NG PIK YUK v. WAI TAI KNITWEAR LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

LABOUR TRIBUNAL APPEAL NO. 49 OF 1987

(Labour Tribunal Claim No. 1598 of 1987)

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J U D G M E N T

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1. This is an appeal from a decision of the Labour Tribunal. The appellant ceased work with the Respondent in January 1987 and sought an award for holiday pay, annual leave pay and severance or long service pay. The Tribunal Officer dismissed the claim on the finding that the appellant was a sub-contractor and not an employee of the Respondent. The point to be decided in this appeal is whether the Tribunal Officer was correct in deciding that in law the relationship between the parties was a contract for services and not a contract of service.

2. The appellant commenced working at the respondents factory in 1976 as a casual piece work sewing worker. A Mrs. Kwok was then the person in charge of the section. In 1985 Mrs. Kwok advised the respondent that she was leaving and the appellant agreed to take over her responsibilities.

3. The test to apply to ascertain the contractional relationship between the parties in a case such this is no longer the one factor "control test". The authorities support what is sometimes called the "multifactor test". In Wong Sai Yee v. Kong Kwan trading as Hop Hung Saw Mill⁽¹⁾ Barker J.A. stated at page 3 :-

"The element of control is without doubt an important factor but it is not 'the essential factor'. Further, control includes the power of deciding, the thing to be done, the way it shall be done, the means to be employed in doing it the time when and the place where it shall be done per McKenna J. in Ready Mix Concrete v. Minister of Pensions⁽²⁾ at page 575."

4. The learned Judge also made reference at page 4 to the decision in Bank Voor Handel en Schee Puaart N.V. v. Slatford⁽³⁾ where Denning L.J. (as he then was) said :-

"In this connection I would observe that the test of being a servant does not rest nowadays on submission to orders. It depends on whether the person is part and parcel of the organization."

5. There is also a reference to the tests to apply in the judgment of Cooke J. in Market Investigations Ltd. v. Minister of Social Security⁽⁴⁾-

".....the fundamental test to be applied is this 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer is no then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be complied of the considerations which are relevant in determining the question, nor can strict rules be laid down as to the relevant weight which the various considerations should carry in a particular case. The most that can be said is that control will no doubt always have to be considered although it can no longer be regarded as the sole determining factor and that factors which may be of importance are such matters as whether the man performing, the service provides his own equipment, whether he hires his own helpers,, what degree of financial risk he takes, what degree of responsibilities for investment and management he has and whether and how far he has an opportunity of profiting from sound management in the performance of his task."

6. As stated by Cooke J. in the Market Investigation Ltd.⁽⁴⁾ case, there is no exhaustive list of the factors to be taken into consideration However some assistance can be found from an article in the Hong Kong Law Journal, Vol. 2 by Mr. John Rear entitled "Self-employment in the Building Industry" The article was referred to by Blair Kerr S.P.J. in Wong Po Bin v. New Universal Paper Co. Ltd.⁽⁵⁾ at page 69 :-

"The principal relevant factors (apart from control) which have been held to point in the direction of a contract of service, i.e. an employer/employee (or in the old terminology a master/servant) relationship are set out below. It cannot be too strongly emphasised, however, that these are merely pointers and that each taken by itself counts for very little, if anything,. Moreover it has been said in the most recent English case that "Whether the contract is one of service depends in the last resort on whether an ordinary person would so consider it in the light of his experience and knowledge" (Challinor v. Taylor (1971) The Times December 22 (N.I.R.C ). The factors are :-

(1)    The employers power or right to select the individual whom he wishes to work for him, whether the selection be made personally or through an agent.

(2)    The employers power or right to dismiss the worker either himself or through an agent.

(3)    The employers duty directly or indirectly to pay the workman's remuneration.

(4)    The payment of periodical wage calculated by reference to piece or time worked as opposed to remuneration by a fixed sum.

