 percent as follows:

• Burden of additional costs

• British Airways alleged that the costs incurred in accounting for Ms. Starmer's removal from the reserve pool (which provided cover for day-to-day eventualities such as sickness) and recruiting another employee to cover the other 50 percent of her job would amount to GBP53,000.

  It was held by the EAT that, with the resources of British Airways in mind, these costs did not justify the refusal of Ms. Starmer's application to work 50 percent. In particular, whether she worked 50 percent or 75 percent British Airways would have had to remove her from the reserve pool and incur these costs, or a large proportion of them, as a consequence (so their own offer of 75 percent work undermined this argument).

• Inability to re-organise work amongst existing employees and detrimental effect on quality and performance

• British Airways' current employees were already flying more hours than permitted by British Airways' agreement with the relevant trade union. Therefore, British Airways argued it could not meet all its staff requests and a reduction in staff could have a detrimental impact on customer services due to the delay between recruiting a commercial pilot and the new pilot actually flying.

  The Tribunal rejected this argument on the basis that a business the size of British Airways could always recruit more employees. The Tribunal saw the agreement between British Airways and the relevant trade union as a voluntary agreement and no more.

• li>Inability to recruit extra employees

• British Airways claimed it could not recruit new employees as it had a freeze on external recruitment and all of its training resources were occupied until either October or November 2004 due to the acquisition of new aircraft during late 2004 and 2005.

  The Tribunal rejected this argument as the recruitment freeze was British Airways' self-imposed constraint.

Conclusion: Whilst commercial issues will be considered by the courts in determining whether an employee's refusal is "justified", the issues must be genuine and substantial and the size and resources of the employer will always be relevant.

Practical guidance on dealing with flexible working requests: recommended steps for employers

The reality is that requests to work flexibly are increasing in Hong Kong. As such it is advisable for employers to prepare to deal with them before they arise.

This Bitesize sets out some practical tips:

Dos

• Have a clear written policy in relation to flexible working and ensure that it is followed.
• Take steps to ensure that all employees are aware of the policy so that the employer's obligations are clear.
• Start from a positive perspective ("How can we do this?", rather than "How can we avoid this?"). Courts are often critical of employers who approach a request to work flexibly by considering why it won't work rather than how any difficulties could be overcome. For example, the employer may wish to consider a trial period.
• If the employee's proposed arrangement is not acceptable, consider (and propose) alternatives. The more flexible the employer can be in suggesting alternative arrangements, the greater the chance of justifying its decision. If there is a reluctance to agree to a permanent change, consider a temporary change or a trial period. Explain and discuss the difficulties with the employee.
• Document the new arrangement carefully. Remember that a lack of clarity leads to disputes.
• Document all reasons for declining an application carefully.

Don'ts

• Don't dismiss an application for flexible work without considering it. The world (and technology) changes so what may have been impossible 5 years ago may now be possible.
• Don't give junior staff the power to decline an application for flexible work. All applications should go through a process.
• Don't be inconsistent. Employers should aim to ensure that flexible working requests are recorded and preferably processed in a way that ensures that decisions are made consistently.
• Don't question whether or not the employee should be looking after a child or relative (don't say, for example, "Can't your maid/mother/wife/husband look after the baby?"). If the employee has care of such child (or relative) then the employee is protected, whether or not there is someone else who could care for the child instead.

The impact of flexible working on an employee's benefits in Hong Kong

In this Bitesize we consider the impact of flexible working on an employee's benefits in Hong Kong, in particular, how to calculate the benefits determined in accordance with the Employment Ordinance (EO).

Are benefits under the EO pro-rated based on the employee's part-time employment?

No, the EO does not expressly provide for any pro-rating of benefits based on part-time employment. For example, an employee's entitlement to the minimum number of statutory annual leave days under the EO (i.e., 7 – 14 days depending on length of service with the employer), provided there is continuous employment, is not pro-rated based on the part-time hours the employee is contracted to work. A part-time employee, provided she satisfies the qualifying criteria, will be entitled to the same number of maternity leave days as a full-time employee.

