TSEUNG WAI CHUEN v. PACIFIC SHOREBIRD (H.K.) LTD.

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO. 49 OF 1996

(Claim No. E1269 of 1995)

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J U D G M E N T

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Background

1. The appellant is the 6th claimant in an action in the Labour Tribunal against the respondent for severance pay. At the conclusion of the hearing the Tribunal awarded the following sums to the appellant:

1) 2) 3) 4) 5)

Wages in lieu of notice (WILON) Annual leave pay Statutory holiday pay Double pay Severance Pay Total

$7,700.00 1,710.00 513.30 6,413.10 18,095.00 $34,431.40

The claim for arrears of wages was dismissed.

2. In computing the amounts payable by the respondent, the learned Tribunal Officer adopted the figure of $6,700 plus the monthly supervisor's allowance of $1,000 as the basic monthly salary of the claimant for an 8-hour working day and that his date of dismissal by the respondent was taken to be as on 31 October 1994. The 4 hours daily overtime pay amounting to $3,350 each month was not included as part of the claimant's monthly wages as he found that the overtime work was genuine overtime.

3. This appeal turns on two points and they are firstly: the learned Presiding Officer erred in law in failing to treat the $3,350 monthly overtime allowance as an integral part of the salary and secondly: in holding that 31 October was the date of dismissal, the learned Tribunal Officer had failed to give proper effect of the provisions of section 16G(1) of the Employees Compensation Ordinance. The appellant contends that the date of termination of employment should have been 20 January 1995 when he was given notice by the respondent company.

4. The claimant was employed by the respondent company as a night-shift supervisor since 22 April 1991. By April 1994 his monthly salary was $6,700 for an 8-hour working day. In addition he was receiving a supervisor's allowance of $1,000 each month. As a result of injuries sustained at work, the claimant last worked on 22 June 1994 and since that date he was on 2/3 salary. By 31 October the respondent company unilaterally stopped the sick leave payments. The learned Presiding Officer held that this amounted to constructive dismissal. There is undisputed evidence that for 11 months in the year prior to his disability he was required to work a 4-hour overtime every day and for his efforts he would receive $3,350 each month.

5. The Respondent did not give evidence at the hearing.

The Overtime Pay

6. The learned Presiding Officer felt himself to be bound by sections 2(2) and 7(4) of the Employment Ordinance which provide that overtime allowance should be excluded from the computation of wages in lieu of notice and severance pay. In his reasons he reminded himself that it remains a question of fact for him to decide as to what is the true nature of such payments. In so doing he must have in mind the cases of New Bright Industrial Co. Ltd v Wong Sau Chi & Ors [1995] 2 HKC 357 and Chow Wai Yee and 203 others v Fong's National Engineering Co. Ltd. Labour Tribunal Appeal No. 65 of 1995.

7. The appellant was a night shift supervisor and his evidence was that although he was supposed to work 8-hour shifts, his evidence at page 18 of the notes of proceedings was :

"There was only 2 shifts in the factory. Last year, over 11 months we work 12 hours. Only when order was not sufficient then the overtime would be cancelled and we work 8 hours a week."

8. The learned Tribunal Officer gave two reasons in support of his findings and they are :

1) There was no documentary evidence to corroborate the appellant's evidence that he had to work overtime for 11 months in the preceding year; and

2) He found that the first 4 claimants to be more credible than the appellant.

9. On the first reason of the absence of documentary corroboration, the learned Presiding Officer said:

"The 6th Claimant's evidence on pattern of overtime was different from the other 4 Claimants..... However, due to the fact that some of the time cards were missing in the relevant period, his evidence lacked documentary corroboration."

10. By documentary corroboration I take the learned Presiding Officer to mean attendance cards or wage computation forms based on the hours of work performed by the appellant. Documents of this nature must be business records kept by the respondent company and I do not think it would be reasonable to expect the appellant to have access to such records. At the hearing, only the time cards covering the period from mid-March to June 1994 were produced by the respondent. On the cards available, the machine printed hours of work show, without exception, that the appellant had worked a 12-hour shift from 8 p.m. to 8 a.m. during the entire 3-month period.

