What’s the upside to summary dismissal?
The advantage of summary dismissal is that it takes immediate effect and the employer is not required to make payment in lieu of notice or other statutory entitlements (long service, annual leave pay, severance, end of year payments). Further, in many contracts, even “guaranteed” bonuses are lost if the employee is summarily dismissed. This potential saving may result in employers embarking on a detailed review of the employee’s contractual provisions, recent work performance, emails and even social behaviour in search of grounds capable of establishing summary dismissal.
When is summary dismissal available?
The circumstances under which an employer is entitled to dismiss an employee summarily are provided in section 9 of the Employment Ordinance (EO). This provides five grounds for summary dismissal:
- The employee wilfully disobeys a lawful and reasonable order.
- The employee misconducts himself, such conduct being inconsistent with the due and faithful discharge of his duties.
- The employee is guilty of fraud or dishonesty.
- The employee is habitually neglectful in his duties.
- Any other ground on which he would be entitled to terminate the contract without notice at common law.
While the grounds set out in the EO are clear, they provide very little guidance on what acts will actually justify summary dismissal.
What is the practical test?
There is no fixed type or degree of misconduct that will justify summary dismissal. Every case will be different and will depend not only on the incident itself, but also the duties of the relevant employee. The question the employer needs to ask is: "Is what the employee did so serious that it is incompatible with their continued employment?" In answering this question the employer must bear in mind that whatever the precise complaint, summary dismissal is justified only in exceptional circumstances; it is “capital punishment” in the employment context and should be exercised with utmost discretion.
It is, however possible to give some guidance on where the line may lie:
- In regard to wilful disobedience, it is important to keep the "wilful" element in mind. Where an employee simply neglects to follow an order (as opposed to deliberately failing or refusing to follow an order), summary dismissal will not normally be justified unless the neglect is in relation to an order of vital importance or the order is persistently neglected.
- The degree of dishonesty required to justify summary dismissal is very low. For example an employee who borrowed a very small sum of money from his employer without permission (although giving notice that he had done so) and paid it back the next day in full was summarily dismissed and this was upheld as valid.
- In regard to being "habitually neglectful" the neglect must be substantial and regular.
The mere fact an employee has breached their contract of employment does not necessarily mean the employer is entitled to dismiss the employee summarily, even if the contract specifically says such breach may result in summary dismissal. Regardless of the wording of the contract, the act complained of must still show that the employee’s conduct is incompatible with their duties and continued employment. The fact that the employer has specified a particular breach as very serious and may result in summary dismissal will assist in this regard, however, it is not determinative.
Investigation prior to dismissal
An employer is required to have a genuine and reasonable belief the misconduct took place and have reached that conclusion after reasonable investigation. There is no requirement that the investigation must be anything beyond what the employer considers reasonable to satisfy itself of the misconduct.
Information discovered after the termination
If an employer summarily dismisses an employee where the original reason for the dismissal was not sufficient, but the employer later discovers another act of sufficient seriousness, the summary termination is still good. A summary dismissal can therefore be justified by information only ascertained by the employer subsequent to the dismissal and on grounds differing from those alleged at the time. However, an employer cannot rely on events that take place after the summary dismissal to justify the termination.
Negligent or poor performance of one’s duties
An employee can be dismissed for poor performance of their duties. Every skilled employee gives an implied warranty they are competent in the work they are employed to undertake. A failure to execute their job accordingly can warrant summary dismissal. However, not every failure or act of negligence will be sufficient; the consequence of the failing must be grave or the negligence habitual. For example, careless driving on the part of an employed driver did not amount to wilful disobedience of an instruction to drive carefully. Absent a specific term in the contract (possibly not even with such a term), the failure to meet budget or sales targets is not a sufficient neglect of duty to justify summary dismissal.
Multiple offences or single incident
Where a single incident is relied on to justify summary dismissal, it must be “exceptional” in nature. For example a single incident of an employee gambling during work hours was not considered sufficient. An employer may also summarily dismiss an employee for the cumulative effect of a number of incidents where none taken alone would justify summary dismissal. Persistent lateness or unauthorised absences can constitute misconduct, while an isolated incident may not.
It is not necessary to warn staff that a serious incident will justify summary termination. However, where the employer wishes to rely on a persistent minor breach (such as lateness), it is advisable to issue a clear warning that such behaviour will not be tolerated and clearly document both the warnings and the breaches. Continued breaches thereafter, without excuse, will constitute the employee wilfully disobeying a lawful and reasonable order and being habitually neglectful in their duties thereby bringing the conduct squarely within the circumstances set out in section 9 of the EO.
It is not necessary to dismiss an employee immediately following an act that would justify summary dismissal. However, there should be sufficient proximity between the act and the dismissal. The longer the gap, the more likely the Court may decide the employer waived its right to terminate.
Changing conduct previously tolerated
It will not be possible to terminate an employee for acts that have previously been condoned as the employer will have waived its right to do so. The employer can take corrective measures to address matters previously tolerated and summarily dismiss an employee who refuses to adapt to the “tighter regime”. However, in such circumstances it will be necessary to make the employees aware of both the change in policy and the consequences of future breaches. If an employee persists in continuing these past practices despite the warning from the employer, the employer could treat the same as wilful disobedience.
