Employment Law &

Practice
LG3 – Rights and obligations arising in the
employment relationship

Darcy Davison-Roberts
October 2022
 ............................................................................................................................................... 3
Terms implied by law .......................................................................................................................... 3
The implied duties of an employer are: ...................................................................................... 3
The implied duties of an employee are: ..................................................................................... 3
The implied duty of the employer and employee are: ............................................................ 3
............................................................................................................................................... 3
Duties of the employer....................................................................................................................... 3
Duty to provide work and remuneration ................................................................................... 3
Fourfold non-delegable duty of care .......................................................................................... 4
1. Duty to provide competent co-workers........................................................................ 6
2. Duty to provide safe plant and equipment ................................................................... 6
3. Duty to provide a safe place of work ............................................................................. 6
4. Duty to provide a safe system of work ......................................................................... 6
Duty to indemnify ........................................................................................................................... 7
Anti-avoidance ................................................................................................................................. 7
............................................................................................................................................... 8
Duties of the employee ...................................................................................................................... 8
Duty to obey lawful and reasonable orders .............................................................................. 8
Duty to exercise reasonable care and skill ................................................................................ 8
Duty of fidelity and good faith ..................................................................................................... 9
Duty of confidentiality ............................................................................................................... 9
Case spotlight: Faccenda Chicken v Fowler .......................................................................... 10
Duty not to compete with employer .................................................................................... 12
Duty to account ......................................................................................................................... 12
Duty to indemnity ......................................................................................................................... 13
............................................................................................................................................. 13
Duties of the employer and employee ......................................................................................... 13

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Implied mutual duty of trust and confidence .......................................................................... 13
Case spotlight: Malik v Bank of Credit and Commerce International SA ......................... 14

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Terms implied by law
§ In addition to express terms of the contract of employment, the contract also
contains a number of implied terms developed under the common law and that
apply only to an employment relationship. The duties imposed upon the employer,
the employee and both the employee and employer are set out below.

§ It is possible to vary or exclude these terms by agreeing express provisions in the

contract of employment that deal with the relevant rights.

The implied duties of an employer are:

1. Duty to provide a safe working environment;

2. Duty to indemnify the employee; and
3. Anti-avoidance.

The implied duties of an employee are:

1. Duty to obey lawful and reasonable orders;

2. Duty to exercise reasonable skill and competence;
3. Duty of fidelity and good faith; and
4. Duty to indemnify.

The implied duty of the employer and employee are:

1. Duty of trust and confidence

Duties of the employer

Duty to provide work and remuneration

§ The duty to remunerate or compensate an employee is arguably a fundamental

term of employment and thus, is almost always set out as an express term of the
contract of employment. Failure to pay an employee under such an express term

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 will be a fundamental breach of the contract of employment and permit the
employee to treat themselves as having been constructively dismissed.

§ In the unusual event that the contract of employment is silent as to remuneration

and it is clear that the worker is not a volunteer, the Tribunal or court will imply
into the contract a term that provides for ‘reasonable remuneration’.

§ The implied duty is of course subject to statutory obligations under the EO

(mandatory minimum levels of paid maternity and paternity leave, sick leave,
statutory holiday pay and annual leave pay) and the Minimum Wage Ordinance
(Cap 608).

§ Separately, the employer is not usually subject to a duty to provide an employee

with work save in certain circumstances. For example, where an employee’s
remuneration is dependent upon number of hours worked or work paid by the
piece, the Tribunal or court will imply a duty on the employer to provide an
employee with sufficient work to earn a reasonable wage.

§ This duty, it has been argued, could apply in situations where a person’s skills and
connections are dependent upon their ability to work. The argument being that if
a person is not provided with work, their skill base and connections suffer. This
argument is even stronger in the case of artists, for example, where their ability to
continue to attract work depends upon them being in the public eye and receiving
constant publicity.

Fourfold non-delegable duty of care

§ Because the employer generally is the person with control of the workplace, there
is a broad duty of care placed upon the employer to take reasonable care for its
employees whilst at work.

§ The employer’s duty of care toward his or her employee is a personal duty – that
is owed to each employee individually and not to some hypothetical person. This
is what makes the duty ‘non-delegable’, meaning that the employer should not
expect his or her employee to discharge the duty of care on behalf of himself or
herself.

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§ The duty is not one of strict liability as it only requires that the employer take
reasonable care. Where it is found that the employer exercised reasonable care in
all the circumstances of the case, then the employer will not be liable to an injured
employee.

§ The duty can be broken down as follows:

Was the harm foreseeable?