(5)    Performance of at least part of the work by the employee himself, i.e. if the workman could delegate the entire performance of the work to another, person it would weigh heavily against there being a contract for service.

(6)    The employers right to demand the exclusive services of the workman.

(7)    The fact that the services are to be performed at the employers premises as opposed to the premises of the employee or a sub-contractor.

(8)    The fact that the services cannot be said to be rendered as part of an "independent business" carried on by the workman.

(9)    The employers duty to provide tools and equipment.

(10)    The workmans obligation to work at times determined by the employer.

(11)    The fact that the workman is engaged generally without reference to any particular task(s).

(12)    The use of words in making the contract which indicated an intention to create a contract of service.

To this list can be added the degree of financial risk if any taken by the workman, the degree of responsibility for investment and management the workman has and how far he has an opportunity of profiting from sound management in the performance of his task.

7. With these considerations in mind it is necessary to examine the primary factors which were established by the evidence as existing in the relationship between the appellant and the respondent.

8. The appellant was responsible for the employment instruction and dismissal of the workers in the sewing section. She controlled the distribution of the work and she prepared samples. In addition as and when required she did piece work - the same work she performed prior to taking over the additional responsibilities in 1985. The workers in the section, including the appellant were required to punch cards for the respondent on the days they attended at the factory. The respondent kept work sheets from which the calculations of the workers wages were made, including those of the appellant. Those workers who stayed working in the section after the appellant had left were required to give 7 days notice to the respondent, when they decided to leave. The respondent paid leave pay and overtime allowance to the workers including, the appellant. When Mdm. Kwok, who the respondent claimed was also a sub-contractor left in, 1985 she was paid for maternity leave by the respondent.

9. The monthly wages were calculated by the respondent from the work sheets and paid by the respondent directly to the workers. The appellant did not "eat price" - that is she was not paid a lump sum by the respondent from which she was expected to pay the workers their wages and meet other commitments normally associated with running a business. The appellant was paid her wages for any piece work done by her and in addition received 10% of the total wages paid to the workers in the section. The appellant was employed exclusively by the respondent, when work was available she and the other workers in the section were expected to attend to it. There were periods when no work was available. The appellant did not have an "independent business" servicing other factories as well as the respondent. The work was attended to at the respondents factory exclusively and the respondent provided all materials and tools/machinery. The appellant had no investment of capital in. the operation and had no opportunity by her performance of making profits over and above her piece work wanes and the allowance. There was a slight risk of loss in that she was expected to make good any loss incurred by overproduction. The hours of work were the factory hours set by the respondent.

10. In his judgment the Tribunal Officer set out those factors which he had had regard to in reaching his decision. He accepted as true the evidence of CHAN WONG Mei -lai for the respondent that in 1985 she had asked the appellant to take over from Mdm. Kowk as sub-contractor and that the appellant had agreed to do so. In the Ready Mix Concrete Ltd.⁽²⁾ case, MacKenna J. at page 512 had this to say about labelling given to a relationship by the parties:-

"It may be stated here that whether the relationship between the parties to the contract is that of master and servant is a conclusion of law dependant upon the rights confered and the duties imposed by the contract. If these are such that the relationship is that of master and servant it is irrelevant that the parties have declared it to be something else. I do not say that a declaration of this kind is always necessarily ineffective. If it were doubtful what rights and duties of the parties wished to provide for a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention."

The Tribunal Officer recognised the need to look at the actual relationship and not at the labels given by the parties. He nevertheless regarded the labelling as a factor. At page 2 of the judgment he said :-

"I feel however that this fact is one of matters to be taken into consideration though it may not carry too much weight."

With respect that would seem to be a proper approach However the Tribunal Officer then went on to consider what he took as the second factor indicating a sub-contract relationship. Some of the wage records kept by the respondent referred to the appellant as a sub-contractor. The Tribunal Officer had this to say :-

"(2)    In the records of the Defendant (EXH D8A) payments to the Claimant are referred to payments for the sub-contractor. It is true that for a number of entries, there was no express reference to sub-contractor. I find, however that the words to the effect of adding 10% allowance had the same effect. This fact indicated to me that the defendant had' treated the Claimant as sub-contractor and that the parties had agreed to this arrangement."

