WONG PUI TUEN KENNY AND ANOTHER v. CROWN MOTORS LTD

HCLA108/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 108 OF 2003

(On appeal from LBTC 552 & 740 of 2003 (Consolidated))

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J U D G M E N T

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1.  This is the claimants’ appeal against the decision of the Presiding Officer of the Labour Tribunal made on 19 August 2003.  The main issues in the appeal are: (i) whether commissions earned by the claimants in respect of car finances they arranged for the defendant’s customers should form part of their wages for the purpose of calculating wages in lieu of notice, long service pay and holiday pay, and (ii) whether the claimants are entitled to be paid for working on rest days.

Background

2.  The 1^st and 2^nd claimants were formerly the sales representatives of the defendant.  The 1^st claimant was first employed on 3 March 1993 and the 2^nd claimant on 10 April 1984.  Their employments were terminated by wages in lieu of notice on 1 and 27 June 2002 respectively.  The defendant had made long service payments to the claimants.

3.  The claimants commenced proceedings against the defendant in the Labour Tribunal, claiming payments for statutory holidays and rest days.  Additionally, the 1^st claimant also claim that there had been short payment of their wages in lieu of notice and long service payment in that the defendant’s computation had not included commissions for car finances they had arranged for the customers.

4.  The Presiding Officer allowed the claim for statutory holidays, but dismissed the claim for rest days.  The Presiding Officer further concluded that the commissions do not form part of the claimants’ wages and had been rightly excluded from the computation of wages in lieu of notice and long service payments, and dismissed the claimants’ claim for the balance of these payments. 

5.  On 25 August 2003, the claimants applied for leave to appeal against the decision.  A set of Substituted Grounds of Appeal was filed on 15 November 2003, on which basis leave to appeal was given on 19 November 2003.   On 18 March 2004, the claimants filed another set of Perfected Grounds of Appeal without leave, contrary to Rule 9(2) of Labour Tribunal (General) Rules.  No issue, however turns on this as the defendant had raised no objection to the Perfected Grounds of Appeal.

6.  There is no cross appeal from the defendant on the decision allowing the claim for statutoryholidays.

Car finance commissions

(1)    The relevant facts

7.  The facts relevant to the issue of car finance commissions as found by the Presiding Officer and as appeared from the documents before the Tribunal can be summarized as follows:

(1)    The defendant carries on the business of car sales and the claimants were employed as its sales representatives.

(2)    In connection with the business of car sales, the defendant would, in some cases, assist the customers to obtain car finances.

(3)    The defendant has lined up with Inchroy Credit Corporation Limited (“Inchroy”) to provide car finances to its customers.

(4)    In return for the defendant’s sales representatives arranging for the defendant’s customers to obtain car finances from Inchroy, Inchroy would pay commissions to the sales representatives as an incentive for them to promote its financial products.

(5)    Under the arrangement mentioned in (4) above, the claimants had during their employment with the defendant received commissions on car finances they had arranged for the defendant’s customers with Inchroy.

(6)    The commissions were paid directly by Inchroy to the claimants twice a month. Inchroy would issue to the claimants monthly statements of the payments made.

(7)    The rate and amount of commissions payable to the claimants were determined by Inchroy.

(8)    Inchroy had filed tax returns on the commissions paid to the claimants as remuneration paid to persons other than employees.

(9)    The commissions were not included in the tax returns filed by the defendant for the claimants.

(10)    Inchroy and the defendant are separate legal entities, but both are companies within the Inchcape group of companies.

(2)    Section 2(1) of the Employment Ordinance

8.  Section 2(1) of the Employment Ordinance defines “wages” as meaning, inter alia:

“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 …”

(3)     The Presiding Officer’s determination

9.  The Presiding Officer held that Inchroy made general offers to car dealers’ sales representatives, including the defendant’s sale representatives, to promote its products in return for commissions, and the sales representatives might accept the offers by arranging car finances for their customers with Inchroy.  He found that the legal obligation to pay commissions rested with Inchroy and the defendant was not contractually liable to pay the claimants the car finance commissions.  He considered it irrelevant that the claimants’ commission earnings were taxed for salaries tax.  On these bases, the Presiding Officer concluded that the commission payments did not form part of the claimants’ wages under their employments with the defendant.

(4)    Perfected Grounds of Appeal

10.  Grounds 1 to 3 of the Perfected Grounds of Appeal are relevant to the issue on car finance commissions.  In substance, the claimants complain that the Presiding Officer had not considered that they were required by the defendant to promote the finance products of Inchroy, and had not adequately considered the statutory meaning of “wages”.

11.  Mr Yu argues that the essential part of the statutory definition of “wages” is remuneration, earnings and allowances “payable to a employee in respect of work done or to be done under his contract of employment”.  In his submissions, wages can extend to remuneration for particular items of work paid by a third party when the work is closely connected with both the employer and the contract of employment.  He also submits that since the claimants were required by the defendant to promote Inchroy’s financial products, this forms part of the work done or to be done under the employment contract with the defendant.  It is further said that the Presiding Officer erred in considering to be decisive, the question of who bore legal obligation and liability to pay the commissions to the claimants. 

