Key takeaways

• Summary dismissal is a remedy of the last resort and is only available where the employee's conduct amounts to a fundamental breach or gross misconduct.
• Intent is critical in this case. The absence of a dishonest motive, coupled with full entitlement to the amounts claimed, weighed heavily in favor of the employee.
• Employers must be consistent. Prior approval of irregular claims and internal arrangements can undermine allegations of misconduct.
• Apparent authority matters. Representations made by senior staff with perceived authority may bind the employer, especially where such arrangements are relied upon in good faith.

In more detail

The dispute concerned a senior executive employed under a three-year fixed-term contract. Under the employment agreement, the employee was entitled to claim up to RMB 20,000 per month in family-related out-of-pocket expenses, subject to the provision of official tax invoices (fa piao). The individual regularly submitted such claims, which were processed and paid by the employer.

The employer later took issue with three hotel invoices submitted over several months. While the invoices were genuine and issued under the employee’s name, they related to a banquet held by a third party. The employer alleged that this amounted to fraud or dishonesty and summarily terminated the employment.

The employee accepted that the invoices did not reflect personal or family expenses but explained that, early in his employment, he had been advised that only invoices issued in the employee's name would be accepted. As genuine family expenses, such as tuition fees or mortgage repayments, were often invoiced in the names of family members, he sought clarification and received verbal confirmation from a senior finance representative that alternative invoices could be submitted to satisfy the documentation requirement.

The court accepted this explanation and found the following:

• The employee’s monthly family expenses consistently exceeded the contractual cap.
• The employer had approved and paid the claims over a long period, with no objection raised at the time.
• The employee had no financial incentive to inflate or falsify claims.
• There was no evidence of dishonest intent.

While the court acknowledged that the use of third-party invoices was irregular, it was not serious enough to warrant summary dismissal.

The dismissal was held to be wrongful, and the employee was awarded approximately HKD 5.4 million in damages, comprising lost salary, year-end bonuses, medical insurance, expenses and accrued leave. The employer’s counterclaim was dismissed, and costs were awarded to the employee.

This decision serves as a strong reminder that summary dismissal is a high-risk course of action. Employers must ensure that they have clear evidence of serious misconduct and consider the full factual matrix, including past conduct, internal practices and the employee’s intent, before proceeding.