Matters are settled in the Labour Tribunal (“LT”) all the time. Where an agreement is reached, the parties often document the settlement terms in a settlement agreement, and this usually brings the proceedings to an end.
However, as demonstrated in Lemon & Sons Global Ltd v Chan Hoi Ling [2026] HKCFI 775, settling a LT claim does not necessarily prevent a party from bringing other claims even if they arise out of the same factual matrix. Of course, this will depend on the scope of the earlier settlement terms and whether there has been any prior determination of the issues in question.
What happened
The employee was employed as a senior accountant (the “Employee”) at the company (the “Company”). On 2 February 2024, the Employee resigned giving one month’s notice.
A few days later, the Employee walked out of her employment claiming that she had been constructively dismissed as a result of the Company’s alleged “ill-treatment”. The Employee contended that she had been ostracised at work and verbally abused by her manager. She also received two warning letters from the Company which allegedly contained false accusations.
The Employee sued the Company for outstanding wages, rest day pay, annual leave pay and reimbursement of expenses (the “1st LT Claims”). It is unclear why the Employee did not pursue a claim for constructive dismissal, despite that being the purported basis for her departure prior to the expiry of the notice period.
In any event, the parties reached a “full and final settlement” of the 1st LT Claims, which was reflected in a consent order made by the LT (the “2024 Settlement”).
Subsequently, the Company brought a wrongful termination claim against the Employee in the LT seeking payment in lieu of notice (the “PILON Claim”).
The LT ruled in the Company’s favour. The Employee then applied for leave to appeal to the Court of First Instance (CFI). One of her grounds of appeal was that the parties had reached the 2024 Settlement and so the Company was precluded from bringing the PILON Claim.
Decision
1. Can the Company pursue the PILON Claim, having reached the 2024 Settlement? Yes.
The 2024 Settlement was confined only to the 1st LT Claims and does not cover any PILON Claim. As such, the doctrine of “res judicata” (i.e. the same cause of action cannot be relitigated against the same party once finally determined) did not apply.
Further, even if the Company’s PILON Claim arose from the same issues of fact as the 1st LT Claims, there had been no prior determination of such issues given that the 1st LT Claims were resolved by a settlement. As such, the doctrine of “issue estoppel” (which precludes a party from re-litigating an issue of fact or law that has already been determined) was also not engaged.
In other words, the 2024 Settlement did not bar the Company from pursuing other claims beyond the scope of that settlement.
2. Was the Employee constructively dismissed for “ill-treatment”? No.
The Presiding Officer at the LT had held that in considering whether there was any “ill-treatment”, the conduct complained of must have a sufficiently serious impact on the Employee’s mental or physical well-being. However, the Employee failed to provide any concrete evidence in support of her allegations. Mere disagreement with the contents of the warning letters, including the Company’s assessment of her work performance, would not suffice to show ill-treatment.
The CFI upheld these findings and found that there was no error of law or facts on the part of the Presiding Officer.
Accordingly, the Employee’s application for leave to appeal was dismissed.
Key takeaways for employers
While the narrow and specific scope of the 2024 Settlement worked in the Company’s favour on this occasion (thereby enabling their subsequent PILON claim), the absence of any global settlement meant that the Company could have been exposed to other claims from the Employee that fell outside the scope of the 2024 Settlement.
When preparing any separation or settlement agreement, employers should ensure that the scope of the release accurately reflects their commercial intentions.
Where the objective is to achieve a full and final settlement of all claims arising from the employment relationship and the cessation of that employment, this must be clearly reflected in a carefully drafted agreement containing a sufficiently broad release of claims provision.
The judgment (Chinese only) is available at the Judiciary’s website.