12.  For the defendant, it is argued that in order to come within the statutory definition of “wages”, the employer must have a legal liability under the employment contract to make the payment in question.

(5)     The statutory definition of “wages”                                                        

13.  The issue is essentially a matter of statutory construction. In summary, the differences between counsel boils down to whether the words “under his contract of employment” should be read as qualifying “remuneration, earnings and allowances … payable to an employee”, or as qualifying the “work done or to be done” by the employee.

14.  The critical words in the statutory meaning of “wages” under section 2(1) are “payable to an employee in respect of work done or to be done under his contract of employment”.  The emphasis is on the contract of employment.  Given that the Employment Ordinance is a piece of legislation to regulate general conditions of employment, hence the rights and duties of employers and employees under contracts of employment, a logical construction mandates that the statutory definition be read to refer to remuneration, earnings and allowances that are paid undercontracts of employment.  The obligation to pay and the entitlement to receive the payment must stem from the contract of employment. 

15.  In most instances, where the payment is in return for work performed or to be performed under the contract of employment, there will be a corresponding liability under the contract to pay for the work done or to be done.  But it does not follow that if the work done or to be done is connected to and carried out under the contract of employment, the employer necessarily has a liability under the contract of employment to pay for it.  Furthermore, where the employment facilities or affords the employee an opportunity to earn a remuneration, the employer does not become liable to pay the employee unless he is already obliged by the contract of employment to do so.  If wages is not confined to remuneration, earnings and allowances payable under the contract of employment, employers will come under onerous burden for which there is no logical justification.  It follows that although it is a very relevant factor that the work for which the remuneration is paid is work done under the contract of employment, the fact is not always determinative of the issue of whether the payment is part of the employee’s wages.

16.  The section is silent on by whom the remuneration, earnings or allowances are payable.  In my view, it is not necessary that the payment must come from the employer.  It can cover payment not paid by the employer personally, but by a third party, so long as the payment is made under the contract of employment.    

17.  Mr Yuen SC has drawn a distinction between the definition of “tips and service charges” and that of “wages” under section 2(1).  He argues that while “tips and service charges” expressly covers payments made by persons other than the employer and recognized by the employer as part of the employee’s wages, the definition of “wages” does not refer to payments by persons other than the employer.  In my view,given that the meaning of “wages” in section 2(1) extends to “tips and service charges”,the meaning of “wages” is wide enough to cover payments made by a person other than the employer provided that they are payments under the contract of employment.

(6)     Payment of the car finance commissions

18.  In the present case, the fact that the commissions are paid by Inchroy is per se not determinative of the issue of whether the commissions form part of the claimants’ wages.  However, this is a very relevant factor, especially when considered together with the overall arrangement on the payment of commissions.  It sheds light on for what consideration and in respect of which contractual arrangement were the commissions paid, and in turn whether the commissions were payments under the claimant’s contracts of employment with the defendant.  

19.  The claimants were paid commissions on account of car finances that they had arranged for the defendant’s customers.  The defendant is a car dealer.  The claimants’ duties and work under their employment contracts with the defendant as its sales representatives, was to promote and effect car sales.  It is not part of the defendant’s business to offer and provide car finances.  The work of the claimants under their employment contracts did not extend to arranging car finances.  On the evidence as found by the Presiding Officer, it was because of Inchroy’s offer to pay commissions and the arrangement Inchroy had with the claimants on commission payment that the claimants made the car finance arrangements for the customers and came to be entitled to the commissions.

20.  Although the claimants’ employments with the defendant had enabled them to earn the commissions, they received the commissions not under and by reason of their contracts of employment with the defendant.  As to the criticism that the Presiding Officer had not considered that the claimants were required by the defendant to promote Inchroy’s financial products, it is not part of the Presiding Officer’s findings on the facts that the claimants were so required.  On the contrary, the Presiding Officer found that the claimants, as with other car dealers’ sales representatives, might accept Inchroy’s offer to promote its car finance products in return for commissions.  It is not the Presiding Officer’s findings that the promotion of Inchroy’s products formed part of the claimants’ contractual duties with the defendant.

21.  In my view, the Presiding Officer had not gone into error in considering that the defendant had no liability to pay the commissions and that the legal and contractual obligation to pay the commissions rested with Inchroy.  In so doing, the Presiding Officer was rightly addressing the issue of whether the commissions were payments under the claimants’ contracts of employment or were payments made pursuant to other contractual arrangement.  The Presiding Officer’s decision accords with the statutory meaning of “wages”.  The claimants’ appeal against the Presiding Officer’s decision on the car finance commissions therefore fails.

Payment for rest days

(1)    The Presiding Officer’s findings

22.  On the claim for rest days pay, the Presiding Officer made the following findings:

(1)    Saturdays, Sundays and public holidays other than statutory holidays were the claimants’ contractual rest days.

(2)    The defendant’s showrooms opened seven days a week and the defendant would organize car shows at weekends and on public holidays.

(3)    The claimants had performed duties at showrooms or car shows on Saturdays, Sundays and public holidays.

