FASHION ART GARMENT FACTORY LTD v. YEUNG MAU CHING AND OTHERS

IN THE SUPREME COURT OF HONG KONG

LABOUR TRIBUNAL APPEAL NO. 39/89

(Claims No. KT-357/89)

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J U D G M E N T

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1. This is a Labour Tribunal appeal against a determination of the Preciding Officer, lodged pursuant to leave granted.

2. The material facts can be shortly stated : The 14 respondents were all ironing-section workers in the employ of the appellant company for some years. I shall call them "the Employees" and "the Company" respectively. On the 6th March 1989, a dispute arose between the Employees and the Company on piece work rates. The allegation is that the Employees deserted their posts. Their employment was terminated by an instant dismissal on account of alleged insubordination and neglect of duty. Between the 5th February 1989 to the 4th March 1989, a period of four weeks, none of the Employees had been given 12 normal working days of work. After their instant dismissal, all 14 Employees duly took steps to qualify themselves to claim severance payments under s.31N of the Employment Ordinance.

3. This appeal is focused primarily on severance payments. Entitlement to a severance payment arises under the Employment ordinance in this way : s.31B(l) creates a liability on the part of an employer to pay his employee of no less than two years' standing a severance payment if the employee is laid off within the meaning of s.31E.S.31B(1) expressly makes such an employee's liability subject to Part VA and Part VC of the Ordinance. S.31B(1) is itself within Part VA; so are s.31E and s.31N. In another words, the employer's liability to pay a severance payment under s.31B(l) is dependent on the requirements in s.31E and s.31N. S.31E specifies the situation in which an employee may be regarded as having been laid off by his employer. S.31N provides that unless certain step or action is taken within a prescribed period, the employee shall not be entitled to any severance payment. I should also mention the proviso to s.11(3) which does not permit an employer to lay off any employee for more than 12 normal working days in any period of 4 consecutive weeks and s.31G by which severance pay is to be calculated. Put simpler in common parlance : if an employee is dealt with by his employer in such a way that he, the employee, may be regarded as having been laid off (s.31E), the employer can be made responsible for paying a severance payment (s.31B(1)) by the employee exercising his right to claim it (s.31N and see s.31E(3) for "a right to a severance payment"), but the employee must take steps so to claim his severance payment within the prescribed time (s.31N).

4. It is reasonably clear that an employer's liability to pay a severance payment does not arise until appropriate measures are taken by the employee to assert his entitlement to it as s.31B(1) which creates the employer's liability is made expressly subject to s.31N which prescribes a time limit for the employee to realise his entitlement to a severance payment: In conclusion, the code for severance payments in the Ordinance must be activated by an employee.

5. The short point in the instant appeal is whether the Employees as former employees were able to exercise their right to claim to be entitled to severance payments after their dismissal, lawful or unlawful.

6. Mr Chan, counsel for the Company, submitted that a lawful dismissal under s.9 of the Employment Ordinance would activate a completely different code for determinating an employee's outstanding entitlements and that an unlawful dismissal would give rise to yet another separate code for resolving the employer's liabilities under, among other sections, s.31Q. Counsel preferred the terms "justifiable dismissal" and "unjustifiable dismissal" without elaboration. I find it, however, difficult to appreciate what it is that counsel hoped to gain. Whatever the dismissal, lawful or unlawful, in any dismissal, so counsel continued, the employer/employee relationship would terminate and the status of an employee would be lost to an ex-employee who is not entitled in that capacity to take advantage of what is regarded by s.31E as a lay off.

7. Mr Hwang for the Employees submitted that the liability of` the company as an employer had accrued before dismissal. That would seem to be clearly unsustainable as s.31.B.(1) is specifically made subject to s.31N which sets in motion these sections in a code of its own for severance payments.

8. Mr Chan, counsel for the Company, conceded that this special code in the Ordinance for severance payments contains no other limitation than the prescribed 3 months in s.31N which lays down a time limit for an employee to invoke, the right to claim his entitlement to a severance payment a right which has enured to his benefit under s.31E but a right which will be lost to him unless duly claimed within the prescribed period under s.31N. However, Mr Chan sought to call in aid the general principles of contract law in his submissions that all rights in a contract of employment must be exercised before its termination or expiry. Once a contract of employment comes to an end by dismissal, the employer/employee realtionship terminates, and the very subsistence of such a relationship is necessary, so counsel contended, for sustaining the locus standi of an employee to exercise his rights. But the right to a severance payment under s.31E and s. 31N is a statutory one. It is a right created by an Ordinance. Its nature and attributes, scope and subsistence are set and regulated by the provisions of the Employment Ordinance. I am not persuaded that a statutory right such as this can be overridden or prejudiced by the general principle in the law of contract.

