LAM PIK SHAN v. HONG KONG WING ON TRAVEL SERVICE LTD

HCLA19/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 19 OF 2006

(ON APPEAL FROM LBTC 3717 OF 2004)

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REASONS  FOR  JUDGMENT

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Prologue

1. Most of us have the experience of joining tours abroad through travel agencies in Hong Kong.  Invariably the travel service company would suggest a certain amount of tips per day to be paid to the tourist guide leading the group.  It is also understood by the customers that the suggested amount of tips would be shared among the tourist guide, the local tourist guide, the driver of the coach and baggage handlers.  In the past, some groups even paid their tips at the beginning or before the tour so that if that amount of money was robbed or otherwise lost, it would be the responsibility of the tourist guide rather than the customers.  Since 2002, the Travel Industry Council of Hong Kong has directed that all tips should only be collected at the end of the tour.  That was of course for other valid reasons.

2. It is also common general knowledge that in the trade of the travel service industry, a tourist guide’s wages by way of salary would be quite minimal.  For example, the monthly basic salary of the appellant (C15) Madam Lam herein was only $2,200.  Some of the tourist guides’ basic salaries paid by the respondent ranged from $1,800 to $2,200.  This kind of salary might not even be sufficient for a tourist guide’s daily transportation expenses and lunch or other meals within his working hours.  Therefore it was described very properly as their basic salary (底薪) only by the respondent in their defence in the Tribunal.

3. There are also employees in other trades who would receive very low minimal salary as part of their wages or even nothing at all but their income mainly or even solely depends on the pieces of works they could perform within a period, say a week or a month.  For example, a factory worker may receive a minimal or no basic salary but the main or sole income comes from the number of pieces of works he could complete, say the number of dresses or parts thereof he could make or the number of toys he could assemble and the amount of wages would depend on certain rates agreed with the employer.

4. In view of the different ways of paying an employee his wages, the Employment Ordinance, Cap. 57 (“the Ordinance”) was introduced by “the” Legislative and Executive “Government” with the objective of protecting employees.  In this respect the Ordinance provided a number of statutory benefits an employee could obtain from an employer.  Thus the recital of the Ordinance said that the objective and purpose of it is :

“	To provide for the protection of the wages of employees, to regulate general conditions of employment and employment agencies, and for matters connected therewith.”

5. This piece of legislation was first introduced and came into effect as far back as 27 September 1968 after the notorious 1967 riot in Hong Kong.  Benefits such as statutory holiday, annual leave, holiday pay, redundancy payment, long service payment, mandatory provident fund scheme and maternity leave pay were introduced to protect an employee over and above what was agreed in the contract of employment between an employer and an employee.

6. In the past there were cases whereby some employers were trying very hard to defeat the provisions of the Ordinance, for example :

(i)	some of them did not grant statutory holiday, annual leave and holiday to their employees for a long time;
(ii)	some forced their employees to accept payment in lieu of the grant of a holiday in breach of section 40A;
(iii)	some forced their employees who have very low bargaining power to sign a contract for service agreeing that they were only independent contractors and therefore by-passed the whole protection net of the Ordinance, but our courts eventually found the state of affairs in substance between them was one of contract of service, i.e. one of employment instead;
(iv)	some found faults with their employee who was pregnant and dismissed her summarily under section 9 with the sole intention of not fulfilling the employer’s responsibility of granting maternity leave to her; and
(v)	some discontinued a contract of service at the end the contract and re-employed the same employee for less than 24 months in order to deprive the employee’s entitlement to employment protection under section 32A.

7. There are other various ways and schemes of some employers trying to deprive their employees from the statutory protection and benefits.  But I must add here that this is no reflection of what I believe to be still the majority of employers in Hong Kong who have dutifully and faithfully kept the statutory requirements and in some, more than what the Ordinance required of them.  (On the other hand there were of course also cases where employees or purported employees were trying to obtain benefits under the Ordinance by deception or other unlawful means.)

8. But the aforesaid cases are no reflection or implication of the present respondent Wing On Travel Service Ltd (“the company”) which is a reputable travel service company in Hong Kong.  I believe they did not win a top prize of the Best Travel Service Company in Hong Kong for no reason at all.  It must be the concerted efforts of their management team and their tourist guides working hand in hand together.  However in this case they would also like a decision by the court as to whether “tips and service charges” should be part and parcel of the “wages” of a tourist guide.  It arose in the following manner.

