Employer argues he was working for other foreign companies
Hong Kong's High Court recently dealt with a case involving a worker's claim against his former employer for overdue salary and bonus. The court had to navigate through a complex set of facts and legal issues to determine the validity of an undertaking signed by the employer to personally bear the worker's unpaid remuneration.
The case revolved around the worker's employment with a company that had operations in Spain. Despite the company's winding-up and the employer's detention in Mainland China, the worker continued to manage projects in Spain based on the employer's assurance that he would be paid.
However, when the promised payments did not materialize, the worker sought to enforce the undertaking in Hong Kong.
The worker submitted a written undertaking dated 18 August 2017 in which the employer, in his personal capacity and with his assets, undertook to bear all the overdue salary and bonus owed by the company to the worker under their employment contract.
The employer was the sole director and one of the two shareholders of the company at all material times.
Employment contract includes bonus
The worker worked in Spain for two companies in which the employer's company had a stake. The company was wound up by a court order on 17 May 2017. In the summer of 2017, while the employer was detained in a detention centre in Mainland China, his legal representative visited him, who passed him the undertaking to sign.
The worker entered into employment contracts with the company in 2010 and 2014. He was entitled to salary and bonus and primarily carried out work for the company in Spain, being in charge of the management and operation of the two Spanish companies.
In a telephone call with the employer in April 2017, the employer asked the worker to take care of the projects in Spain, assured him that he would personally see to the payment of the overdue salary and bonus, and requested the worker to refrain from bringing proceedings against the company.
The worker made a claim against the employer for the overdue salary and bonus for 2013–2018. On the other hand, the employer denied that there was any overdue salary and bonus, asserted that the worker was employed by the Spanish companies but not by his company, and denied that his company instructed the worker to work for the Spanish companies.
The employer claimed that the undertaking was unenforceable for want of consideration, void or voidable as being signed under duress and undue influence, and unenforceable for being unconscionable. He also claimed that the worker was obliged to go through arbitration under the 2014 employment contract, which the worker failed to do.
In view of a settlement reached between the worker and one of the Spanish companies, the employer claimed that the present action was an abuse of process and should be dismissed.
Worker’s employment issues
The court had to determine several key issues, including:
- Whether the worker was ever employed by the company under the employment contracts;
- Whether there were overdue salary and bonus;
- Whether the employer signed the undertaking under duress or undue influence under the applicable governing law;
- Whether the undertaking was void for lack of consideration under the applicable governing law;
- Whether the worker was obliged to go through arbitration under the 2014 employment contract before commencing legal action; and
- Whether it was an abuse of process for the worker to commence these proceedings after the settlement with the Spanish company.
In assessing the credibility of the witnesses, the court found the worker's evidence to be logical and supported by contemporaneous documentary evidence. On the other hand, the employer's evidence was found to be inconsistent and lacking credibility.
Applying Hong Kong’s labour laws
Under Hong Kong law, the employer had the burden of proving duress or undue influence, but failed to do so. The circumstances surrounding the signing of the undertaking did not support the employer's claims of threat to his life, health, or liberty, or that the worker was in a position to exert undue influence over the employer.
The court found that there was consideration for the undertaking, as the worker continued to manage the projects in Spain despite the company's winding-up and its failure to pay the overdue salary and bonus. But for the undertaking, the worker would have ceased his work on the projects and commenced proceedings right away.
The court also rejected the employer's arguments that the worker was obliged to go through arbitration before commencing legal action, as the employer was not a party to the 2014 employment contract containing the arbitration clause.
The court also found no abuse of process by the worker, as the settlement with the Spanish company did not cover the present action.
Thus, the court found in favour of the worker and granted him judgment for the overdue salary and bonus up to 2017. Costs were awarded to the worker on an indemnity basis due to the employer's culpable conduct and poor litigation conduct.
