PRECIEUX GARMENT FACTORY LTD. v. LAM KIN CHUNG and Others

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

Labour Tribunal Appeal No.5 of 1997

______________

______________

_______________

J U D G M E N T

_______________

The appeal

1. The Appellant was the former employer of the four Respondents. In the Labour Tribunal, Miss Queeny Au Yeung, the Presiding Officer, awarded the Respondents wages in lieu of notice, severance payment, arrears of wages, annual leave pay and statutory holidays pay. The last three items were admitted by the Appellant before the Presiding Officer. The Appellant objected to the claim for wages in lieu of notice and severance payment. Subject to one concession made by the Appellant regarding the wages in lieu of notice which I shall deal with later, the Appellant's appeal is in respect of the award for wages in lieu of notice and severance payment.

Severance payment

2. The only issue in regard to severance payment is whether the four Respondents were laid off by the Appellant.

3. The entitlement to severance payment is provided by s.31B of the Employment Ordinance ("the Ordinance") :

"31B. General provisions as to right to severance payment

(1) Where an employee who has been employed under a continuous contract for a period of not less than 24 months ending with the relevant date -

(a) is dismissed by his employer by reason of redundancy; or

(b) is laid off within the meaning of section 31E,

the employer shall, subject to this Part and Part VC, be liable to pay to the employee a severance payment calculated in accordance with section 31G."

4. Section 31E(1)(b) of the Ordinance provides that :

"(1) Where an employee is employed under a contract on such terms and conditions that his remuneration thereunder depends on his being provided by the employer with work of the kind he is employed to do, he shall for the purposes of section 31B(1) be taken to be laid off where the total number of days on each of which such work is not provided for him by the employer exceeds -

(a) ...

(b) one-third of the total number of normal working days in any period of 26 consecutive weeks,

and he is not paid a sum equivalent to the wages which he would have earned if work had been provided on the days on which no work was provided."

Wages

5. The Respondents were employed by the Appellant as piece-rated ironing workers. They were paid between $1.60 and $3.00 per piece of work. On the days on which no work or insufficient work was provided, the Respondents would do ironing and would be paid "company pay" of $240 per day based on eight hours' work. It is common ground between the parties that the average daily wages of the four Respondents were as follows :

1^st Respondent - $320.40

2^nd Respondent - $318.30

3^rd Respondent - $379.40

4^th Respondent - $331.60.

Normal working days

6. The 26-week period was between 9^th March and 7^th September 1996. Based on a 6-day week, the number of working days for this 26-week period was 156 days. According to Exh.C8, during this period there were three statutory holidays, hence the number of working days in this period was 153 days.

7. The s.31E provision would not be triggered if the employer was able to provide 102 normal working days to the workers which was two-third of 153 days.

8. The Appellant stated that 109 normal working days were provided to the employees. The Presiding Officer rejected this and accepted the evidence of the union representative of the Respondents and treated a working day with income of $300 or more as a normal working day. She further accepted the analysis that the number of normal working days plus days of leave for the Respondents ranged from 50 to 59 days. These fell far short of the 102 normal working days. In other words the number of abnormal working days exceeds one-third of the total number of normal working days and the Respondents were deemed to be laid off.

9. The Appellant attacks the choice of $300 as being arbitrary. I disagree. Based on the Appellant's own calculation, the Respondents' wages were greater than $300 per day. According to Ying Cheong Shoe Mfy. v. Yam Yuk Bing LTA No.102/1986 (Decision of Rhind J., 1^st May 1987) the meaning of "normal working days" in s.31E(1) means :

"... a normal day's work which enables an employee to earn a normal day's wages. A normal day's wages is, in effect, no different from an average day's wages for a piece-rated employee."

10. The Presiding Officer had correctly assessed the evidence and applied the law to reach the conclusion that the Respondents were laid off and awarded severance payment to them.

Inquiry

11. The Appellant also argued that the Presiding Officer had failed to discharge her statutory duty of investigation. It was said that she had failed to enquire about the scope of the contractual works that the Respondents had undertaken to do. The argument being that she had erred in confining the contractual work to the piece-rated works when the evidence show that the Respondents received company pay as well.

12. I see no merit in this argument. Although in paragraph 10 of the Reasons of Decision, the Presiding Officer stated that an employee would be taken to be laid off if the total number of days on which piece-rated work was not provided for him by the employer exceeded one-third of the total number of normal working days, one can see that the evidence she relied upon in respect of actual normal working days was those based on the actual earnings of the Respondents.