The issue

9. As aforesaid, the Ordinance has provided a number of entitlements and benefits to an employee.  But all these benefits are based on the amount of wages received by the employee during a certain period, say a day, a week or a month.  It was anticipated that an employer might prescribe and agree with an employee who has no or very low bargaining power, a very low basic salary whereas the income of the employee would depend on other remuneration, earnings, allowance, commission, bonuses or even overtime pay.  Tips and service charges would be one of them.  Thus in the definition of wages in section 2 thereof, it is provided that :

“	‘wages’(工資) subject to subsections (2) and (3), means all remuneration, earnings, allowances including travelling allowances and attendance allowances, attendance bonus, commission, overtime pay, tips and service charges, however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done under his contract of employment, but does not include-
	(a)	the value of any …. food, …. provided by the employer;
	.…”  (emphasis added)

10. Further, “tips and service charges” is defined in the same section as follows :

“	‘tips and service charges’ (小費及服務費), in relation to wages, means sums of money received, directly or indirectly, by an employee in the course of and in connection with his employment which are—
	(a)	paid or derived from payments made by persons other than the employer; and
	(b)	recognized by the employer as part of the employee’s wages; …”

11. The case before me in this appeal is mainly concerned with sub-paragraph (b) and that is : whether tips and service charges had been recognised by the employer as part of its employees’ wages.  I shall now set out the background of this case leading to this appeal hereinbelow.

Background

12. The 15^th claimant, Lam Pik Shan, was an employee of the respondent company between April 1997 and February 2003.  By a contract of employment in writing dated 7 April 1997 as a “Counter Sales/Escort”, her salary was stated as $1,800 per month which would be reviewed annually.  Her contract of employment was terminated after February 2003.  That was our SARS year.  In the defence of the company, it was admitted that her basic salary was $2,200 at the time of termination. 

13. In this case she claimed for the following items :

(i)	annual leave pay	$27,294.96
(ii)	statutory holidays (difference in wages)	$63,795.62
(iii)	overtime payment	$43,554.17
(iv)	statutory holidays payment in lieu (difference in wages)	$15,461.00
		$150,105.75

There was a further claim for difference in meals allowance which she has withdrawn in the Tribunal below (as the definition of “wages” as stated in paragraph 9 herein has excepted food allowance anyway). 

14. This appeal came before me because Madam Lam was entitled to legal aid.  Originally there was a 14^th claimant, Lui Yun Man, who was taken as a test case before the Tribunal.  His similar claims under his contract of employment were dismissed both at the trial and at the review respectively in January and May 2005.  However he could not obtain legal aid for the appeal.  Thus, as I have said before, Madam Lam reinstated her claims with an understanding that her application would be dismissed for the same reason in order she could lodge this appeal on the similar matrix of facts and the legal issue.

15. In short, in the judgment below dated 3 May 2006 concerning C15, the judgment referred to all the reasons stated in the judgment for C14 and thus in this appeal, I am concerned with all those reasons given in both judgments.

The issue of “net tips” as part of wages

16. As explained hereinbefore, the main issue in this case is whether all the tips and service charges pocketed by the claimants is part and parcel of the wages for the purposes of the Ordinance as claimed by C15. 

17. The company contended otherwise in that those amounts of tips and service charges were not part and parcel of her wages and her wages should only be the basic salary of $2,200 a month.

18. In deciding whether tips and service charges were part and parcel of the wages, one would have to start with what the company has provided in its Employees Handbook as to how tips and service charges should operate leading to the same being eventually pocketed by the claimants.

19. Tips were not mentioned in the contract of employment.  However, in every tour there would be a suggested amount of tips per day the company would expect its customer to pay to the tourist guide at the end of the tour.  In the handbook of guideline to the company’s employees, it was specifically provided as to how tips and service charges should be collected.  First, a tourist guide should pay to the company before the tour an amount of “head tax” (人頭稅) per customer which is usually equivalent to 20% of the suggested tips to be paid by a customer at the end of the tour.

20. Since the year 2002, the Travel Industry Council directed that all travel agencies should not demand payment of tips before the tour and thus the company also stipulated that tips should only be collected at the last day of the tour. 