The rate of pay for benefits determined in accordance with the EO is mostly calculated by reference to the "daily average wage" of an employee which, in turn, is calculated by reference to the employee's preceding 12 months' wages. In calculating the "daily average wage" any period during which the employee did not receive wages or "full wage" by reason of (essentially) an authorised absence and the wages paid for that period, is to be disregarded. By disregarding periods where an employee is not paid wages or "full wages" and the wages paid during that period, the "daily average wage" will be higher than if those periods (and wages) were included.

Does an employer still need to consider if there is "continuous employment" for a part-time employee when determining entitlement to EO benefits?

Yes, where a statutory benefit is conditional upon an employee having satisfied the "continuous employment" requirement and the employee has failed to satisfy such requirements then that statutory benefit is not payable.

But as discussed at length in the Bitesizes titled "Family Friendly practices and the Employment Ordinance", the term "continuous employment" is defined in section 3 and the First Schedule of the Employment Ordinance. Paragraph 3(2) of the First Schedule provides that any absence from work in circumstances where, by mutual arrangement, the employee is "regarded as continuing in the employment of his employer" shall count as a time during which the employee worked. A period of part-time off where it is agreed the employee does not have to work is, therefore, likely to be a period of absence during which employment will be treated as continuing and not break the "continuity" of employment for the purposes of the EO.

What are the employer's obligations in relation to statutory holiday pay for statutory holidays during a period of part-time off?

An employer is obliged to pay statutory holiday pay in accordance with the EO. This would require a payment of an amount equal to the employee's "daily average wage". Such payment must be made not later than the day on which the employee is next paid his or her wages after the statutory holiday.

What about a period of maternity leave?

Section 14 of the EO sets out both the conditions for payment of maternity leave pay (which include employment under a continuous contract immediately prior to the commencement of maternity leave) and the amount payable. The amount is determined by reference to the "daily average wage". As such, if an employee is entitled to maternity leave pay then such amount will need to be determined by reference to the employee's wages in the preceding 12-month period.

What is "positive discrimination"? Is it risky?

Positive discrimination involves the active promotion of a category of individuals who are identified as having been previously disadvantaged or under represented. Positive discrimination will always involve a counterbalance of negative discrimination.

Although section 48 of the Sex Discrimination Ordinance contains an exemption for acts that are reasonably intended to ensure employees or individuals in a protected category have equal opportunities and access to services, facilities or opportunities and are afforded benefits or programmes in relation to employment, this section does not permit employers overtly to favour women over men in the selection process for roles or promotions.

Whilst employers may have the best intentions in encouraging managers to recruit more women and to identify the best female talent for positions as they arise, any employer who actively encourages its managers to select women as opposed to men for new roles or to otherwise favour women in the recruitment process is at risk of claims from men for direct sex discrimination under the Sex Discrimination Ordinance (in Hong Kong).

What are the risks for Hong Kong employers when calculating bonuses for employees who have been on maternity leave?

If an employer disentitles an employee or reduces the amount of an employee's bonus due to the employee having taken maternity leave then it may be at risk of a claim for unlawful discrimination.

The key legal considerations in determining if there is unlawful discrimination are as follows:

Is there less favourable treatment on the grounds of the employee's pregnancy?

If 'yes' (for example, but for her pregnancy the employee would have been entitled to participate in the bonus scheme), then this is likely to amount to direct discrimination unless an exception applies.

If 'no', then has the employer applied a requirement or condition across the board (including to a person who is not pregnant) but:

If a smaller proportion of employees who have taken maternity leave during the bonus year can comply with the bonus criteria, then the employer is at risk of a claim for indirect pregnancy discrimination unless it can show that it is justified in its approach.

All the facts and circumstances need to be considered in assessing the legal position including:

• Is the bonus for past performance or future incentivisation or both?
• What are the conditions or criteria for determining entitlement to and the amount of any bonus? What is the rationale or justification for such conditions or criteria?
• If it is a performance based bonus, how is the employee's performance assessed? Is the period while on maternity leave disregarded?
• What has been the past practice in relation to awards to employees who have taken maternity leave during the bonus year?

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