13. The Presiding Officer had further considered that after the Respondents left the employment, the Appellant had recruited four ironing workers and had successfully got four replacements. She held that what happened after the 26 weeks had little relevance except to show that it was unlikely that within the 26 weeks in question there should have been insufficient work for the claimants to do. She said that :

"Having sufficient ironing work available in Defendant was per se not sufficient to rebut the presumption in section 31E if, e.g. the work was never assigned to Claimants. The issue here was one of causation, namely, did Defendant sub-contract out because of Claimants' uncooperative working attitude? Did Claimants refuse to do it when assigned the work, hence the sub-contracting out? If the answer to either question was in the affirmative, then the presumption under section 31E of the Employment Ordinance might be rebutted."

14. The Presiding Officer examined the evidence and found that the lack of normal working days was not due to the Respondents doing external work. She further rejected the Appellant's contention that the Appellant had to sub-contract the ironing work because of the unco-operative attitude of the Respondents. She was not satisfied that on the non-working days there had been work available and assigned to the Respondents which they had refused to do or had it done with company pay.

15. Such findings are clearly open to the Presiding Officer and I see no error of law being committed.

Section 31C(5)(b)

16. The Appellant further argued that the Presiding Officer had failed to consider s.31C(5)(b) of the Ordinance which would have barred the Respondents' claim for severance payment. Section 31C(5)(b) provides that :

"(5) An employee shall not be entitled to a severance payment by reason of dismissal where he leaves the service of his employer -

(a) ...

(b) without having made a payment in lieu to the employer in accordance with section 7."

17. In my view, s.31C(5)(b) has no application. The entitlement to severance payment arises on two occasions. First, when the employee is dismissed by his employer by reason of redundancy, and second when he is laid off within the meaning of s.31E. Section 31C(5) deals with entitlement to severance payment by reason of dismissal. It does not deal with lay-off.

18. Reference can also be made to the other sections in Part VA of the Ordinance. Section 31B(2) deals with situations in which an employee who is dismissed shall be taken to be dismissed by reason of redundancy. Section 31D deals with situations where an employee shall be taken to be dismissed by the employer and in s.31Q, an employee who has been dismissed by his employer is presumed to have been so dismissed by reason of redundancy. None of these provisions equate lay-off with dismissal.

19. In Pow Yee Wah v. Chung Wai Stationery Factory Ltd. LTA No.45/1985 (Decision of Mortimer J. dated 6^th January 1987), it was held that s.31C(5) has no application in a constructive dismissal situation. It would appear that this case applies to the facts of the present case as well.

Wage in lieu of notice

20. Rhind J. in Ying Cheong Shoe Mfy. examined the power to order payment of wages in lieu of notice. He said that the power to order such payment is derived from s.8A(1) of the Ordinance. Section 8A(1) is as follows :

"8A.(1) Without prejudice to section 9, 10 or 11(2), where a contract of employment is terminated otherwise than in accordance with section 6 or 7, a sum equal to the amount of wags which would have accrued to the employee during the period of notice required by section 6 shall be payable by the party terminating the contract to the other party."

Rhind J. held that :

"... Section 8A(1) provides that wages in lieu of notice 'shall be payable by the party terminating the contract to the other party'. Although section 10 has been characterised by the description 'constructive dismissal', there can be no doubt in the present case that it was the employees who terminated the contract when they accepted the employer's repudiation. As the employer was not the 'party terminating the contract', there is no obligation on the employer to pay wages in lieu of notice. That does not mean, however, the employer is entitled to walk away scot-free. Instead of being liable to pay liquidated damages under section 8A(1), the employer is instead liable to pay unliquidated damages according to ordinary common law principles for breach of contract. Thus, instead of ordering the employer to pay wages in lieu of notice, the learned Presiding Officer should have assessed common law damages for the employer to pay."

What the learned judge said applies equally to the present case and the Respondents were not entitled to wages in lieu of notice. The passage was accepted by Mr Ng, Counsel for the 1^st Respondent. Mr Lee, Counsel for the Appellant, upon taking instructions, agreed that if I should dismiss the appeal, which I understand to be the appeal on severance payment, the Appellant, so as to save further cost and time, would not apply to have damages assessed, but would instead accept the award of wages in lieu of notice made by the Presiding Officer. Based on the concession, I would not disturb the decision of the Presiding Officer on this claim.

Counterclaim

21. The Appellant had also counterclaimed for wages in lieu of notice. As it was the Appellant who was in breach of the contract of employment, clearly it was not entitled to such a claim and the Presiding Officer had correctly dismissed the claim.

Conclusion

22. Accordingly the appeal is dismissed with cost nisi to the Respondents. There is money in court which should be paid out to the Respondents. The Respondents should jointly submit a written application within 14 days as to how the money should be apportioned between them. The money will be paid out accordingly.