11. On the issue of credibility, the evidence of the 1st to 4th claimants were that they would work 12 hours every working day for some 8 to 9 months a year for several years. After considering their evidence the Tribunal Officer found that the overtime work would only be performed by them occasionally as and when required by prior notice of the company. On that basis he found that the payment they received were genuine overtime payments and therefore it should not be treated as part of the monthly wages.

12. Despite the fact that the respondent company did not give evidence at the trial, the appellant's uncontradicted evidence on his overtime pay was however rejected by the Tribunal on the appellant's lack of credibility. At page 4 of his reasons the learned Presiding Officer said :

"Although the 6th Claimant said that the same duties were carried out by him in 11 months a year, I was inclined to place more credit in the 1st 4 Claimants' evidence in this respect. I found as a fact that there had been seasonal fluctuation in the pattern of overtime work in the defendant company. The 4 hour overtime, in my judgment, were genuine overtime and hence should not be included in the calculation of wages in lieu of notice or severance pay."

13. The 1st claimant whose evidence was adopted by the 2nd, 3rd and 4th claimants was recorded to have said, later on the same page of the notes of proceedings:

"I am not clear for I didn't perform night shift. The shift was changed to 2 and with effect from May or June 1987. Each shift last 12 hours, i.e. 8 a.m. to 8 p.m., 8 p.m. to 8 a.m."

14. It appears that when the learned Presiding Officer made this observation he had not addressed himself to the fact that while the other claimants were day shift workers, the appellant was a night shift worker holding a supervisory position. What the other claimants said about their overtime arrangements might not have applied to the case of the appellant. However, the Presiding Officer applied his findings in respect of the 1st to 4th claimants to the case of the appellant. It appears from the reason that the learned Presiding Officer had interpreted the evidence before him erroneously by failing to give any weight at all to the records of work attendance that were exhibited before him. I am forced to conclude that on the issue of overtime payment his findings were contrary to the weight of the evidence before him.

15. There has been no shortage of cases coming before the courts in recent years on the issue of the true nature of sums paid to employees which are labelled as overtime payments. Section 7(4) of the Ordinance had opened the way for unscrupulous employers who would design a salary structure in such a way that the workers are required to do regular overtime work. The result would be that while a considerable part of the workers' monthly take home pay would consist of overtime payments, when their employment is terminated or when the question of severance payment arises, the employer will seek protection from the Ordinance by arguing that the overtime payments are not part of the workers' wages. One of the calculated effects of such salary structure is that the severance pay a worker receives would be greatly reduced, to the worker's disadvantage.

16. The spirit of the legislation is to afford some form of financial security to the workers in the event of their employment being terminated. A great number of such workers will have to live on the severance pay until the time they could find alternative employment. It is settled law that when the issue of overtime payment arises, the courts would look at all the circumstances of such payments and will not simply accept what is being labelled as such. It is always the substance rather than the label which determines the true nature of these payments.

17. Over the years the courts have adopted various approaches as an aid to resolve this issue on a given set of facts. I have the benefit of reading the long line of cases decided by my learned brothers in the High Court on this subject.

Regularity of overtime work

18. For my part, I am contend to start by looking firstly at the regularity of the overtime work done by the particular claimant in question. If, for instance, overtime work is only occassional throughout the worker's employment, such evidence will only go to show that they are genuine overtime work. However, if such times are so regular that the overtime hours had become the employee's normal working hours, this must be evidence to the contrary.

The percentage of overtime pay

19. The next area which I find to be of assistance is the amount of overtime pay a claimant receives expressed as a percentage of the claimant's basic salary. For a worker who is only given occasional overtime work, this percentage must necessarily be small. But if this exercise yields a high percentage and for my part, say upwards of 30% for each month throughout most of the duration of his employment, looking at it objectively, it must be within the worker's reasonable expectation that the overtime pay is part of his regular monthly wages. If the evidence is that the basic salary alone is unrealistic for employments of this nature, I would be inclined to treat the overtime payments as part of the claimant's regular monthly salary.