The tribunal / court will look at:

Þ The nature of the job performed

Þ Is the workload more than normal for the job
Þ Is the work particularly demanding of the employee
Þ Are there issues amongst other workers doing the same or similar jobs
Þ Levels of absenteeism

What did the employer do about the harm or what should the employer have done about the
harm

The tribunal / court will look at:

Þ Were there signs of impending harm

Þ Were there warnings given regarding the harm
Þ Given the employer’s resources, what should the employer have done to
mitigate the risk of harm

Was there a breach?

Is there a causal relationship between the breach and the harm?

§ The scope of the duty of care can be broken down into four sub-categories:

1. Duty to provide competent co-workers;

2. Duty to provide safe plant and equipment;
3. Duty to provide safe place of work; and
4. Duty to provide a safe system of work.

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 1. Duty to provide competent co-workers

§ The duty to provide competent co-workers is similar to the concept of vicarious

liability, that is the employer is liable when injury is caused by the injured
employee’s co-worker due to the co-worker’s fault.

§ The duty makes the employer liable to the injured employee for the breach by the
co-worker.

2. Duty to provide safe plant and equipment

§ This common law duty overlaps with the statutory duty placed upon employers
under the Factories and Industrial Undertakings Ordinance (Cap 59) but is likely
broader given the limitations of the statute to particular types or work and
workplace.

3. Duty to provide a safe place of work

§ This duty involves maintaining a work environment that is, as far as is reasonably
practicable, safe and without risk to the employees’ health.

§ The employer bears responsibility to take reasonable care to provide a safe

premises including safe ingress and egress to the workplace. This duty will also
operate even when the employee is sent off the workplace’s premises to work.

§ This duty may overlap with the employer’s statutory duties under the Occupiers’
Liability Ordinance (Cap 314).

4. Duty to provide a safe system of work

§ A safe system of work is the term used to describe the way in which work is
organised, the way in which it is intended that work is to be carried out, the giving
of adequate instructions the sequence of work, the taking of precautions for the
safety of workers and at what state, the number of such persons required to do
the job., the part to be taken by each of the workers and the moment at which
they shall perform their respective tasks.

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§ An employer bears the responsibility of taking all reasonable steps to maintain a
safe system of work so as not to expose his or her employee to unnecessary risk
of injury.

§ This obligation extends to responsibility for actions taken by employees and also
agents of the employer, thus the duty placed upon the employer to provide
competent co-workers.

Duty to indemnify

§ The employer is under a general duty to indemnify its employees for any expense(s)
that the employee reasonably incurs in the course of his or her employment.

Anti-avoidance

§ This duty prevents an employer from avoiding express contractual obligations

contained in an employee’s contract of employment by terminating that
employee.

§ For example:

Þ An employer cannot terminate an employee’s employment in order to avoid

an employee’s entitlement to permanent health insurance;1
Þ An employer cannot avoid its obligation to pay an employee a contractual
redundancy payment by communicating that the dismissal was due to a
reason other than redundancy;2 or
Þ An employer cannot terminate an employee if a dominant intention in
dismissing the employee was to avoid paying the employee a contractual
bonus.3

§ It is not yet clear whether this term will be of general application to all contracts
of employment. As such, whether such a term will be implied into a contract of

1
Aspden v Webbs Poultry & Meat Group [1996] 1 RLR 522
2
Jenvey v Australian Broadcasting Corporation [2002] IRLR 520
3
Tadjudin v Bank of America [2016] HKCU 1193 (CA)

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 employment remains a question of fact and to will be determined on a case-by-
case basis.

Duties of the employee

Duty to obey lawful and reasonable orders

§ There is an implied duty on the employee to obey an employer’s lawful and reasonable
instructions(s).

§ Thus the instruction must be:

Þ ‘reasonable’ = a request to carry out a task that forms part of the employee’s
role or job description.
Þ ‘lawful’ = an instruction that is unlawful can be ignored by the employee and
cannot be the basis for a summary dismissal.

§ Where an employee fails to do so, they may be liable for a fundamental breach of the
contract of employment. It is the employee who bears the burden of establishing a
reasonable excuse for not obeying a prima facie lawful and reasonable instruction.

Duty to exercise reasonable care and skill

§ At the time of entering into the contract of employment, it is commonly the

situation that the employee holds himself or herself out as having the necessary
skills, aptitudes and knowledge to the perform he work contracted for.

§ The employee thus owes a duty to his or her employer to carry out his or her work
with reasonable skill and competence. Flowing from this duty is the duty of the
employee to indemnify his or her employer in the event that he or she fails to
exercise such reasonable skill and competence and it results in either tortious
liability on the part of his or her employer or other losses and damages incurred by
the employer.

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§ Where new methods are introduced to a worker’s work, the worker is duty bound
to adapt to the new methods provided that they are given sufficient training by
their employer.