Having first acknowledged that labelling should carry little weight he then drew from the partial labelling of the wage sheets a conclusion that the Parties had agreed to a sub-contract relationship. He was wrong to do so.

11. The Tribunal Officer also considered as relevant in indicating a sub-contract the fact that the appellant engaged the workers, distributed the work and saw that the work met the deadline. The respondent's evidence was that the appellant was asked to recruit the workers because she had contact with workers that the respondent did not.

12. This point was considered in the Wong Sai Yee⁽⁵⁾ case, the facts of which were very similar to this case. There the appellant recruited the workers, who were on piece work rates. The respondent paid the appellant a lump sum from which he paid the workers - he did "eat price". He had power to dismiss workers. The respondent did not tell him how to do the work merely what work was to be done. Barker J A. at page 4 stated :-

"Another helpful approach is that postulated by Cooke J. in Market Investigations v. Minister of Social Security at page 184 'Was the appellant carrying on business on his own amount'. In our opinion he was not. He was working exclusively from the respondent, in the respondents premises, using the respondents machinery to work on the respondents materials. True it is that he had wide powers of engaging and dismissing worker's but so do senior officials in companies who, are clearly employees. The reality of the situation appears to be that as the leader of the gang he was a foreman and that he and the workers were all employed by the respondent."

13. The Tribunal Officer considered the receipt by the appellant of the 10% allowance to be a crucial factor. He considered this to be her profit from her sub-contracting business of recruiting and instructing workers to do work at the respondents premises. The appellant had supervisory responsibilities for which she was entitled to an allowance. She was performing no more functions than the appellant in the Wong Sai Yee - and in that case the appellant paid the workers wages In the light of all of the other factors pointing to a contract of service the Tribunal Officer was wrong to regard the payment of an allowance as a "crucial" factor. He also placed significance on a finding that the appellant could be absent from work and that the wage sheets showed that she could earn a sizeable income from doing little or no work. With respect that is a conclusion which the evidence does not support. The wage sheets relate only to calculation of wages for work completed at piece work rates. The appellants work was to employ and supervise, distribute work, prepare samples and ensure the work was completed satisfactorily on time. She did piece work only when the need arose. It was wrong from the Tribunal Officer to find on the basis of the piece work wage sheets that the appellant was absent from work for long periods of time. It is interesting to note that when the appellant was absent it was the respondent not the appellant who provided a substitute supervisor. He further went on to say that the receipt of the 10% was all the more significant because "she has no capital in the outlay, e.g. provision of work place and tools/machinery (all such provided for by the defendant)." The provision of the work place and tools/machinery are factors pointing to a contract of service not a contract for services and the Tribunal Officer was wrong to take the view he did of these factors.

14. The Tribunal Officer accepted the evidence of the respondent that the keeping of punch cards and wage sheets and the calculation and payment of wages were all for the convenience of the appellant. He also accepted the appellant's evidence that the 10% payment was in lieu of the "eat price" method - to enable respondent to control the wanes paid to the workers. To do so was in my view to ignore or misconstrue those primary factors established by the evidence which when balanced against other factors point overwhelmingly to the relationship between the appellant and the respondent being in law a contract of service and not as he found a contract for services. I am satisfied that he was wrong to find the appellant to be in law a sub-contractor and not an employee.

15. The matter is remitted to the tribunal with the direction to the Tribunal Officer to make findings on liability and quantum based on the finding that the appellant was an employee of the respondent.

⁽¹⁾ H.K. Civil Appeal No. 97 of 1987

⁽²⁾ [1968] 2. QB. 497

⁽³⁾ [1953] 1 QB 248

⁽⁴⁾ [1969] 2 QB 173

⁽⁵⁾ [1973] H.K.L.R. 59