21. After a tourist guide had collected the tips from the customer, he would deduct the 20% of head tax he had already paid to the company for that tour and pocket the same himself by way of re-imbursement only.  Then he would pay the local tourist guide and the driver according to an agreed percentage and also deduct the total amount he had paid in advance to all baggage handlers in the trip.  There would also be other expenses like tips paid to waiters of restaurants patronised by the customers in a tour. These payments and deductions were all stipulated by the company.  Then he would pocket the balance as net tips and service charges paid to him as allowed by the company.  In other words, tips were suggested and calculated meticulously and explicitly by the company in their regulation and distribution and the same were all made known to the tourist guide.  In this respect, it is indistinguishable from the decision in the case of 任訴新光酒樓 [1] in which the Court of Appeal found in favour of the employees where the employer restaurant collected some extra money for side dishes from patrons and later distributed a sum to all levels of employees. This was done according to a detailed arrangement as to percentage, mode and dates of distribution of such money.

22. No doubt the total amount of monies collected by the claimant from the customers was not part of the claimant’s wages. Out of the total amounts, various sums of money were paid to the local tourist guide, the driver and the baggage handlers and they were not the balance of tips pocketed by the claimant.  These three kinds of persons were not employees of the company herein.  It is only the balance eventually pocketed by the claimant that would form the “net tips” which is part of her wages.  Thus it is incorrect for counsel for the company to submit that “if the claimant’s argument is correct, it would mean that the defendant recognised the Disputed Sums as wages for people who were not its employees”.  The Disputed Sums should only be the balance of the tips eventually pocketed by the claimant herself.  That is the “net tips” as submitted by the claimant’s counsel.  From the papers before me, I gather that all claimants were only claiming the “net tips” (e.g. See C13’s claim at 3-1032).

23. In this case the claimant also added an estimated tour allowance payable by the company to her for each trip.  Thus the basic salary, the net amount of tips pocketed by her and the allowance would become her wages in her claims herein.  According to the record, she had earned tips of about $10,000 odd for January 2001.  The total amount received by her every month was of course different.  Sometimes this amount of tips could be just $1,000 or $2,000 odd to $4,000 odd per tour.  She might even get $497 only for a four-day tour to Beijing involving only six customers.

24. The aforesaid indicated that a tourist guide’s income depended very much on the tips collected by her in a tour.  In other words, earnings of the company is parallel to that of the tourist guide and if the number of tours dropped severely like in the SARS period in 2003, a tourist guide earned much less and tours were few in those days.  A number of them were laid off in this case and hence their claims.

25. In any event, the average wages for the last 12 months before the claimant’s termination of contract of employment differed a lot between the mere basic salary of $2,200 a month and the additional amount of tips of, say more than $10,000 a month.  As benefits stipulated in the Employment Ordinance depend on the amount of wages, the difference between the amount calculated by the claimant in this claim and the company was about $150,000.  The decision of the Tribunal therefore has a far-reaching effect on the claimants and the whole industry at large.

26. In support of the company’s defence, Mr Rimsley Yuen S.C. who appeared with Mr M.C. Law for the company further submitted that in the definition of “wages” it recognised “tips” payable to an employee. Since tips were at the discretion of the customers, they were not bound to pay the suggested amount. In order to include “tips and service charges” as “wages” or part thereof, the former should be legally bound to be payable by the customers. However, although it is not a legally bound amount payable by the customer, it was nonetheless an amount paid to the tourist guide in the context of the tourist guide’s discharge of his duties. The definition of “tips and service charges” defined them to be sums of money received directly or indirectly by an employee… which are paid by persons other than the employer.  Accordingly these amounts of tips and service charges fall squarely into the definition of wages as provided in the Ordinance. Thus the word “payable” in the definition of “wages” does not apply to “tips”. This is in line with the proviso at the beginning of the definition section in S.2 (1), which provided that:

“	In this Ordinance, unless the context otherwise requires--…
	‘wages’ means…
	‘tips and service charges’…means”.
	(emphasis added)

27. Thus in this respect, money paid by customers (and not payable as in a legally bound situation) would be tips and service charges for the purposes of the Ordinance.

