CHOW WAI YEE and Others v. FONG'S NATIONAL ENGINEERING CO. LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

LABOUR TRIBUNAL APPEAL NO. 65 OF 1995

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J U D G M E N T

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1. The Claimants, over 200 of them (the Employees) were employed by the Respondent, Fong's National Engineering Company Limited (the Employer) in various positions in its factory for various periods of time. It was agreed that the Employees were all dismissed by the Employer by reason of redundancy and hence they were entitled to be paid severance payment under Part VA of the Employment Ordinance Cap. 57.

2. The only dispute between the parties was whether certain payments termed as "Overtime Pay" and "Attendance Bonus or Diligence Bonus" should be included as part of the Employees' wages in the computation of severance payment.

3. It appeared not in dispute that the written contracts between the Employer and the Employees stipulated that the working hours were 8:10 a.m. to 5:00 p.m. But invariably, the Employees worked until 6:00 p.m. or 7:00 p.m. The "wages" of the Employees were calculated on the basis of the first 8 hours until 5:00 p.m. at the normal rate and the remaining one or two hours at the rate of 1.5 times the normal rate.

4. If the Employees worked every day during the wage period until either 6:00 p.m. or 7:00 p.m., they would be paid two extra days' wages based on an 8 hour working day in a month. The extra pay was called "Attendance Bonus or Diligence Bonus."

5. The learned Presiding Officer of the Labour Tribunal included the "Overtime Pay" but excluded the "Attendance Bonus or Diligence Bonus" in the computation of severance payment.

6. The Employer appealed against the decision, claiming that the "Overtime Pay" should be excluded. The Employees cross-appealed against the decision, claiming that the "Attendance Bonus Diligence Bonus" should be included.

7. In his Reasons for Decision, the learned Presiding Officer made the following finding of facts :

1. The "overtime" from 5:00 p.m. to 6:00 or 7:00 p.m. had been a daily and regular affairs during the Employees' employment with the Employer.

2. The Employer expected each employee to carry out the normal overtime, namely the one or two hours period from 5:00 p.m. to 7:00 p.m.

3. An employee who wanted to be excused from doing the "overtime" would have to verbally apply for permission from the superior and failure to do so would attract action such as warning, in addition to the loss of the "Attendance Bonus or Diligence Bonus."

4. In planning its production schedule, the Employer had taken into consideration the normal "overtime" of the Employees.

5. The Employer provided free transport for the Employees and the timing of such free transport was arranged to accommodate the normal "overtime" of the Employees.

6. The learned Presiding Officer concluded that the Employees were obliged under the contracts to perform the "overtime" work.

8. Mr. Cheung, on behalf of the Employer argued that "wages" are simply the contractual remuneration payable to employees for work which, under the relevant contracts of employment, the employees are obligated to perform and the employer obligated to provide and overtime pay means the remuneration which, under the relevant contracts of employment, is payable to employees for performing work for such time over and above the contractual hours of work and/or at such hours when the employees are not obligated to work and/or when the employers are not obligated to provide work.

9. Mr. Cheung suggested that as the contracts between the Employer and Employees provided for the normal working hours to be 8:10 a.m. to 5:00 p.m., any work conducted after 5:00 p.m. would be overtime work no matter how regular such overtime work was. Mr. Cheung seek to rely on some English authorities to the effect that overtime hours would not become part of the "normal working hours" even if such work was regularly conducted and even expected by other sides unless there was an obligation on the part of the employees to perform and an obligation on the part of the employer to provide such work. Reference was made to Tarmac Roadstone Holdings Ltd v. Peacock [1973] 1 W.L.R. 594 and Redpath Dorman Long Ltd v. Sutton [1972] I.C.R. 477.

10. In England, due to the presence of trade unions and the collective bargaining situation, employment contracts are very much affected by "standard conditions" set down by trade unions or enacted by the relevant legislation. Redundancy payment depends on the "normal working hours" and there are clear statutory provision as to the meaning of "normal working hours". As can be seen from the judgment of Lord Denning M.R., the decision in Peacock's case (supra) rests principally on the statutory meaning of "normal working hours." Because of the statutory provision, employers are obliged to provide and employees are obliged to work a certain minimum hours of work in a week or a month. The word "obligation" was used in such context.

