How far can you go in Hong Kong in stopping an employee from joining a rival company? |
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How far can you go in Hong Kong in stopping an employee from joining a rival company?

Published on Saturday, 21 Nov 2015

The Background

Hong Kong companies are commonly plagued by talent leakage and talent shortage, and retaining a good hire is not always easy. Unlike the notice-period requirements in mainland China, an employee in Hong Kong may resign “at any time” and leave immediately, as long as they pay a sum of money equivalent to the wages for the contracted notice period. Once the sum, in lieu of notice, is paid, the employer cannot legally stop the employee from leaving the company.
This ties in with the Basic Law in that every person in Hong Kong has a right to work as he or she wishes and cannot be denied the opportunity to pursue an occupation of his or her choice.

Some companies who wish to stop their staff from joining a competitor see a court injunction as a possible option, but generally the courts will not shackle the parties to an employment contract when there is no longer any confidence or trust between them.

However, the court will stop an employee from performing certain tasks for a competitor if there are reasonable restrictive covenants in the employment contract, or if the employee is in possession of confidential information.

The Cases

This issue has recently been the subject of a Hong Kong case in which the court was asked by a football club, Eastern Athletic Association Football Team, to restrain a professional footballer from playing for a rival club, Kitchee, based on a provisional contract he signed with Eastern Athletic.
Fortunately for the footballer, the court refused to grant an order to restrain him. 

The court found that if the footballer was restrained from joining another football club, he must either sit idle or play football only for Eastern Athletic. Since a professional footballer needs to play in matches to maintain his career, making an order to restrain him from playing for a competitor would effectively compel him to play only for one football club, despite the fact that the mutual trust and confidence between them no longer existed.

In an earlier court case, the Hong Kong court was asked by a management agent to restrain an actress, Huang Sheng-yi, under the agency contract, from working with another agent.

In that case, the court also refused to grant an order to restrain the actress.

The court explained that, given the nature of the entertainment industry, it was essential that the actress continue performing to maintain her career. If the actress was barred from taking part in any public performance, or from using her image or name for any promotion for a number of years, it would lead to the end of her career.

The Facts

Despite the above cases, there are a variety of circumstances in which the courts in Hong Kong will restrain employees from competing unfairly.
First, this could be done if an employee discloses confidential information, steals the valuables of an employer or takes any maturing business opportunity to a rival company.

It could also be done if an employee makes derogatory comments about an employer in breach of the terms in a separation agreement.

Finally, an employee could be restrained from competing unfairly if he or she fails to honour the reasonable restrictive covenants in an employment contract. This could be by competing with an employer or soliciting customers and former colleagues during the restrained period.

It is important for employers to keep in mind that the courts in Hong Kong will not order an employee to work for a former employer against their will or under an employment contract. Nor will it grant an order to restrain that person from joining a competitor that would have the same effect as forcing that person to work for the company.

Although seeking an injunction is not a feasible way to force an employee to stay, employers can apply to the courts to restrain any delinquent employees for failing to honour the reasonable restrictive covenants, or for stealing any assets or maturing business opportunities.

This article appeared in the Classified Post print edition as Can you stop an employee from joing a rival ?

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