28. As I have said, the central issue in this case is whether the company recognised tips as wages.  The learned presiding officer below, Mr George Own, decided otherwise.  The question before me now is whether there is any error in law in his decision.  I am fully conscious that it is not for me to make my own finding of facts in lieu of the presiding officer.  Appeal will only be allowed if there is an error in law involved.

29. However, it will be more convenient to gather all the facts agreed between the parties and what inference that can be drawn from those facts in making a final conclusion by applying the appropriate laws to those facts.  But before I do I shall first of all consider the presiding officer’s decision as to the legal meaning he attached to the collection of tips by the claimant from a customer. 

The finding of a collateral contract by the Tribunal

30. In the first place, the presiding officer found that the collection of tips from customers was under a separate collateral contract between the tourist guide and the company and not part and parcel of her contract of employment.  He found that it was another contract whereby the tourist guide “bought” the opportunity to collect the anticipated “tips and service charges” from the company by paying the “head tax” to the company.

31. In my view I do not consider it possible or proper to infer such a collateral contract.  The customer had only one contract with the company at the time of agreeing to join the tour.  Only one amount of money was paid for the tour and in entering in the contract he was informed of the suggested amount of tips per day per person.

32. Having entered into a contract of tour with the company by a payment of the agreed fee, the company provided everything as stated in the contract.  However there was also a suggestion of the amount of tips to be paid at the end of the tour.  No doubt the suggested amount was not a contractual amount that the customer was legally bound to pay as aforesaid.  Nonetheless, it is common general knowledge that unless the customer was not satisfied with the services provided in the tour, he would at least pay the suggested amount.  On some occasions a customer might even pay more than the suggested amount when he was very satisfied with the service of the tourist guide, including the local guide and the driver. 

33. In the end I find that it is incorrect to infer a separate collateral contract between the company and the tourist guide in the payment of tips and service charges.  This finding of the presiding officer would seriously affect the conclusion reached by him that tips and service charges were not part and parcel of the wages received by the claimant since a deviation at the beginning would result in a different conclusion.  Further, such an inference and interpretation would have ignored the fact that those payments were made under the tourist guide’s contract of employment.  It should be recalled that tips and service charges in relation to wages was provided in the Ordinance as :

“	… sums of money received, directly or indirectly, by an employee in the course of and in connection with his employment which are—
	(a)	paid or derived from payments made by persons other than the employer; and
	(b)	recognized by the employer as part of the employee’s wages; …”
	(emphasis added)

34. The aforesaid added emphasis falls squarely into the situation whereby those tips were paid by the customers and received by C15 and other tourist guides.  Thus the definition in section 2 for “tips and service charges” and in particular sub-paragraph (a) thereof was satisfied in this case. In fact the company had not put forward a defence of collateral contract at all in the Tribunal below. 

35. Further, as submitted by Mr Eric Shum, counsel for the claimant, the company did collect tips on behalf of a tourist guide in some tailor-made tours for certain individual groups and the company could and actually did elect to collect tips on behalf of the tourist guides beforehand.  This, in any event, is inconsistent with the existence of a separate collateral contract.

36. Finally, there is evidence that the company would refund “the head tax” to the claimant if the suggested tips were not paid at the end of the tour due to no fault on the part of the claimant herself.  This would clearly show that the company had agreed to bear the risk of the claimant and therefore defeat the inference that there was a collateral but separate contract between them as submitted by counsel for the claimant.  The decision of the presiding officer is therefore wrong in his Review Decision that it would not amount to bearing the risk of the claimant in receiving no tips through no fault of her own.  Thus, as I have said, the only issue is whether the employer recognised them to be part of the employee’s wages as required in sub-paragraph (b) of the definition of “tips”. 

The concept of recognition of tips as wages

37. Recognition of course is a subjective act of the company.  However, the issue is whether the company had recognised tips as part of the wages during the contract of employment with C15.  The fact that an employer did not recognise tips as wages after a contract of employment and in particular at the time of a claim in the Labour Tribunal is of little or no evidential value at all.  On the other hand, an admission by a respondent in the Tribunal can be taken as evidence against him.

38. Further the burden is on a claimant to prove on a balance of probability that the company had recognised tips as part of the wages.  When there was no direct oral or written recognition of the tips as wages, each case would be decided on all the basic facts found by a Tribunal together with reasonable inferences to be drawn from those facts on a balance of probability.  In this respect, I would avoid using the phrase of “real and cogent evidence” presented by a claimant since it would easily give rise to a misunderstanding that the standard of proof is higher in this kind of civil cases.  In considering the issue of recognition there are further basic facts agreed between the parties and they are important in deciding this central issue.

