The Case

The Macau Judicial Base Court recently held that Macau law applied to an employment relationship between a Hong Kong citizen and his Hong Kong-based employer, notwithstanding that the employment contract clearly stated that Hong Kong law governed the relationship. As a result of this finding, the former employee was able to claim compensation from his former employer under Macau law for work undertaken during his employment on Macau public holidays and rest days.

In assessing which law applied, the Macau court gave considerable weight to the fact that the employee had travelled to Macau regularly for work and received a salary supplement for each day that he worked in Macau. In light of these factors, the court formed the view that the employment relationship was mainly developed in Macau and that Macau law had a closer connection to the case.

This case is a useful reminder that it is often not possible to exclude the operation of the laws of the jurisdiction in which an employee works. An employer may sometimes have exposure, and an employee may have rights, under the laws of more than one jurisdiction.

The Analysis

Although the Macau court applied the laws of Macau in determining the dispute, this does not mean that Hong Kong law would not also apply. If the same employee had commenced proceedings in a Hong Kong court or through a Labour Tribunal instead of the Macau courts, claiming rights under Hong Kong law – notwithstanding that a significant amount of his work was performed in Macau – the Hong Kong court would generally apply the following principles to decide whether Hong Kong law applied:

• Where the contract specifies that a particular law will govern the relationship, that law will generally be treated as the proper law of the contract, subject to one qualification (see below).
• If there is no express choice of law in the contract, the courts will seek to infer the parties’ intention as to the applicable law from the nature and terms of the contract and the general circumstances of the case.
• Where no such inference can be made, the applicable law will be the system of law to which the contract has the “closest and most real connection”. This will take into account such things as the place of the performance of the contract, the place of negotiating the contract and the domicile of each of the parties, and any jurisdiction clause of the contract.

These rules provide useful guidance when considering whether Hong Kong law will apply to an employee who is working solely or predominantly outside Hong Kong.

However, the 2012 case of Cantor Fitzgerald Europe & Ors v Boyer & Ors (HCA 1160/2011) demonstrates that where there is a real connection between the work performed and Hong Kong, the application of the rules may not be so straightforward.

In that case, the Court of First Instance interpreted broadly the scope of the Hong Kong Employment Ordinance, holding that it applied to individuals who were working in Hong Kong, irrespective of any express choice of governing law in the employment contract.

The Conclusion

These two cases demonstrate the difficulties that employers face in cross-border employment arrangements, due to the risk that a disgruntled employee may shop around for the most favourable forum in which to bring their claim. Accordingly, employers need to be alive to the possibility that multiple sets of laws may apply, and take appropriate steps to manage that risk.

This article appeared in the Classified Post print edition as Bosses beware over cross-border employment law.