Unreasonable vs Unlawful Dismissal in Hong Kong

Introduction

Hong Kong's Employment Ordinance distinguishes between two separate concepts when employment is terminated: unreasonable dismissal and unlawful dismissal. The two terms are often conflated but operate under different legal tests, involve different remedies, and place the burden of proof differently. This article describes each concept in general terms, identifies the principal ordinance, and notes which tribunal or body typically handles such matters.

Hong Kong does not have a broad "unfair dismissal" regime comparable to the United Kingdom. The Employment Ordinance instead operates on specific, fact-based categories — of which unreasonable dismissal and unlawful dismissal are the core protections.

Unreasonable Dismissal

The central question in an unreasonable dismissal matter is whether the employer's decision to terminate the contract was supported by a valid reason recognised by the Employment Ordinance. The Ordinance lists categories of valid reasons — typically related to the employee's conduct, capability, qualifications, or the genuine operational requirements of the employer. Where the employer cannot show that the dismissal fell within one of these categories, and the employee satisfies the Ordinance's minimum period of continuous employment, an unreasonable dismissal claim is available.

In an unreasonable dismissal matter, the burden of demonstrating a valid reason typically rests on the employer. If the employer fails to meet this burden, the tribunal may consider two principal remedies: an order for reinstatement or re-engagement, or terminal payments. For a pure unreasonable dismissal (where the dismissal is not also unlawful — see below), orders for reinstatement are constrained by the Ordinance: the consent of both parties is required, and an employer cannot be compelled to reinstate against its will. Where no reinstatement or re-engagement order is made, the Tribunal may award terminal payments and compensation. The compensation award is subject to a statutory cap, currently set at HK$150,000.

Not every employee qualifies to bring an unreasonable dismissal claim. The Ordinance requires the claimant to have been employed under a continuous contract for a minimum statutory period. This is an eligibility threshold, not a judgment on the merits of the underlying complaint.

Unlawful Dismissal

Unlawful dismissal is a separate category. Even where an employer has what appears to be a sound business reason, certain dismissals are prohibited by law regardless. The Employment Ordinance and Hong Kong's anti-discrimination statutes list circumstances in which dismissal is not permitted, including:

• Dismissing an employee injured at work before the conclusion of the statutory process under the Employees' Compensation Ordinance
• Dismissing an employee for lawfully exercising trade union rights or for participating in union activities
• Dismissing an employee during pregnancy, statutory maternity leave, or the protected period following maternity leave as defined by the Ordinance
• Dismissing an employee because they have given evidence to an enforcement body concerning the employer's conduct
• Dismissing an employee on a ground protected by Hong Kong's anti-discrimination statutes — the Sex Discrimination Ordinance, Disability Discrimination Ordinance, Family Status Discrimination Ordinance, and Race Discrimination Ordinance

The evidentiary path in an unlawful dismissal matter varies by the specific protection relied on. In some categories, the Ordinance authorises a tribunal or the Equal Opportunities Commission to impose criminal liability or civil orders against the employer. Available remedies may include mandatory compensation, damages orders, and in appropriate cases reinstatement.

An important exception on reinstatement orders. As noted above, for a pure unreasonable dismissal a reinstatement or re-engagement order requires the employer's consent. However, the Employment (Amendment) (No. 2) Ordinance 2018, which came into effect on 19 October 2018, created an exception for dismissals that are both unreasonable and unlawful. For employees dismissed on or after that date in circumstances that fall into both categories, the Labour Tribunal may order reinstatement or re-engagement without the employer's consent, where the Tribunal considers such an order appropriate and practicable. Where an employer fails to comply with such an order, the employer is required to pay the employee a further sum, on top of the usual terminal payments and compensation — three times the employee's average monthly wages, capped at HK$72,500. A wilful failure to pay the further sum without reasonable excuse is a criminal offence.

Procedure and the Relevant Tribunals

Unreasonable dismissal matters are typically heard by the Labour Tribunal, which operates informally. Parties are generally self-represented — legal representation is not permitted — and the tribunal is designed to resolve employment contract disputes at low cost to both sides.

Unlawful dismissal matters that involve discrimination are first channelled through the Equal Opportunities Commission for conciliation. If conciliation fails, the matter may proceed to the courts. Dismissals tied to work injuries or employees' compensation may involve both the Employees' Compensation Assessment Board and the District Court.

In short: unreasonable dismissal turns on whether the reason for dismissal was valid. Unlawful dismissal turns on whether the dismissal itself was legally prohibited. The two concepts are distinct, but a single termination may give rise to claims under both.