Additional basic facts

39. Apart from the aforesaid modus operandi of how tips should be collected and distributed, there are additional facts presented in the Tribunal.  In this case, a tourist guide would have to make an “end-of-tour report” in which she would have to inform the company only when extra tips were collected, i.e. when the amount of tips were less than the suggested amount, she would not have to report to the company.

40. Since the year 2002, the company compiled an income report of its employee and filed the same with the Inland Revenue Department (“IRD”).  At their request, the company also included an estimate of the amount of tips received by each and every tourist guide. The company all along has a record of the number of tours led by each tourist guide in a financial year and the amount of suggested tips in each tour. In the company’s record for each tourist guide furnished to the IRD on a standard form provided by it, the amount of “Total Recommended Tips” was stated and the same was followed by certain “sums paid on behalf of customers out of the former amount”. These deductions were made and categorised into payments to:

(i)	local guides,
(ii)	drivers,
(iii)	porters,
(iv)	writers, and
(v)	others.

41. There were two other items of deductions, namely:

(a)	flat deduction of 3% of the “Total Recommended Tips”. The explanation note in this IRD form said it was “in consideration of the telephone or other expenses…”;
(b)	rebate to company which was the aforesaid “Head Tax” charged by the company.

42. In short, the income of the claimant would include the net tips pocketed by her as aforesaid.

43. There is also evidence that the company had provided letters of reference for their tourist guides when they requested the company to provide the same for a credit card company stating the amount of income received by each one of them in the past year (e.g. The letter of certification of the company dated 9 October 1997 at Bundle 1 p.121).  The total amount of income would include the tips and service charges received by the tourist guide. This apparently was made on the application of an employee in the company’s standard printed form entitled “Miscellaneous Application Form”. Here the printed words under the column of “Salary Proof” were “Annual/Monthly Salary”. The employee filled in the amount of $180,000, which presumably was his annual salary (See Bundle 2 p. 122).

44. Similarly, in the same kind of form of the company, an employee stated his annual salary as $350,000 for the purposes of his application to obtain a mortgage from a bank (see Bundle 1 p. 124). The company duly certified the same as the employee’s total annual income in its letter dated 11 August 1997 (See Bundle 1 p. 123).

45. On the other hand, there were instances when the company certified the amount of salary received by a tourist guide for the purposes of an application to the Housing Authority in his application for public housing.  The amount of salary stated therein was only the basic salary.  That was also done at the request of an employee. 

The company’s argument as accepted by the Tribunal

46. The finding of facts of the presiding officer was that there was no proof or evidence of the company’s recognition that tips were regarded by it to be part of the employee’s wages.  First of all there was no mention of tips in the employment contract.

47. In his view, recognition is subjective and the employee must prove by way of sufficient evidence for an inference to be drawn that his employer recognised tips as part of his wages.  However, contrary to the case of Li v. Windsor Sauna[2] in which the employer collected the tips and redistributed it to their employees, the company herein did not handle the money at all.  It did not know the exact amount collected by the employee and had no means to control its exact amount.  Therefore it cannot be put to bear any consequence or risk arising from it. 

48. Further, contrary to what was commonly called the Philip Wain[3]’s case, in which commissions therein involved clear contractual entitlement and fixed percentage, in the case herein the amount of tips involved were only a mere suggestion. 

49. Before 2002 there was no need for the company to include tips in its annual income report for the claimants to the IRD.  It was only under the direction and pressure of the IRD after 2001 that the company was obligated to include an estimate of service tips for its employees in their annual income report.  This does not amount to a recognition of income in terms of tips as wages. 

50. It was further submitted for the company that the Employees’ Handbook was not meant to include all the employees’ contractual terms.  It merely served as guidelines for the appropriate behaviour of an employee.  Tips was not mentioned under the section regarding “pay/salary” and the company regarded those guidelines as recommended or required behaviour of the employees since they would affect the company’s image.

51. Is the company correct in its submissions which were accepted by the Tribunal?  I shall start with what reasonable inferences could be drawn from the basic facts.