9. Moreover, somewhat different concepts are introduced by the Ordinance to continutiy or termination of a contract of employment. Under s.3IE (2), cessation of a contract of employment may be treated as unbroken when no severance payment has been made. Under s.31T (3), the ending of an employment may be treated as falling on the day following when it ends on a rest day or holiday.  It can readily be understood why, strict contractual principles should not be applied.

10. Counsel for the Company further submitted that the use of the word "employee" in s.31E and s.31N is indicative of the legislative intent, to permit the exercise of his right to claim a severance payment by an employee only in his capacity of an employee and not an ex-employee. Thus, so counsel maintained, such a right may only be enjoyed during the subsistence of the contract of employment. But the word "employee" also appears in other sections of the Ordinance, in particular s.31RA(1)(d) where "employee" is even used in the context of the estate of a deceased employee. I do not share the opinion of counsel.

11. On no account, therefore, can it be said that an employee's right to a severance payment ceases or becomes overtaken or extinguished on his dismissal.

12. This Court was assured by counsel for the Company that despite the convoluted language of Grounds 1 and 2, the substance of complaint is that entitlement to a severance payment will be lost to an employee after his dismissal. On the proper' construction of the sections I have referred to, these grounds fail.

13. As a postscript, it is of interest to note the position in the United Kingdom. There, even after an employee has served his notice of intention to claim redundancy pay, upon his dismissal, whether unlawfully or lawfully, the statutory provisions for lay-off would be superceded by a separate set of provisions in the legislation. See The Law of Redundancy, Cyril Grunfeld, 3rd Edn., p.163. But in England, an employee's right to claim redundancy pay is explicitly made terminable by law in s.6(b) of the Redundancy Payment Act 1965 as re-enacted in s.88(2)(b) of the Employment Protection (Consolidation) Act 1978. S.6(b) of the Redundancy Act 1965 reads as follows :-

"Where an employee has given notice of intention to claim, (b) he shall not be entitled to a redundancy payment in pursuance of the notice of intention to claim if he is dismissed by his employer (but without prejudice to any right to a redundancy payment by reason of the dismissal)."

14. There is no equivalent provision in our Employment Ordinance. The need for a specific provision in the United Kingdom legislation presupposes that our statutory right of an employee to a severance payment would not be put an end to by a dismissal.

15. Ground 3 of the Notice of Appeal of the Company relates to the alleged failure of the Presiding Officer to determine the validity of the dismissal. I have taken the view that a dismissal, whether lawful or unlawful, would not override the operation of these relevant sections. The dismissal is immaterial. The 3rd Ground of Appeal has, therefore, no substance.

16. Moreover, it was the stance of the Company taken by its representative before the Presiding officer that the dismissal was lawful for alleged misconduct. Evidence was also led before the Presiding Officer that the dismissal was lawful for the same reason. It would have been open to the Presiding officer to assume the dismissal as lawful and proceed on that assumed premise. His deliberation and determination on what was claimed to be a fact by the Company could not have been legitimately complained of. It would have been absurd for the Company to maintain that it was still necessary for the Presiding Officer to adjudicate on the lawfulness or unlawfulness of the dismissal if the Presiding Office had assumed a fact most favourable to the Company. The Presiding Officer in fact stated categorically that it was futile to embark on the question of the validity of the dismissal. With the view so taken I entirely agree.

17. Ground 4 presents considerable difficulty if only for the facts that counsel for the Company selected for his criticism, atone time, "holiday" and, at another time, "annual leave" and that submissions on the proviso to s.31E (1) were shifted between whether the exclusion clause was to be interpreted with reference to "12 normal working days" or "the period of 4 consecutive weeks". Mr Chan finally elected to mount his attack wholly at the non-exclusion of the 3 days' statutory holiday in the period of 4 consecutive weeks.

18. Counsel's submissions can be summed up as follows s.31E (1) lays down a time frame of 4 consecutive weeks for computing the number of normal working days. The proviso to s.31E (1) excludes holidays from the determination as to "whether an employee has been laid off". Such an exclusion, in effect, precludes holidays from being calculated in the period of 4 consecutive weeks. In another words, the 4 consecutive weeks' period must be extended by the number of statutory holidays involved, and in this case, there were 3.

