When a senior employee walks out of a termination meeting without signing a separation agreement, can the employer salvage the deal and its waiver simply by leaving the medical insurance running? A recent Hong Kong judgment delivers a clear answer: no. For employers who rely on separation agreements to achieve a clean break when separating with a senior employee, the decision is a timely reminder that informality can be costly.
The Hong Kong Court of First Instance in Rydin Per Niclas Hakan v Wuza Yaki Ltd [2026] HKCFI 2940 confirmed that an employee who has expressly rejected separation terms will not be taken to have accepted them by conduct simply by continuing to use a benefit that remained technically available.
Facts
In July 2013, the respondent (the “Employee”) joined the appellant, a fish trading company (the “Company”), as Vice President of Sales. The employment contract included a six-month post-termination non-competition clause (the “PTR”). To uphold the PTR, the Company was required to notify the Employee within three weeks of serving the termination notice and pay compensation equal to 100% of his annual salary in the prior year (the “PTR Compensation”).
In February 2024, the Company terminated the employment by payment in lieu of notice. On the same day, the Company presented the Employee with a proposed separation agreement (the “Separation Letter”) which included the following terms:
- His medical insurance would continue to be in place until 22 August 2024;
- His acceptance of the separation terms would be in full and final settlement of all and any claims he may have against the Company regarding his employment and the termination (the “Waiver”); and
- He would abide by the PTR but did not mention payment of any PTR Compensation.
After a Company director explained the terms to the Employee, he stated that he did not agree to them and left without signing the letter. Despite declining the offer, the Employee (and his family) continued to use the medical insurance between March and August 2024.
The dispute
In September 2024, the Employee brought a Labour Tribunal claim against the Company for approximately HK$2.6 million, being a full year’s salary, as PTR Compensation.
The Company argued that although the Employee had initially rejected the Separation Letter, the offer had been “revived” by the Company’s continued provision of the medical insurance. By using that insurance along with his family between March and August 2024, the Employee had, so the argument went, accepted the separation terms by conduct. If correct, this would have meant that the Waiver applied, extinguishing the Employee’s HK$2.6 million claim.
The Labour Tribunal rejected this argument in its entirety and awarded the Employee the full HK$2.6 million. Undeterred, the Company applied to the Court of First Instance for leave to appeal. The central question was whether the Employee’s use of the medical insurance could constitute acceptance by conduct of the separation terms, including the all-important Waiver.
The decision
Leave to appeal was refused. The court emphasised that a contract will not readily be inferred from conduct alone. The conduct relied upon must be “unequivocally referable” to the alleged agreement and not merely consistent with it. Crucially, where one party knows the other has no intention to contract, no contract will be implied, however the facts are dressed up after the event. The court applied these principles to two questions:
1. Did the Company “revive” the offer in the Separation Letter? No.
The Separation Letter expressly required the Employee to accept its terms by signing and returning a copy. He never did. After that rejection, the Company never communicated, expressly or otherwise, that the offer remained open. It never checked whether the Employee was using the insurance post-termination. Most damaging of all, the Company did not even raise the conduct-based acceptance argument until after all evidence had been taken at the Labour Tribunal, a telling indicator that the Company itself could not have intended for insurance usage to constitute acceptance.
As for the insurance itself, the court held that its continued availability was not unequivocally referable to a revival of the rejected offer. It was equally consistent with simple administrative inaction of a failure to cancel the policy rather than a deliberate, positive step to keep the offer alive. In the court’s view, there was no offer remaining on the table.
2. Even if there had been a continuing offer, was it ever accepted? No.
Even if an offer had somehow survived the Employee’s emphatic rejection at the meeting, the court found that using the insurance did not amount to acceptance. The Employee made clear at the meeting that he was rejecting the terms “once and for all”. His subsequent use of the insurance was readily explicable: the cover simply remained active and, when his wife enquired about their options, the insurer itself recommended they use it for eye examinations. That evidence was unchallenged. The court observed that standing back from the facts objectively, it made no sense to interpret them as the Employee having changed his mind and accepting the terms without telling the employer.
Leave to appeal was refused. The Labour Tribunal’s award of HK$2.6 million in PTR Compensation stood in full.
What this means for employers
Exit negotiations should not be left to linger. If an employee rejects your separation offer and you wish to keep it open or make a fresh one, communicate that clearly and in writing. An employee’s continued use of a benefit that you have simply forgotten to cancel will not rescue you. Silence and administrative inaction are not offers.
The judgment is available here.