Inferences to be drawn

52. It is of course true to say that knowledge of the existence of tips would not be enough for the purpose of the Ordinance.  It has to be recognised by the company as part of the employee’s wages.  However, apart from the existence of tips, the company knew that a tourist guide accepted the contract of employment not because of the meagre sum of basic salary but mainly because of the amount of tips collectable by her according to the suggested amount of the company.  Thus the company at least recognised that a tourist guide’s income depended heavily on those tips and not the basic salary.

53. After all it was the company who had created this item of “head tax” payable by a tourist guide which amounted to 20% of the suggested amount of tips payable by a customer.  The reasonable inference is that the company participated in the tips itself through this modus operandi and the tourist guide would even have to pay 20% in advance before the collection of the tips paid at the end of a tour.  No doubt this will give the tourist guide more incentive or motivation to perform her services well.  But then the company could not be heard to say it had no means to control the amount of tips at all.

54. The whole tour was accompanied by the tourist guide from the company and according to the company, the tourist guide would be considered to be working 24 hours a day throughout the tour.  The company did not just recognise the existence of tips; it actually actively participated in the tips by collecting 20% thereof first from the tourist guide whilst the total amount of tips would only be collected at the end of tour by the attending tourist guide.  The company was in fact already ensured of its share in the tips by requiring the tourist guide to pay the company in advance of the tour.  This would be the case even when the amount of tips collected were less than the suggested amount.

55. Although in the contract of employment, this item of tips was never mentioned, it was clearly mentioned in the Employee’s Handbook, albeit it was not under the section regarding “pay/salary”.  An employee nonetheless would have to abide by all the stipulated conditions as laid down in the handbook in the discharge of his duties.  Any deviation from it would affect the image of the company which is very important for a travel agency.  In a serious case, the company could even dismiss an employee under section 9 of the Ordinance summarily and the consequence would be very serious for the employee since he would not be entitled to a number of benefits under the Ordinance.

56. In the definition of “wages”, it is provided that wages “means …. tips and service charges …. payable to an employee ….”.  Counsel for the company submitted that the word “payable” connotes a legal liability to pay.  However in the definition of “tips and service charges”, it is provided that they are “….sums of money received, directly or indirectly, …. which are paid or derived from payments made by persons other than the employer”.  It cannot be said that tips must be payable by a third person who has a legal liability to pay.  Otherwise, it will make a mockery of those voluntary tips paid by a customer patronizing a restaurant. 

57. The company had issued letters to credit card companies stating the total annual income of the employee and the same included the basic salary and the tips received by the employee on average in the past months, albeit at the request of the employee.

58. Further at the request of the IRD, the company reported to them the total amount of income of each and every tourist guide by including all the estimated amounts of tips according to the company’s record. 

59. What is the meaning one would designate to these amounts of tips received by the tourist guide in the past months?  Were they part of the wages or just sui generis in the sense that they would stand separately on their own and not form part of the wages?  If they were not wages, one would have asked what they were when they were part of the income of the tourist guide.  I consider from all the basic facts agreed between the parties, that the reasonable inference to be drawn is that tips and service charges were part of the wages and that they could not be otherwise when they were part of the income of the tourist guide “received by an employee in the course of and in connection with his employment which are paid or derived from payments made by persons other than the employer”. 

60. The company enabled its employees to earn this amount of tips and service charges by assisting and also participating in the mechanism of collecting the same.  The employee received those tips in the discharge of his contract of employment in respect of work done or to be done under his contract of employment in the course of and in connection with his employment in accordance with the Ordinance.  It is particularly so when the payment of the tips and service charges from a customer is not made under a separate collateral contract between the company and the tourist guide as an independent contractor. 

61. Apart from suggesting the amount of tips, the company stipulated the time of collection of tips as well.  It also prohibited against refusing, forced collection, or additional collection of tips. 

62. In the end I do accept the submissions made by counsel for the employee, Mr Erik Shum, that tips was part of the wages of the claimant.  It is in line with the description of basic salary put forward by the company itself in its defence.  The word basic means : of, pertaining to a base or constituting a minimum especially in a standardized scale (of wages …. etc).[4]  The phrase basic salary also implies there is another kind of salary.[5]  That other part of the salary must be part and parcel of her salary though paid in a different manner.  No one can say that salary is not wages.