Duty of fidelity and good faith

§ The duty of fidelity is actually a broad umbrella term used to encompass a range
of sub-duties imposed upon the employee that includes, amongst others, the duty
not to compete with the employer and the duty not to disclose certain
confidential information, save in certain circumstances.

§ The following are some of the sub-categories of the duty of fidelity owed by an
employee to his or her employer:

Þ Soliciting existing customers of the existing employer to move to the

employee’s proposed new employer, whilst still employed by the existing
employer;
Þ Failure to disclose the misconduct of a fellow employee; and
Þ Disrupting the business of the employer.

§ Additional sub-duties are set out in more detail below.

Duty of confidentiality

§ An employee is under a duty not to disclose any confidential information that he

or she gains due to his or her employment.

§ Key to this duty is discerning what constitutes ‘confidential information’ and to

what extent this duty persists into the post-employment period.

§ The leading case on the duty of confidentiality is the case of Faccenda Chicken v
Fowler.4 At issue in the case of Faccenda was the limits of the duty of
confidentiality during employment and the extent to which the implied duty
carried over into the post-employment period. The employee defendants in

4
[1986] IRLR 69 (CA)

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 Faccenda were not subject to any express confidentiality term in their contracts of
employment.

Case spotlight: Faccenda Chicken v Fowler

The English Court of Appeal in Faccenda Chicken v Fowler established the categorisation
of information obtained in the course of an employee’s employment into three
categories to which different considerations apply. They are:

Category 1

This category of information is considered to be trivial or public information. Such

information is not deemed confidential at all and an employee is free to disclose and/or
use such information during and after employment.

Category 2

This category is comprised of information that an employee is required to treat as

confidential either because he/she is told that such information is confidential or
because it is obvious (on an objective basis) that such information is confidential. Such
information, however, once viewed by the employee is merged into his/her own skills
and knowledge and applied in the conduct of his/her employment.

Disclosure of this category of information during the currency of employment is likely a

breach of the employee’s duties owed to his/her employer but which he/she is free to
use once he/she has left employment. The principle underlying this category of
information is that it would be unworkable, unrealistic and unfair to expect an
employee to forget everything that he/she has learned in the course of employment.

Category 3

This category is what is referred to as ‘trade secrets’. This is information that even if an
employee has memorised the information, he/she cannot lawfully disclose such
information even in the post-employment period. Such information is only to be used to
the benefit of the employee’s employer.

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It is often difficult to discern between Category 2 and Category 3 information.

In Faccenda, the Court of Appeal suggested that in order to determine if information

comes within Category 3, one should consider ‘all the circumstances of the case’
including, but not limited to:

(1) The nature of the information;

(2) The nature of employment;
(3) Whether the employer impressed on the employee the confidentiality of the
information; and
(4) Whether such information can be easily isolated from other information that the
employee is free to use or disclose.

The approach in Faccenda has been approved and applied in Hong Kong in the cases of
Deacons v White & Case Liability Partnership [2003] 3 HKLRD 670 and Kuoni Travel
China Ltd v Kelly Frances Richards (unreported, HCA 1265/2006, 28 September 2006).

In Kuoni, To J, also considering how to discern Category 2 from Category 3

information, stated that in order for information to fall into Category 3, it must be
information:

(1) Used in a trade or business;

(2) That is not in the public domain;
(3) That “can be easily isolated from other information that the employee is free to
use so that any man of average intelligence and honesty would think it is
improper to use the information at the disposal of his new employer”;
(4) That if disclosed to a competitor would cause “real or significant harm” to the
owner of such information (i.e., the employer); and
(5) That the employer limited the dissemination, did not encourage or permit
widespread publication or impressed upon the employee that the information
was confidential. [per To J, Kuoni at para 9]

§ The decision in Faccenda confirmed that whilst an employee has a duty not to
disclose certain confidential information during his or her employment, once the

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 employment ends, the law will only grant protection for confidential information
that amounts to a trade secret of the employer.

§ As a result of Faccenda and subsequent decisions, information of a sufficiently

high degree of confidentiality is to be distinguished from knowledge that can be
said to have become part of the employee’s own skills and knowledge that he will
then necessarily carry with him to the next employment. This latter type of
information can therefore be disclosed or utilised by the employee in the post-
employment period.

§ The only category of information that continues to be protected by the implied

duty of confidentiality in the post-employment period is confidential information
that amounts to a trade secret. What amounts to a trade secret, however, can be
difficult to determine and depends on the facts of each case.

§ Because the ambit of the implied duty of confidentiality is limited, employers

wanting to protect their confidential information should address this issue with a
clearly and concisely drafted term in the contract of employment.