Refusal to perform additional tasks
An employee is not required to perform tasks outside the job description or capacity in which they were employed. Therefore, the refusal to do so will not justify summary dismissal. However, employment contracts are often drafted to give the employer a broad discretion in this regard. A refusal to perform a task that falls within the employment terms, although outside the employee’s usual role, may give rise to grounds for summary dismissal.
It is often the case that the incident complained of does not relate directly to the employee’s duties. These can be considered in three categories:
- Social context during work - employees are bound to have dealings with each other of a social nature during work. Where this contact results in abuse or ill-treatment of any kind, summary dismissal will be justified. The situation becomes grey when trying to determine what constitutes unacceptable social dealings. In one case, the Labour Tribunal held that a male employee’s repeated touching of a female colleague’s hair (despite her protests), although annoying, was acceptable social contact and did not justify summary dismissal. The High Court disagreed on appeal, although the fact that the female employee was under a disability may have aggravated the situation.
- Work context outside work hours - it is common for employers to require or at least encourage staff to participate in social events organised to promote the business, such as dinners or drinks with clients. It will be possible to summarily dismiss an employee for their behaviour during such events provided that the employee’s behaviour is inconsistent with their employed duties. However, the Court may take into account the employee’s actual “duties” at such an event. If the employee is expect to entertain and drink with clients, then one can expect some sympathy from the Court if the acts complained of arose from the employee heartily embracing that “duty”.
- Purely social - it is possible to summarily dismiss staff for acts entirely unconnected with their employment. However, the act will have to have a substantial bearing on the employee’s suitability for the duties they are employed to perform. Dishonesty type offences are likely to qualify in this regard regardless of when or where they occur. In regard to other acts, it will depend on the duties of the person involved. An employee getting drunk on his or her own time is unlikely to justify summary dismissal.
However, if that person is employed as a drug and alcohol councillor, the position may be different. As a general rule, an employee is free to act how they see fit in their own time and only acts outside of work that are of an extremely serious nature (this probably means criminal) will justify summary dismissal.
Before summarily terminating an employee, an employer should consider the possible redeployment of the employee to a new role where the inappropriate behaviour would not be relevant to the duties. For example a UK Court considered it relevant whether a groundkeeper at a girl’s school, who had been convicted of the indecent assault of a young girl outside of work, could be reassigned to duties with less contact with the school’s girls. The Court of Appeal ultimately found that the school’s concerns over the groundkeeper’s continued employment in any capacity was reasonable (and therefore summary dismissal was justified). However, the mere fact that the lower Court considered his summary dismissal unjustified because redeployment was not properly considered stands as testament to how serious offences outside work must be before an employer can safely summarily dismiss the employee.
In reality, for most employers, professional staff redeployment is not an option. Nevertheless, it is advised that employers at least consider this possibility (and make a note of why it is not appropriate) before the employee is summarily dismissed.
No mixing and matching
Employers must either dismiss an employee summarily or they dismiss them with notice (or a payment in lieu of notice). If the employee is being dismissed summarily, this must be made clear to the employee. It is not possible for an employer to dismiss an employee summarily and also make a payment to them in lieu of notice. If an employer does so, it will be a dismissal with notice and the employee will then be entitled to all of their statutory entitlements. If an employer wants to make some payment to the outgoing employee then it must be clearly expressed to be an ex gratia payment.
Burden of proof
It also needs to be remembered that the burden of proving the conduct said to justify such a dismissal lies on the employer. It would be as well to have good evidence of the alleged misconduct or other breaches.
What’s the down side to summary dismissal?
Employers are often under the mistaken belief that there is no “down side” to dismissing employees summarily. This view is often taken because the penalty under section 8A of the EO for wrongfully terminating staff (such as summary dismissal where it is not justified by the circumstances) is equal to the amount that the employer would have had to pay had they terminated the employee correctly (i.e. with notice). Therefore employers may take the view that even if they are wrong and even if the employee insists on their rights, the employer is no worse off. This, however, fails to take into account four important down sides:
- Invalidating post termination restrictions - if an employer summarily terminates an employee in circumstances where they were not entitled to do so, all of the employee’s contractual post termination restrictions are likely to be unenforceable. This means that the employee will be free to immediately join a competitor and approach staff and clients.
- Common law damages? - Hong Kong case law is unclear on whether an employee is entitled to seek common law damages for wrongful termination over and above the statutory damages set out in section 8A of the EO. The general view among practitioners is that the EO precludes common law damages for wrongful termination. However, there is at least one Hong Kong case where damages were awarded over and above the statutory entitlements. Although this decision may well be an anomaly, a former employee who is confident that they will receive their statutory entitlements may be tempted to bring an additional claim for common law damages thereby making it harder for the employer to simply make a payment of the statutory entitlement to settle the matter.
- Reputation? - Remaining employees may be left with a sour taste if it transpires an employee was wrongfully terminated summarily in order to avoid making statutory payments.
- Costs - Although there are no costs orders in the Labour Tribunal, summary dismissal cases, particularly where there are large sums of money involved are often transferred to the High Court, where representation is allowed and costs orders are usually made against the losing party.