In Hong Kong's labor market, various employment agreements are utilized depending on the nature of the employment and the needs of both the employer and employee.

Continuous Contract

The most prevalent type of employment agreement in Hong Kong is the continuous contract. This agreement offers open-ended employment with no predetermined end date. Employees under a continuous contract, after working at least 18 hours a week for four consecutive weeks, qualify for various benefits mandated by the Employment Ordinance (EO). These benefits include rest days, paid annual leave, sickness allowance, paid statutory holidays, maternity leave, paternity leave, severance payments, and long-service payments.

Fixed-Term Contract

A fixed-term contract specifies a predetermined duration of employment in the agreement itself. This contract automatically terminates upon reaching the end date. However, the agreement can be extended or renewed with mutual consent. Fixed-term contracts offer more flexibility for employers with temporary project needs. Employees on such contracts with a minimum service of four weeks and 18 hours per week are still entitled to some EO benefits.

Part-Time Contract

There's no legal distinction between part-time and full-time employees in Hong Kong's labor law. The key differentiating factor lies in whether the employment falls under "continuous contract" criteria. Part-time employees who meet the 18 hours/week for four weeks threshold qualify for EO benefits alongside full-time employees.

Written employment contracts, while not mandatory in Hong Kong, are highly recommended for clarity and protection for both employers and employees. Here are some essential clauses to consider including in your employment agreement, referencing the Employment Ordinance (EO) as a primary source:

Basic Information

• Parties: Clearly identify the employer and employee with their full names and contact details.
• Commencement Date: Specify the official start date of employment.

Job Details

• Job Title: Define the employee's designated position within the company.
• Job Description: Outline the key duties and responsibilities associated with the role.
• Place of Work: Indicate the primary workplace location, with a mention of remote work possibilities if applicable (EO).

Compensation and Benefits

• Salary: Clearly state the employee's base salary, including currency and payment frequency (EO).
• Bonuses: Detail any bonus schemes or performance-based incentives offered.
• Benefits: List any employee benefits provided, such as health insurance, allowances, and leave entitlements (EO).

Working Hours and Leave

• Working Hours: Specify the standard working hours per day and week, adhering to statutory minimum rest days (EO).
• Leave Entitlements: Outline the employee's annual leave entitlement, statutory holidays (paid or unpaid), and sick leave provisions (EO).

Termination

• Notice Periods: Establish the required notice period for termination by both employer and employee (EO).
• Termination Clauses: Address potential scenarios for termination, including misconduct, redundancy, and probationary period considerations (EO).
• Severance Pay: Outline any severance pay entitlement based on length of service (EO).

Intellectual Property

• Confidentiality: Protect the employer's confidential information and trade secrets through a confidentiality clause.
• Inventions and Ownership: Specify ownership rights over intellectual property created by the employee during employment.

Additional Considerations

• Restrictive Covenants: Include clauses restricting competition or solicitation of clients after employment, ensuring reasonableness (common law).
• Dispute Resolution: Establish a process for resolving any disagreements arising from the employment contract.
• Governing Law and Jurisdiction: Specify the governing law and jurisdiction applicable to the employment contract.

Probationary periods are a standard part of employment agreements in Hong Kong, providing a trial period for both employers and employees to evaluate compatibility.

Duration of Probation

In Hong Kong, there is no legal limit on the duration of a probationary period. However, it is common for these periods to last between three to six months. Employers are advised to avoid excessively long probationary periods (over three months) to reduce the likelihood of potential disputes.

Notice Periods During Probation

During the first month of probation, employers can terminate the contract without providing any notice. After the first month, employers are required to give at least seven days' notice before termination. On the other hand, employees are not legally obligated to provide notice if they choose to resign during the probationary period.

Termination Rights During Probation

During the probationary period, employers have the right to terminate an employee's employment without providing a reason or paying severance (end of service pay). Similarly, employees also have the right to resign during probation without notice.

Key Points to Remember

Probationary periods serve as an opportunity for both parties to assess their fit. The Employment Ordinance (EO) provides certain protections to employees only after the probationary period ends and they become "continuous employees". Therefore, it is recommended for both employers and employees to carefully review the probation clause within the employment contract.

In Hong Kong employment agreements, confidentiality and non-compete clauses are often included to safeguard an employer's legitimate business interests. However, these clauses are subject to specific legal interpretations and limitations.

Confidentiality Clauses

Confidentiality clauses are frequently used to define what constitutes confidential information and to prevent its misuse by employees, both during and after their employment. Even in the absence of a specific clause, employees have an implied duty to protect trade secrets and other highly confidential information.

A well-constructed confidentiality clause will typically:

• Clearly define "confidential information", covering specific categories of information such as client lists, marketing strategies, and formulas.
• Detail restrictions on the use and disclosure of confidential information.
• Specify the duration of the confidentiality obligations, which may extend beyond the term of employment.

Non-Compete Clauses

Non-compete clauses are designed to prevent an employee from taking up employment with a competitor for a certain period after leaving the company. Unlike confidentiality clauses, non-compete clauses are viewed less favorably by Hong Kong courts.

The enforceability of a non-compete clause depends on its reasonableness. Courts will consider factors such as:

• Scope of restriction: The clause should be limited to areas of competition that are geographically and functionally relevant.
• Duration of restriction: The restricted period should be reasonable and not excessively limit the employee's ability to find new work.
• Employee's seniority and level of access to confidential information: More senior employees with access to sensitive information may be subject to stricter non-compete clauses.

Legal Precedent and Importance of Reasonableness

Hong Kong's Basic Law, which functions similarly to a constitution, protects an individual's right to choose their profession. This principle makes courts hesitant to enforce overly restrictive non-compete clauses.

A landmark case, BFAM Partners (Hong Kong) Ltd v Mills & Anor [2021] HKCFI 2904, underscores this point. The judge acknowledged that a non-compete clause might still be necessary even if a separate confidentiality clause exists, but only if the non-compete clause is deemed reasonable.