§ There is a general public interest exception to the duty not to disclose confidential
information when the information relates to fraud or misconduct for which there
is a public interest that the information be disclosed.

Duty not to compete with employer

§ This applies in the currency of employment and is unlikely to continue into the post-
employment period unless the contract of employment contains post-employment
restrictions (ie, restrictive covenants such as a non-compete clause).

Duty to account

§ Employees must account to their employer for any property provided to them by
their employer or received by them from a third party for the employer.

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§ An employee is similarly obliged to account to the employer for any bribe,5 secret
profit or commission received by the employee in consequence of his or her
employment.

§ The fact that the employer has suffered no loss does not affect the employee’s
overriding duty to account.

Duty to indemnity

§ Where an employee breaches his or her duty to use reasonable skill and care and
as a consequence, the employer is obliged to pay tortious damages to a third party,
the employer has a right to be indemnified for any amounts paid by them.

§ It is not always clear if this is an implied duty to indemnify or if damages assessed

to be paid by the employee to the employer are damages for breach of contract
(i.e., the breach of the implied term to use reasonable care and skill).

Duties of the employer and employee

Implied mutual duty of trust and confidence

§ There is an implied duty on the part of both the employer and the employee not to
act in a manner that undermines the trust and confidence.

§ This implied term is thought to be necessary in order to enable the contract of

employment to continue in the way in which it is envisaged by the parties.

§ Examples of cases in which the employer has acted in a way which does, or is
calculated to, destroy the relationship of trust and confidence between the
employer and employee include:

Þ Verbally abusing an employee;

Þ Failing to pay a discretionary bonus to a high-performing employee because he
or she has given their notice; and

5
AG v Lui Lok [1984] HKLR 275

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 Þ Undermining a superior in front of his or her subordinates.

§ Where an employer breaches the mutual duty of trust and confidence, this can
amount to a repudiation of the contract of employment by the employer. The
employee can then elect whether to affirm the contract or accept the employer’s
repudiation and treat the contract as being at an end. The aggrieved employee can
potentially claim that they were constructively dismissed and seek payments due
to them upon lawful termination under their contract of employment and the EO.

§ The leading case on the mutual duty of trust and confidence is Malik v Bank of Credit
and Commerce International SA.6

Case spotlight: Malik v Bank of Credit and Commerce International SA

The essential facts of Malik are that Bank of Credit and Commerce International SA
(‘BCCI’) failed as a result of it engaging in fraudulent and corrupt conduct. The former
employees sued BCCI alleging that through its conduct, it had breached the implied term
of mutual trust and confidence requiring BCCI to operate its business in a way that was
not corrupt and dishonest. In accepting the former employees’ argument, the House of
Lords stated that:

‘The conduct must, of course, impinge on the relationship in the

sense that, looked at objectively it is likely to destroy or seriously
damage the degree of trust and confidence the employee is
reasonably entitled to have in his employer’

Thus, the House of Lords found that the manner in which the employer had conducted
itself impacted upon its relationships with its employees. BCCI’s former employees were
awarded what have come to be known as ‘stigma damages’ as the employees’ job
prospects had been so damaged by BCCI’s conduct in breach of the mutual duty of trust
and confidence.

Malik was later considered in Johnson v Unisys Ltd [2001] IRLR 279 (HL) where the
dismissed employee claimed for damages suffered as a result of the way in which he was

6
[1997] IRLR 462 (HL)

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dismissed, the House of Lords in Johnson were unable to find that there was an implied
duty that the employer would exercise its power of dismissal fairly and in good faith. As
such, the employee could not rely upon the fact that he was dismissed without a fair
hearing and in breach of the employer’s disciplinary procedure to establish a claim for a
breach of the implied term of trust and confidence.

The House of Lords in Johnson also found that it was inappropriate to imply this term (ie,
the implied term of mutual trust and confidence) to a situation of dismissal because the
implied term of mutual trust and confidence was fundamentally about preserving the
relationship between the employer and employee and not about the way in which the
relationship is terminated. For a more recent case on this point, see the case of Edwards
v Chesterfield Royal Hospital NHS Foundation Trust [2011] UKSC 58 in which Johnson
was examined in detail.

Therefore, the principle enunciated in Malik, ie, the duty of trust and confidence, only
applies in the currency of employment and does not apply to termination of the
employment relationship.

The implied duty of mutual trust and confidence set out in Malik was adopted by the
Hong Kong courts in Evelyn Semana Bachicha v Poon Shiu Man Henry [2002] 2 HKLRD
833 (CA) and the limits of Malik (as set out in Johnson) were recently confirmed in the
case of Lam Siu Wai v Equal Opportunities Commission [2021] HKCFI 3092 where the
High Court affirmed that the duty does not apply to the act of termination of
employment.

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