Decision

63. In conclusion, it must be taken that the company had recognised that customers would consider those services rendered by the claimant as something they had “bought” from the company in one single contract of tour.  The tips they paid the claimants were made for this singular set of services.  In other words, customers obtained the service of the tourist guide qua his employment with the company but not otherwise. 

64. To my mind it is irrelevant that tips were collected by the tourist guide directly from the customers at the end of the tour and was not paid into the company’s account for redistribution by the company to the claimants.  It is only a consequence of the nature of the trade of the company which differs from other trades such as restaurant or massage parlour.  In both of the latter two examples, after services were rendered by the employee of the employer company, be it a restaurant or a massage parlour, payment was made directly to the employer and therefore would form part of the account of the employer. It is just a convenient way of operation whereby money would pass through the hands of the employer and become indirect payment to the employee concerned.  Some of the employers of restaurants or massage parlours also participated in the tips collected in various percentages.  Here, it is just out of convenience that money was paid directly to the company’s tourist guide and that he was not required to pay back the balance into the company’s account again.  Otherwise it would just be for reimbursement to their employees at a certain future day, say the end of the month.  That would be cumbersome and in fact troublesome for the company which would not serve any purpose.

65. In the end, the company would not have to bear the burden of collection and accounting to its employees.  If the customer paid less, the company would take it as a consequence of the tourist guide’s service or lack of the same.  The company would in any event have participated in the tips paid.  On the other hand, there is no evidence here either that C15 had ever reported over payment of the prescribed amount of tips by customers and in the end one can safely assume that all customers paid the prescribed amount of tips and in fact the company apparently made the same presumption in its report to the IRD.

66. The presiding officer was of the view that in the case of Li v. Windsor there was a fixed percentage of 10% to 15% deduction by the employer before distributing the remainder to the claimants and thus the employer therein had more control over the amount and handling of tips than the company herein.  However in my view, he could not consider that the situation was different when the company in the present case required the fixed amount of head tax to be paid by the claimant first, which was then deducted by the claimant from the tips collected at the end of the tour.  This is a distinction without a difference in that the company actually participated in the tips paid by customers and also regulated their collection and distribution by the aforesaid modus operandi.  This is in effect similar to the deduction and regulation by the employer in the Windsor’s case.  The two trades are quite different and therefore the method of collection and distribution are different out of a matter of convenience. 

67. Similarly, regardless of the procedure of dealing with the tips, the money paid is of the same nature in both cases, i.e. both for service rendered under the employment of the company involving no other private agreements between the company and the employee nor between the employee and the customer.  At all times, the claimant herein was the employee of the company working on its behalf even on a 24-hour basis as required by the company.  The service quality would directly affect the image of the company in its customers’ minds.

68. In the end I find that the different ways of handling the money should not affect the nature of the amount received.  The company has actually facilitated its collection.  The different kinds of methods or degree of facilitation and control in collection would not change the nature of the tips received.  Further, it does not change the fact that the company was involved in its procedure and regulation.  The payment directly from the customer to the tourist guide was merely done for administrative convenience and was a means for the customer to express his sincerity and thanks directly to the tourist guide. 

69. Lastly, in respect of the company’s certification of the employee’s basic salary for the purposes of the employee’s application for public housing, it is only a matter of regulatory requirement of the Housing Authority in the relationship between it and the employee.  If there is a failure to report the full income of the employee, it is a matter of responsibility of the employee to the Housing Authority.  It cannot be taken as evidence that the company did not recognise the tips as part of the wages of the claimants.  Even if it is some kind of evidence to the contrary, it by itself cannot tip the balance to the conclusion that the employee has failed to prove on a balance of probabilities that the company had recognised tips as wages. 

Epilogue

70. I understand this judgment will have some far-reaching effect on the company and the industry at large.  But one must bear in mind the purpose of the Government in introducing the Employment Ordinance for the protection of the employees.  They have less bargaining power and are more prone to a number of risks to the extent that they could, through no fault of their own, lose their job and therefore support for their families.  The provisions of wages in lieu of notice, redundancy payment, long service payment, statutory holidays payment in lieu, etc. were introduced so that employees could have a sufficient period of time and financial support therein to find re-employment.  The operation was based on the usual monthly income as wages received by the employee.  He himself together with his family also depended on such an amount.  To take only the basic salary of the tourist guide when it is common general knowledge in the trade that his whole income mainly depended on tips, would defeat the purpose of the Ordinance.