11. Similarly, the decision of Sir John Brightman in Redpath's case (supra) also involved the interpretation of the Redundancy Payments Act 1965 and the Contracts of Employment Act 1963 when it was decided that overtime work, even expected by both the employer and the employee, could not be taken into account as "normal working hours" unless it was compulsory in the sense that the employee was obligated to work and the employer was obligated to provide such work under the contract of employment in question.

12. In my view, the English authorities are of little assistance in the interpretation the Employment Ordinance. Similarly observation was made by Jerome Chan J. in New Bright Industrial Co. Ltd v. Wong Sau Chi [1995] 2 HKC 357 at Page 363,

" 'Overtime' is not defined in the Ordinance. In Tarmac Roadstone Ltd v. Peacock [1973] 1 WLR 594, it was held that if the overtime work was compulsory, in the sense that the employer is obliged to provide and the employee obliged to accept, it should be included within the definition of 'normal working hours' in Sch. 2 to the Contract of Employment Act 1963 for the purpose of redundancy pay. As Leong J. in Pang Tin Yee & others v. Fong's National Engineering Co. Ltd. (LTA 65/93, unreported) I do not find the English Court of Appeal decision of particular assistance in construing 'overtime' payment under our Ordinance. Leong J. accepted the approach ...."

13. In Hong Kong, there is no collectively bargaining. There are no "standard conditions" set down by trade unions or enacted by legislation. There is no statutory meaning of "normal working hours".

"Normal working hours" can only be given it ordinary meaning and in considering the meaning and effect of "overtime pay" as set out in the Employment Ordinance, it is important to bear that in mind.

14. The earning of the Employees for the period from 5:00 p.m. to 7:00 p.m. clearly falls within the definition of "wages" under Section 2(1) of the Employment Ordinance as remuneration in respect of work done and should be included in the computation of severance payment unless it was "overtime pay".

15. Unfortunately the Employment Ordinance does not define "overtime" or "overtime pay" and again in my view, they have to be given their ordinary meaning.

"Overtime" in the context of employment, in my view refers to period of working time over and above or additional to the period of normal or regular working time of the employee.

16. What is the normal or regular working time of an employee is a question of fact to be decided on all the evidence pertaining to his employment. The terms of the written contract are clearly relevant. But all other factors need to be taken into consideration. And as Jerome Chan J. said at Page 364 of New Bright's case (supra) observed :

"It is true to say that it matters not how the parties attempted to label, it is the substance and nature of the actual regular working hours that the court should have regard to in finding what is overtime work."

17. What then were the normal or regular working time of the Employees at the material time ? Was the normal or regular working time between 8:10 a.m. to 5:00 p.m. as the written contract stipulated or was the normal or regular working time between 8:10 a.m. to 6:00 p.m. or 7:00 p.m. when the Employees in fact worked such period everyday ?

18. I do not find the question difficult to answer at all.

19. I cannot ignore that all the employees in fact worked until 6:00 or 7:00 p.m. everyday despite what was stated in the written contract and if the employee wished to leave earlier, permission from the Employer was required. Such regularity or pattern lasted over a very long period of time to the extent that the learned Presiding Officer considered it amount to a variation of contract by conduct.

20. I cannot ignore that the free transport provided by the Employer to the Employees was arranged to tie in with the Employees finishing work at 7:00 p.m. In my view, the learned Presiding Officer was clearly right in concluding that the Employer arranged its business on the basis of the Employees working until 6:00 or 7:00 p.m. and that the Employees were obligated to work until such time.

21. On the evidence before the learned Presiding Officer, the normal or regular working time of the Employees was up to 6:00 or 7:00 p.m. and not just up to 5:00 p.m. In the circumstance, the pay to the Employees for the period from 5:00 p.m. to 6:00 or 7:00 p.m. was not overtime pay and should not be excluded in the computation of the severance pay to the Employees.

22. Mr. Cheung, on behalf of the Employer, also complained that the learned Presiding Officer had failed to adopt the definition of 'overtime employment' in Regulation 10(11) of the Women and Young Persons (Industry) Regulations. With respect, 'overtime employment' is defined under Regulation 10(11) for the purposes of the regulation only and it has no bearing on the meaning of 'overtime pay' under Section 2(2) of the Employment Ordinance. In any event, there was no evidence as to what was the period of work fixed by a notice under regulation 9 and the reference to the meaning of 'overtime employment' under regulation 10(11) can be ignored for the purpose of the present appeal.

