The impact of Covid-19: Overview of legal issues facing employers

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By Matthew Durham, registered foreign lawyer at Gall

This article first appeared on the Human Resources Hong Kong website.

The Covid-19 pandemic has caused significant unpredictability and upheaval for businesses. Recent reports show that the unemployment rate has risen to a 17-year high of 7% in Hong Kong. Employers have had to act swiftly to implement alternative working structures and to counteract financial pressures. These challenges are likely to continue.

Variation of contract
Employers have explored a variety of measures to reduce operational costs and alleviate financial pressure, including: Salary and benefits reductions, reducing or changing working time or working days, and asking employees to take unpaid leave.

Making changes such as these to an employee’s terms and conditions will constitute a variation of contract and requires employee consent, unless the employment contract includes a clear right to unilaterally vary the specific term.

In practice, it’s unusual to see clauses which allow a unilateral change of salary or hours. Accordingly, employers must engage with affected staff to agree the relevant change and document this in writing. Failure to do so may result in a constructive dismissal situation.

Communication with affected employees is important and should be clear and consistent. Employers must not involve any discriminatory reasons in selecting affected employees.

Employers can seek to persuade staff to accept reductions by explaining that changes are temporary and required to stabilise and sustain the business. In addition, such measures may help to reduce the likelihood of lay-offs, redundancies or other more radical outcomes.

Redundancies
In serious circumstances employers may be forced to reduce headcount. Depending on the situation, redundancy may be a valid ground for termination if the termination occurs wholly or mainly because of:

• Closure of the employer’s business;
• Cessation of business where the employee is employed;
• Or because the requirement for the employee to carry out particular work ceases or diminishes.

While there is no regulatory framework governing redundancies, employers must avoid discriminatory reasons and other grounds where termination will be considered unlawful. The employer must provide the required notice (or payment in lieu) and termination payments.

Primarily this means a severance payment for staff who have been employed for at least 24 months, but employers should not overlook other contractual entitlements such as salary, fixed bonuses and incentives such as stock options which may be accelerated by the termination.

Internal and external communications are again important. Employers should consider how redundancies may affect consumer or customer confidence, as well as how to maintain morale among remaining employees in this scenario. 

Work from home
Although there is no statutory right to WFH and this must be contractually agreed, WFH arrangements have proved a necessary and effective practical response to government restrictions, reducing the risk of infections in workplaces and accommodating employees with children while schools are closed.

Nevertheless, both employers and employees continue to be bound by employment obligations during WFH. Such arrangements throw up several issues worthy of attention.

• Health and safety: Alongside a common law duty, employers have a statutory duty under the Occupational Safety and Health Ordinance (“OSHO”) to provide a safe working environment for the employees. This duty may extend to WFH and a breach could potentially amount to an offence. Employers could potentially be liable under the Employees’ Compensation Ordinance for personal injury by accident arising out of and in the course of employment. Given the practical difficulties of monitoring WFH, employers should review the coverage of their insurance policies, consider seeking undertakings from employees regarding safety at home, issue reminders regarding best working practices, and provide contact persons for emergency notifications.

• Confidentiality and data protection: WFH paired with the increased use of technology increases the risk of confidentiality and privacy breaches. Employers should remind employees of their obligations, including taking practical steps to prevent unauthorised access, processing, use, loss or erasure of personal data. The WFH set up should have a private space for work-related communications and employees should use office issued devices and secure internet connections as far as possible.

• Performance management: During WFH arrangements employers should maintain regular contact, reporting and feedback with employees, including conducting appraisals and reviews. Any disciplinary issue should be investigated, as far as possible, in accordance with the applicable procedures. That said, employers should factor in a degree of flexibility to alleviate practical pressures, such as home schooling, and offer support to employees in need.

Employer handbooks and policies
These documents provide vital detail and guidance for many aspects of employment relationships. Employers should review and update their policies to take account of the fast-moving Covid environment and provide clear rules on arrangements such as WFH. In most cases it is relatively easy to update policies, provided that they are not treated as terms of the employment contract.

Working overseas
Given travel and other restrictions employees may ask to work remotely from locations outside Hong Kong. Before agreeing to this employers should consider whether the individual has a right to work in the location and any tax implications for the company or the individual arising from such an arrangement.

COVID vaccinations 
The Hong Kong government has commenced implementation of a COVID-19 vaccination programme intended to cover all Hong Kong residents. This is seen as a big step towards a confident return to normality and a means for employers to protect their personnel, workplaces and businesses, yet reports suggest that many people will refuse the vaccine.

This is a sensitive issue. There is no clear and absolute right for an employer to insist that an employee is vaccinated. Accordingly, employers may encourage employees to get vaccinated and advocate the benefits of doing so, but they should be sensitive to individual concerns and ultimately not seek to force employees to do so.