71. Of course, one will have to construe the Ordinance according to its wordings and apply the true meaning and purports of the provisions therein on those basic facts in this particular case in order to decide whether or not there is a recognition of tips as wages by the employer.  I have given my reasons therefor and I consider that the totality of evidence would support such an inference to be drawn. 

72. It is true to say there was no express provision in the contract of employment that the company recognised the amount of tips as wages.  But it is also true that there is no provision herein saying that the company did not recognise such tips would form part of the wages and the employee accepted that to be a term of the contract of employment.  The lack of provision of recognition is therefore as neutral as the lack of non-recognition.[6] 

73. If a company had not calculated tips as part of the wages in its account by its financial controller in the past, it would pose a very heavy burden on the company.  However, this would mean the company had wrongly assessed its position before.  No doubt for future tours, this responsibility of the company will have to be taken into account and tours will have to be offered at a higher price than they were.  In the end, the burden would be shared by customers and the community at large.  To my mind, our whole community will have to bear this burden one-way or the other. In short, even if my decision is otherwise, our whole community will have to bear the consequence through taxation to the Government who in turn will have to tackle the consequence of unemployment and poverty.  One way or the other, our whole community would have to bear all the consequences.  Similar consequences will ensue either by complying with certain measures taken by the Government, or by avoiding those measures taken by the Government.

74. As I have said in the beginning, the legislative measures were introduced by the Government in order to achieve a fairer and more stable society in Hong Kong.  It is only possible to have a stable society by achieving prosperity for the whole community at large together and not just for a few.  We cannot have stability without prosperity for all or at least for most people in the community.  In any community where the dominant majority is in poverty and polarization between the rich and the poor is getting more and more severe, this would certainly create instability and in the extreme condition, unrest and commotion for the whole community.  This will be as unstable as a reversed pyramid. By then customers for tours will certainly be few and some tourist guides may have to face unemployment.

75. We all like to have harmony in our community. We simply cannot have harmony without stability.   In this respect, our community will like to bear this responsibility in a harmonious way and it is only through responsible employers that harmony can be achieved.  Most of us are aware that there are a few industrialists who have operated their factories in the Mainland with holistic care and treatments for their workers.  Some even provide recreational leaders and facilities for their workers in their spare time.  These factories could survive through high time (when other factories were offering higher wages), and low time (when the number of contracts of works were dropping tremendously lower), when their faithful workers work hand in hand with their employers at all times.  In one very impressive case, an employer even carried his sick worker to see a doctor in the middle of the night when there was no other transportation available.  Obviously that is not what the law requires of an employer.  But we can see real harmony among these factories.

76. I must however emphasise once again that there is no suggestion that the company herein, being a reputable travel service company, has in any way behaved in an irresponsible manner.  In fact the regulations and the conditions it imposed on its employees have been very reasonable and responsible indeed.  This also applies in the collection and distribution of tips. Apparently it was just a misunderstanding of its legal position as provided in the Ordinance.  Here, the company would also like to know whether according to the law, it should be responsible for the higher amount of wages according to the net tips pocketed by the employee in the circumstances of this case.

Orders

77. For the aforesaid reasons I have allowed the appeal and set aside the Orders of the Tribunal on the day of the hearing.  The presiding officer, in dismissing the claim, did not assess whether the total amount claimed was payable should he allow the claim of the claimant.  Perhaps time should not be wasted in the assessment when in the test case, the parties were concentrating their efforts in the central issue of liability only.  For that reason, I have directed that the case should be remitted to the Labour Tribunal for the assessment of the quantum of entitlement of C15 before another Presiding Officer. In the assessment of the amount of tips received by the claimant as part and parcel of her wages, the additional amount of wages by way of tips and service charges should be the aforesaid “net tips” only.

78. It is of course open to the parties to agree on a sum or certain directions/orders by consent if there is a miscalculation on the total sum or otherwise. 

79. There is also an order of costs to the appellant/claimant in the appeal and in the court below to be taxed if not agreed.  C15’s own costs shall be taxed according to the Legal Aid Regulations.