23. Mr. Cheung put forward the following question :

"Why should the Employer treat the workers more generously on dismissal then if their contracts of employment were not terminated?"

24. In my view, it is not a question of treating the workers more generously on dismissal. The Employment Ordinance provides for certain compensation to be paid to the workers upon dismissal and the quantum of such compensation relates to the ordinary and regular earning of the workers.

25. The "overtime pay" was part of the ordinary and regular earning of the Employees on the facts of the case.

26. The learned Presiding Officer had come to a correct decision in including the 'overtime pay' in the computation of severance payment and the appeal by the Employer must therefore be dismissed.

27. On the cross-appeal by the Employees, Mr. Cheung conceded in the light of the decisions in Wong Ping-kong & others v. Tai Hing Cotton Mill Ltd [1994] 2 HKLR 108 and New Bright Industrial Co. Ltd v. Wong Sau Chi & Others [1995] 2 HKC 357 that he could no longer argued that the 'Attendance Bonus or Diligence Bonus' was not remuneration payable to the Employees in respect of work done or to be done under their contracts of employment with the Employer.

28. It was suggested, however that if Jerome Chan J's analysis in New Bright's case was correct, then almost all allowances relating to attendance and/or punctuality attendance would be caught by the definition of wages and hence contrary to the intention of the legislation when the Employment Ordinance clearly recognises that a contract of employment may provide for other benefit or allowance in addition to wages.

29. Whether all allowances relating to attendance and /or punctuality of attendance would be caught by the definition of wages is not an issue that I need to decide. Suffice for me to say that the situation had been carefully analysed by Jerome Chan J. and I agree with him. In any event, the decision in Tai Hing Cotton Mill's case (supra) is binding on me.

30. Mr. Cheung suggested that the decision in Tai Hing Cotton Mill's case should be limited to it own facts. I do not agree. The facts might be different. The reasoning clearly applies.

31. Keith J. stated at Page 109 :

"At the end of each wage period, the employee received his pay for the work he had done in that wage period. His pay fluctuated because it depended on a number of variable factors. One of those factors was his attendance at his place of work. If he attended at his place of work regularly, he qualified for a higher rate of pay for the work he had done. The higher rate of pay for the work he had done to which his regular attendance at his place of work entitled him was reflected in the attendance bonus. His regular attendance at his place of work, in other words, was one of the factors which determined the amount of his pay for the work he had done in the wage period, and the attendance bonus was the component in his pay for the work he had done which was attributable to his regular attendance at his place of work."

32. The 'Attendance Bonus or Diligence Bonus' in issue cannot be distinguished from the 'attendance bonus' in either Tai Hing Cotton Mill's case or New Bright's case.

33. The final point made by Mr. Cheung was that the 'bonus' is question was discretionary and therefore should be excluded as wages under Section 2(1) of the Employment Ordinance. With respect, this point was a non-starter. The evidence clearly indicated that as long as the Employees complied with the prerequisite conditions, they would be entitled to the 2 days wages as 'bonus'. There was nothing discretionary about it. It was not an isolated payment made to a chosen few for outstanding performance. It was a regular and fixed payment to the Employees as long as they did the 'overtime work' on every day of the wage period. I cannot imagine how the Employees would react if they were to be told that the Employer was not going to pay the 'bonus' to them as it was discretionary.

34. I have considered the very able argument of Mr. Cheung. However, the learned Presiding Officer was clearly wrong, as he himself recognised, in failing to include the 'Attendance Bonus or Diligence Bonus' in the computation of the severance pay.

35. The cross-appeal by the Employee is therefore allowed and an order made that in the computation of severance pay to the Employees, the 'Attendance Bonus or Diligence Bonus' should be included.

36. The Employer is to pay the costs of the Employees to be taxed if not agreed. For the Employees who are legally aided, their own costs will be taxed in accordance with the Legal Aid Regulations. The order on costs is an order nisi to be made absolute 14 days after the delivering of the judgment.