(4)    The claimants’ work on the contractual rest days is not in the nature of compulsory work as provided for in section 19(2) of the Employment Ordinance.

(5)    The claimants had not requested to work on their rest days.

(6)    The defendant by fixing duty rosters for weekend duties and public holidays duties, had requested the claimants to work on their rest days.

(7)    By attending duties on their rest days in accordance with the duty rosters, the claimants had agreed to work on their rest days at the request of the defendant.

(8)    For voluntary work on rest days, section 20 of the Employment Ordinance does not require the employer to grant compensation leave or to pay overtime payment. It is primarily a matter of contract between the employer and the employee.

(9)    The defendant’s employee’s handbook provides for overtime work to be compensated by overtime pay or time off at the defendant’s discretion. The handbook was prepared for the whole Inchcape group, and the provisions on overtime pay did not apply to the claimants.

(10)    There was no agreement between the claimants and the defendant that the defendant would pay overtime pay to the claimants for their work on rest days. The claimants would only be remunerated by commissions on sales they achieved when performing the rest day duties. The claimants worked on weekends and public holidays in return for the opportunity to achieve more sales and to earn more commissions.

(11)    In the 9 years and 18 years that the 1^st and 2^nd claimants had respectively worked for the defendant, they had never been paid overtime pay for their weekend or public holiday duties.

(12)    In the absence of agreement, the claimants had no entitlement to payment for working on rest days.

(2)       The grounds of appeal

23.  Grounds 4 to 6 of the Perfected Grounds of Appeal relate to the rest day claim.  Ground 4 complains that the Presiding Officer erred in finding that the claimants agreed to work on rest days upon the request of the defendant when there was evidence that the claimants were required to work and they had no choice but to do so.  Ground 5 says that the Presiding Officer was wrong in finding that the absence of compensation agreement was sufficient to dismiss the claim for rest day.  Ground 6 argues that the defendant had failed to provide substitute rest days as required by section 18(5) of the Employment Ordinance, as a result the claimants become entitled to payment or compensation for their work on rest days.

(3)     Challenge to the finding of agreement to work

24.  Section 32(1) of the Labour Tribunal Ordinance provides that a party may only appeal against the Labour Tribunal decision on the ground that the decision is erroneous in point of law or is outside the jurisdiction of the tribunal.  No appeal lies from findings of facts made by the Tribunal.

25.  The Presiding Officer’s finding that the claimants had agreed to work on their rest days upon the defendant’s request is a finding of fact.  Even though it might have been the claimants’ evidence at the Tribunal that they had worked on the rest days because they felt they had no choice, it was opened to the Presiding Officer to come to a different conclusion on the evidence, and he had given reasons for arriving at that finding.  The claimants’ appeal is not on the basis that the Presiding Officer’s finding of fact cannot be reasonably entertained so that it amounts to an error of law.  As such, it is not open to the claimants to challenge the finding, which is a finding of fact, on appeal: Lee Tim v. Chow Suk Ching [1997] 1 HKC 470 at 475F-G.  Ground 4 must fail.

(4)     Statutory provisions on rest days

26.  Grounds 5 and 6 can be taken together.  In dealing with these grounds, it is necessary to have regard to the different sections on rest days under Part IV of the Employment Ordinance.  Section 18(1) provides that the employer shall appoint rest days for the employees.  Section 18(5) further provides that an employer may with the employee’s consent substitute for the rest days appointed, some other rest days within the same month and before the rest day so appointed or within 30 days following the appointed rest days.  Section 19 deals with compulsory work on rest days, in which case the employer shall substitute for any rest day on which an employee is required to work some other rest days within 30 days.  Section 20 relates to voluntary work on rest days.  An employee may request to work on rest days or may, at the request of the employer, agree to work on rest day. 

27. It is only in the case of section 19, namely, compulsory work on rest days by reason of emergency or breakdown of machinery and plants, that the employer is under a statutory obligation to grant substitution for the rest days on which the employee had worked.  As the Presiding Officer rightly found, the present case does not fall within section 19.  There is thus no question of granting substitution rest days under section 19(3).

26.    In the case of section 18(5), it only enables the employer, with the employee’s agreement, to change the appointed rest days for some other rest days. There was no evidence in the Tribunal that the claimants had agreed with the defendant to take rest days in lieu of those on which they had worked.  At the same time, the Presiding Officer had found that the claimants had agreed to work on their rest days in return for the opportunity to conclude more sales and earn more commissions.

27. Other than section 19(3), none of the sections on rest day requires the employer to grant compensation leave or make compensation payment to an employee for his work on rest days. The question of rest day pay is essentially a matter of contract between the employer and the employee.

28. Accordingly, the Presiding Officer, having found that the defendant had not agreed with the claimants to pay overtime pay for their work on rest days, is correct in concluding that the claimants have no entitlement to be paid rest day pay.  The claimants’ appeal against the dismissal of their claim for rest day therefore fails.

Conclusions

29. For the reasons mentioned above, the claimants’ appeal is dismissed.  Applying the normal rule of costs follow event, I make an order nisi that the claimants pay the defendant the costs of this appeal, to be taxed if not agreed.