The nature of the overtime work

20. Where a worker is required to perform overtime work which are similar in nature to his duties in the ordinary hours of his employment and provided that all the other elements are present, I take the view that this could be one of the factors in his favour for inclusion of the overtime pay as part of his wages.

21. It has been suggested that the court should look at the employment contract and the conditions of employment therein. From my experience such documents are rarely helpful as more often than not, there are no provisions for overtime work.

22. Occasionly a worker's contract of employment may have provisions for the hours of work to be performed on each working day. In some contracts there may also be a provision whereby a worker is required to perform overtime work as and when directed by the company. In such a case I take the view that the worker should have a choice of refusing extra work for he have only contracted to work for the hours stipulated in his employment contract. If it is a case of mandatory participation, the absence of free choice on the worker's part could be one of the factors operating against the employer's case.

23. For all that was said, each case must be dependant on its own facts and it would be unrealistic to lay down a set of rules to cover every conceivable situation. It may be that there are other factors which I had not mentioned but the presence of which may tip the balance in a particular manner.

24. As I have indicated earlier, the appellant's evidence has not been contradicted. For 11 months of the year he was required by the company to work overtime. My calculations show that the monthly overtime pay of $3,350 represents a staggering 43% of the appellant's total monthly pay ($6,700 basic salary + $1,000 supervisor's allowance). With great respect to the learned Presiding Officer, his finding that the $3,350 was genuine overtime pay was against the weight of the evidence and could not be sustained.

Date of termination of employment

25. The second ground of appeal turns on the date of termination of the appellant's employment and the effect of section 48 of the Employee's Compenstation Ordinance.

26. The learned Presiding Officer held that the appellant was constructively dismissed on 31 October 1994 and all calculation on the items claimed were based on this date. It was argued that the employer was in breach of section 48 (1) (iii) of the Ordinance which provided for the commission of a criminal offence if an employee who was suffering an incapacity is dismissed without prior consent of the Commissioner of Labour. It was also suggested at the hearing that when the learned Presiding Officer was shown the Certificate of Assessment issued by the Employees' Compensation (Ordinary Assessment) Board dated 22 June 1994 he should have inquired of the appellant if he had lodged any appeal against the assessment. The fact remains that the appellant did on 28 June 1994 filed an objection and that being the case, the respondent could not have dismissed the appellant because the original assessment was deemded void by virtue of section 16G (1A) of the Employees' Compensation Ordinance. To hold that 31 October was the date of constructive dismissal would have the effect of condoning the respondent's act of breaching the provisions of section 48 (1) of the Ordinance.

27. I do not think this point calls for further consideration in the present appeal because in the respondent's written statement to the Tribunal, it was stated very clearly that the appellant was dismissed on 20 January 1995 and not before. In so far as the respondent had never retracted from this admission, it would not have been open to the learned Tribunal Officer to fix the date of constructive dismissal to be 31 October.

28. For the reasons given, this appeal is allowed and the award of the Tribunal is set aside and substituted by the itemized amount appearing below. The calculation is based on the overtime pay of $3,350 being incorporated as the appellant's monthly wages and that his date of termination of employment was on 20 January 1995.

One month Wage In Lieu of Notice $6,700 basic salary $1,000 supervisor's allowance $3,350 overtime (4 hours) Annual Leave Pay For the period January to December 1994 Statutory Holiday Pay (2 floating holidays) $11,050 x 2/30 Arrears of Wages April to May 1994 Double Pay For the period January to December 1994 Severance Pay $11,050 x 2/3 x 45.37/12 Total

$11,050.00 $5,156.00 $736.00 $900.00 $11,050.00 $27,855.55 $56,747.55

29. The total award is therefore $56,747.55. Cost of the Appeal be to the appellant and the appellant's own cost is to be taxed in accordance with Legal Aid Regulations.