19. Bearing in mind the definition of "week" from one Saturday midnight to the following Saturday midnight, if Mr Chan is correct it would mean that for every week to be had in the time frame of 4 consecutive weeks, one must take at least two weeks, from midnight Saturday of week 1 to midnight Saturday in the following week, in order to make up seven days to compensate for the intervening Sunday in the first week. In that fortnight less two Sundays, 12 days may be made out of a total of 14 for counting as a statutory week. For the whole of the 4 consecutive weeks, it would take 8 weeks to make up the period of 4 weeks, bearing in mind the definition of "week". That can hardly be said to be consecutive. Even if the 4 consecutive weeks' period were to be taken together, the 4 Sundays in these four weeks would have to be compensated for by at least another week. Therefore, a minimum of 5 weeks would be required for securing the time frame of 4 consecutive weeks in s.31E (1). Again, 4 consecutive weeks in the Ordinance cannot mean 5 consecutive weeks. It is monumentally non-sensical. Mr Chan's suggested construction is clearly unworkable.

20. In fact, what is being provided for by the proviso to s.31E (1) is simply to exclude paid rest days or paid public holidays or paid days during a lock-out from being calculated for the purposes of the sub-section as a paid day for determining lay-off. An employee is regarded as being laid off (a) when work is not being provided for him on a minimum number of normal working days or (b) if he is not paid for such work for that same period (not, be it observed, for the 12 normal working days but for the same period). There are three elements in s.31E (1) to which the proviso may possibly apply : first, the period of 12 normal working days; secondly, the period of 4 consecutive weeks; and thirdly, the lay-off. For the absurdity I have endeavour to highlight, the proviso cannot refer to the period of 4 consecutive weeks. The proviso does not, by its, own language, "the employee is not provided with work", apply to the 12 normal working days. (Emphasis mine). It is clearly stated in the proviso that the time lost during a lock-out, on a rest day or a holiday in which the employee is not provided with work shall not be taken into account in determining "whether an employee has been laid off". The computation is for "lay-off" and that is precisely what the proviso says. A lay-off may be averted by (a) "work" or (b) "pay for the work". The proviso by its very terms takes (a) out of its context because the basis of the proviso is that the employee is not being provided with work :

"Provided that any period during which an employee is not provided with work because of a lock-out by his employer, or as a result of a rest day or holiday, shall not be taken into account in determining whether an employee has been laid off". (Emphasis mine)

21. That leaves only the other limb in the lay-off, viz. (b) "pay for such work". That is the only subject-matter susceptible to the exemption in the proviso. Limb, (b) is an alternative to (a). It is tolerably clear that (b) envisages the situation of an employee who is paid for work he is engaged to do but "the employer does not provide such work for him". If work is provided for an employee, he would, instantly fall within limb (a), and it is only when "the employer does not provide such work for him" that (b) need be considered. What is stipulated in the proviso is : during the time of a lock-out, a rest day or a holiday "when an employee is not provided with work", then even if he is paid, such time should be excluded (be it noted, not from the 12 normal working days) from "such period" as that of the 12, normal working days for the purposes of s.31E (1). I hardly need emphasize again the relevant part of s.31E (1) which reads : "whereby he is not entitled to any remuneration under the contract for such period". (Emphasis added). If the employee is not paid for this period during a lock-up, on a rest day or holiday for which he is not provided with work, both limbs (a) "work" and (b) "pay for such work" are absent, and the proviso would have no application. As I have said, the proviso only becomes operative when an employee has no work but paid in a lock-out, on a rest day or holiday.

22. The Presiding officer selected the period from the 5th February 1989 to the 4th March 1989, a total of 28 days, 4 consecutive weeks. His core reasoning was that the three-day statutory holiday did not affect the same period as that for the 12 normal working days, whether or not the Employees had been paid. The Employees were not so "entitled to any remuneration under the contract for such period" as to preclude them from being regarded as laid off within the meaning of s.31E (1). This is in essence what the Presiding Officer decided, though differently expressed. His decision is clearly correct and cannot be faulted.

23. Grounds 5, 6 and 7 were said to be allegations of partiality against the Presiding officer. An accusation of bias would necessarily undermine public confidence in the administration of justice. Such an allegation should not lightly be made unless it is supported by cogent and clear evidence. There is no such evidence in this case. Mr Hwang must be correct in his succinct reply that even if the Presiding Officer had been guilty of bias, the Company has not been shown to have been prejudiced. After all, the Presiding Officer's determination was exclusively on interpretation of the various sections of the Employment ordinance and his attitude good, bad or indifferent, could not be even remotely material. I have read the record of appeal with care and circumspection. The Presiding Officer eagerly sought to impress upon the representative of the Company that its opposition was ill - founded in law. A layman could perhaps be forgiven for entertaining the erroneous notion that all those who are not with him must be against him, but insofar as Grounds 5, 6 and 7 were advanced in support of an attempted condemnation of judicial conduct they are totally unwarranted.

24. In conclusion, the appeal of the Company must be dismissed. I dismiss it with costs to the respondents represented. For the respondents unrepresented, subject to what counsel has to say, I propose to award a reasonable sum to each by way of expenses, say, $100 per day.