WONG SHAM AND OTHERS v. CHIU KUNG HUI AND ANOTHER

HCA 1418/96

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1418 OF 1996

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J U D G M E N T

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This case originated as E5361 of 1995 at the Labour Tribunal. There were four claimants. The case, for some unknown reason, was transferred to the High Court. The claimants became Plaintiffs. Then three of the four Plaintiffs dropped out and the only outstanding claim is that of the 3rd Plaintiff ("the Plaintiff") who is now legally aided. The Defendant all along acts in person. The Plaintiff's claim is for (1) arrears of wages of $20,656.00 and (2) severance payment or long service payment of $128,180.85. The Defendant, ever since the case started, has admitted that money is owing to the Plaintiff for work done. Without committing himself to the exact amount due, the Defendant repeatedly stated that he would settle that as soon as money comes in. During the course of trial, the Defendant agreed that $20,656.00 is due to the Plaintiff for work done but not as arrears of wages. As to the severance payment or long service payment, the Defendant during the course of trial eventually conceded that he cannot dispute the quantum; the only issue is liability. According to the Defendant, the Plaintiff is not entitled to either severance payment or long service payment because the Plaintiff was not an employee of the Defendant - the Plaintiff worked for the Defendant as a contractor.

2. On the test of contractor or employee, all the authorities in England and Hong Kong have settled on what may be called the multi-factor approach. There is, however, no definitive list of factors as the authorities recognize that the relevant factors may vary from case to case. As a convenient reference, I shall focus on the 8 factors listed in Chitty on Contracts, Volume II, pp 703 - 704 relied upon by V. Bokhary J in The Royal Hong Kong Golf Club v. Cheng Yuen [1996] 3 HKC 121. I shall state the facts which are largely not disputed and then analyse them by reference to the 8 factors.

3. There is no written employment contract between the parties. The Defendant, however, did keep a record of the personal particulars of the Plaintiff. The record contains the name, age, sex, qualification (left blank), Hong Kong Identity Card Number, native origin, telephone number, address, previous post and photo of the Plaintiff. It is a standard form. Although it is not labelled as such, the record does look like a staff record.

4. At all material times, the Plaintiff performed his work at the Defendant's workshop. The door key to the workshop is kept by an employee of the Defendant. The Plaintiff should work six days a week between 9 a.m. and 6 p.m. everyday with one hour lunch break. Obviously, unless the Plaintiff was called upon to work overtime he would be locked out after regular working hours. Apart from a couple of hand tools like scissors and hammers, all the equipment or tools of trade used by the Plaintiff were provided by the Defendant. All the raw materials were also provided by the Defendant.

5. From November 1977, the Plaintiff was employed on daily basis. On or about 7th July 1987, the Plaintiff began to be paid on piece rate basis. The change to piece rate was not evidenced by anything in writing except a schedule of rates for work ("The schedule of rates"). From then on, the Defendant would take orders from customers for standard design sofas and issue work orders to the Plaintiff for production. At the end of each monthly period, the Plaintiff is paid according to a purchase order which listed the amount due for each piece according to the schedule of rates. Incidentally, the schedule of rates never changed. All through the years, the Plaintiff was paid at the same rates. It can hardly be said that the Plaintiff had any bargaining power to work on his own account. Occasionally, the Defendant would accept a custom order and the Plaintiff would be paid an amount agreed on ad hoc basis. This continued until October 1995 when the Plaintiff gave notice to terminate his contract with the Defendant.

6. At the time of switch to piece rate, although the Plaintiff had had about 10 years service with the Defendant, there was no severance payment or long service payment to mark off the change of the nature of the contractual relationship between the parties. For at least a couple of years after that, the Defendant continued to file employer's tax return in respect of the Plaintiff stating that the Plaintiff was his employee. There is no evidence as to subsequent tax returns by the Defendant but the Plaintiff says in evidence that he himself continued to file returns for salaries tax.

7. Throughout the 18 years the Plaintiff was working for the Defendant, he was never given any sick leave pay, statutory holiday pay or annual leave pay. The Plaintiff says in evidence that he thought he was not entitled to these benefits. As for taking time off, he did give notice beforehand on each occasion. The Defendant, on the other hand, says that the Plaintiff was free to take leave at any time and he did sometimes go on holiday for a few weeks.

8. On these evidence, I check against the list of factors as follows:-

(1) "The degree of control exercise by the employer": The Defendants says there was no supervision over the Plaintiff but there was quality control. The Defendant was a craftsman; quality control is already effective supervision. Since the Defendant supplied the materials, I doubt very much if there was no control to prevent unnecessary wastage. I have little difficulty in concluding that the Defendant had control.

(2) "Whether the worker's interest in the relationship involved any prospect of profit or risk of loss": I do not really see any real prospect of profit or risk of loss in the sense of a business undertaking. The Plaintiff had no initiative or room for manoevre over costs or prices.

(3) "Whether the worker was properly as part of the employer's organization": Clearly, the Plaintiff was part of the Defendant's organization.

(4) "Whether the worker was carrying on business on his own account or carrying on the business of the employer": The Defendant alleges that the Plaintiff could hire his own workers. But he never did and he was never told that he could. In view of the way the workshop was run, I doubt very much if the Plaintiff could hire his own workers. The Defendant further alleges that the Plaintiff had worked for others from time to time whilst being the Defendant's contractor. But there is no hard or objective evidence in support. I cannot see how it can be fairly said that the Plaintiff carried on business on his own account.

(5) "The provision of equipment": It is safe to say that the Defendant provided practically all materials and equipment.

(6) "The incidence of tax and national insurance": The documentary evidence shows that the Defendant treated the Plaintiff as his employee for tax purposes for a couple of years after the Plaintiff was switched to piece rate. The Defendant says this was a mistake by his Accounts Department. Even if it was a real mistake, it does not prejudice the Plaintiff's claim that he was an employee because the Plaintiff did not know and could have no say in how the Defendant filed tax returns.

(7) "The parties' own view of their relationship": I accept that the Defendant thought of the Plaintiff as his contractor. However, the Plaintiff was in no doubt that he was an employee. The Defendant did nothing to put firmly in the Plaintiff's mind that he was a contractor and in a number of ways led the Plaintiff and any other reasonable man to believe that the Plaintiff was his employee.

(8) "The traditional structure of the trade or profession concerned and the arrangement within it": There is no evidence on such structure or arrangements.

9. Needless to say, the fact that the Plaintiff was paid on piece rate basis is neither here nor there. I would not draw any inference on the non-payment of sick leave pay, statutory holiday pay and annual leave pay because from experience there have been employers who simply failed to comply with the Employment Ordinance, Cap. 57. In fact, this is symtomatic of employers who deny employer - employee relationship. The Plaintiff being practically an illiterate man was, I find, not aware of his statutory rights.

10. The Defendant did at one stage contend that the Plaintiff was not in any event entitled to severance payment or long service payment because he resigned of his own accord. I have no difficulty in rejecting this argument. It is beyond dispute that the Defendant did not pay the Plaintiff for four months before the Plaintiff gave his notice. Obviously, there was constructive dismissal.

11. In the premises, I find that the Plaintiff was an employee of the Defendant from 1977 to 1995. The Plaintiff was in law dismissed by the Defendant by reason of redundancy. Accordingly, there is judgment for the Plaintiff for $20,656.00 as arrears of wages and $128,180.85 as severance payments together with interest on both sums at the judgment rate from the date of filing claim at the Labour Tribunal until payment. There is also order for costs against the Defendant to be taxed if not agreed. The Plaintiff's own costs are to be taxed in accordance with Legal Aid Regulations.