Cross-Border Employment: Who’s the Employer?

The case of Li Mijiang v Hoilung Group International Limited[1]highlights the importance of clear employment documentation in cross-border employment arrangements.  The Claimant (“Mr. Li”) was awarded damages by the Labour Tribunal for arrears of wages and other payments under Hong Kong law. The Defendant (the “Company”) successfully appealed on the basis that the Tribunal had failed to properly investigate key issues,  and argued that Mr. Li was in fact employed in Mainland China by its Shenzhen entity. 

Background

Mr. Li claimed he was employed by the Company under two successive agreements dated 1 August 2021 (“2021 Agreement”) and 1 January 2022 (“2022 Agreement”).

He alleged he had been constructively dismissed under section 10A of the Employment Ordinance due to the Company’s failure to pay several months’ wages. He therefore commenced proceedings in the Labour Tribunal claiming a payment in lieu of notice, late and underpaid wages, leave and holiday entitlements, and the value of a share option. 

The Company denied any Hong Kong employment relationship, asserting instead that Mr. Li was employed under a separate contract by  “深圳海龍精密股份有限公司” (the “Shenzhen Company”).  It contended that the 2021 Agreement did not exist and that the 2022 Agreement was never performed. 

The Labour Tribunal preferred Mr. Li’s evidence and awarded him HK$300,580.96.

Findings 

Employment by Shenzhen Company

The Court found there was ample documentary evidence pointing to an employment relationship between Mr. Li and the Shenzhen Company, including:

• A signed employment agreement dated 1 August 2021between Mr. Li and the Shenzhen Company (“Shenzhen Agreement”);

• A letter from the Shenzhen Company dated 2 January 2022 appointing Mr. Li as its general manager; and 

• An official record showing the Shenzhen Company’s payment of Mr. Li’s PRC social insurance contributions from August 2021 to November 2022. 

Mr. Li admitted that he had signed the Shenzhen Agreement, had worked for the Shenzhen Company and had received salaries from the Shenzhen Company.   

The Court held that the Labour Tribunal had failed to properly investigate whether Mr. Li was in fact employed by the Shenzhen Company, and that this alone justified allowing the Company's appeal.

Illegality 

The Court noted that the 2022 Agreement envisaged that a substantial part of Mr. Li’s employment duties would be performed in Hong Kong.  It also purported to be governed by the Employment Ordinance. 

As Mr. Li had not obtained permission from the Immigration Department to work in Hong Kong, the Court held it was at least arguable that the 2021 Agreement (if it existed) and the 2022 Agreement were void and/or unenforceable by reason of illegality. 

As the Labour Tribunal had failed to investigate the issue of illegality, the Court allowed the Company’s appeal on this issue. 

Voluntary Resignation 

The Court held that the Labour Tribunal had failed to consider a document dated 24 September 2022 confirming Mr. Li’s resignation on the ground of excessive stress.  Mr. Li also admitted emailing the resignation document to his supervisor. 

Mr. Li argued that the Shenzhen Company had not accepted his resignation, as the Shenzhen Company did not pass any resolution to this effect.  However, this was inconsistent with his claim that he had been constructively dismissed by the Company in Hong Kong due to non-payment of wages.

The Court allowed the Company’s appeal on this issue as well. 

Conclusion

The Court therefore set aside the Labour Tribunal’s decision and remitted the case back to the Tribunal for retrial with a different adjudicator to address the above grounds of appeal. 

Takeaways

• In cross-border employment arrangements, it is important to clearly identify the employing entity, location of work, terms of employment and governing law. 

• Where work is to be performed in Hong Kong, employers must ensure the individual has the right to work in Hong Kong.   A failure to do so could render the contract void or unenforceable. 

• Employers should maintain copies of signed employment agreements, termination notices, leave records, payroll records and regulatory filings.   Aside from legal obligations to maintain proper records, these documents can be the determining factor in employment disputes.