CHENG PAK YAN AND ANOTHER v. WUI YIP ASPHAIT CO

___________

HEADNOTE

___________

                Labour Tribunal Appeal - whether lay offs under Section 11(3) Cap. 57 are not "normal working dais" within the meaning of that expression in Section 31E(1). Whether a lay off beyond the permitted length amounts to constructive dismissal held

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____________

BETWEEN

___________

JUDGHENT

___________

1. Thin is an appeal from the Labour Tribunal, leave having been granted by thus Court on 15th July 1986. The Respondents (Claimants) were employed by the Appellant as operators of an asphalt laying machine. The 1st Respondent had been employed since 2nd June 1982 and the 2nd Respondent had been employed since 7th January 1984.

2. Both Respondents had served notices of request for severance pay an the Appellant on the 3rd March 1986 contending that they had been laid off by the Appellant. They claimed against the Appellant in the Labour Trubunal and were awarded -

3. This appeal is only in respect of the Tribunal's awards to both Respondents of :-

(a)     26 days wages in lieu of notice; and

(b)     severance payment.

4. The Presiding Officer held that the Appellant did not provide the Respondents with the requisite number of days work and pay and that by reason thereof the Respondents were entitled to severance pay; also the Presiding Officer held that the Respondents could and did take this failure to provide the requisite number of days of work with pay as a repudiation on the part of the Appellant of the contract of employment and amounted to a constructive dismissal of the Respondents and that the Respondents were entitled to 4 weeks wages in lieu of notice.

5. No point is taken on this appeal as to the correctness or otherwise of the Presiding Officer's calculations on the amount of the awards. Nor of his decision that if severance pay was payable then there was a constructive dismissal which entitled the Respondents to wages in lieu of notice.

6. The appeal is argued on the basis that the Respondents were not in the circumstances of the case entitled the severance pay at all and that it followed from that that there had been no constructive dismissal.

Severance Payment

7. This is governed by Part VA of the Employment ordinance and In particular section 31B. Sub-section (1) of this section provides :-

"When an employee who has been employed under a contract for a period of not less than 24 months ending with the relevant date -

 

(a)     ..........   

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

 

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

 

Section 31E provides:-

"(1) When 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 when the employer does not provide such work for him for at least the total of 12 normal working days in any period of 4 consecutive weeks and whereby he is not entitled to any remuneration under the contract for such period.

 

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

 

(2)    The continuity of a contract of employment of an employee shall not be treated as broken by any lay-off as a result of which no severance payment has been made.

 

(3)     For the purposes of this Part the (relevant date) in respect of the right of an employee to a severance payment arising by reason of lay-off means any day on which the period of 4 consecutive weeks referred to in subsection (1) has expired."

 

8. It was common ground before the Labour Tribunal, that having worked on the 1st February 1986 the 1st Respondent had been provided with only 3 working days in the 4 week period commencing on the 2nd February and ending on the 1st March, whilst the 2nd Respondent during the same period had been provided with no work at all.

9. The Appellant's defence was that there were 9 rainy days in February which should have been deducted and that also the workers usually went to mainland China to spend the holiday a few days before Chinese New Year and came back to Hong Kong a few days after it and that these days should have been deducted in the calculation.

10. The Presiding Officer held that the rainy days were "neither here nor there" and that there had been no mention about the length of "shut-down" for the Chinese New Year Period. He took the view that the Appellant had not provided sufficient work within the meaning of section 31E and that the Respondents were therefore entitled to severance pay.

11. The ground of appeal on the severance pay point is framed in the following way :-

"Section 11(3) of the Ordinance was not considered by the Presiding Officer in his making of the Award/Order. By the nature of business of this Company, there was an implied term in the contracts of employment with the Claimants that they may be subject to lay-off for such periods during which the requirement of their works were temporarily suspended because of raining which prevented the road surfacing works which this Company undertook from being carried out. During February, 1986, there were altogether 9 working days which were so affected by raining and accordingly, the Claimants were subject to lay-off by the Company for the said 9 working days which was allowed for by Section 11(3) of the Ordinance.''

12. Miss Carlye Chu, Who appears for the Appellant on this appeal, submits that one should look at the number of days when work is not provided. From that figure one should deduct the rest days and holiday days referred to in the proviso to subsection (1) of s.31E. But Miss Chu goes further and submits that the Presiding Officer should have deducted the rainy days of which there were 8 which did not fall on statutory holidays or rest days, it being an implied term under section 11(3) that work would not be provided on rainy days. In other words they would not be regarded as "normal working days" if it had not been possibly to provide work because of rain. A normal working day, she says, means a day on which the employer is obliged to provide work.

13. She also submits that the days of the Chinese New Year temporary shut down should be deducted as a result of section 11(3) because there was am implied agreement between the parties that work would not be provided during this period and that there was no obligation on the part of the employer to supply work during this period. If the evidence is not sufficiently clear on this point, she submits the case should be remitted to the Labour Tribunal for further investigation on this matter.

14. As reliance has been placed on section 11(3) I will now turn to this section.

15. This section falls within Part II of the Employment Ordinance which is the Part which deals generally with contracts of employment, their termination and their suspension.

16. The section makes provision for suspension of such contracts in certain cases and for lay-offs. Subsection (3) provides :-

"Without prejudice to the provisions of subsection (1), an employer may lay-off an employee for such periods an are expressly agreed in, or may be implied from, the contract of employment.

 

Provided that the period of lay-off shall in no case exceed a total of 12 normal working days in any period of 4 consecutive weeks. "

17. Thus Miss Chu submits, when one looks at the number of days work not provided, one does not make into account In the calculation under S.31E(1) the number of days on which, as result of an express or implied tern in the contract under s. 11(3), an employer is not obliged to provide work.

18. In this case she deducts from the total number of days not worked by the Respondent in February, 7 rest/holidays under the proviso to subsection. (1) of section 31E. She then deducts 12 days under section 11(3) in respect of rainy days and Chinese New Year temporary shut-down days and arrives at a figure of only 6 not working days in respect of the lst Respondent and 9 non working days in respect of the 2nd Respondent. Since they do not reach the minimum of at least 12 non working days, prescribed by section 31E, she submits that no cases have been made out for severance pay.

19. In support of her argument that the parties can agree to period of temporary lay off she refers to the case of Puttick v. John Wright & Sons (Blackwall) Ltd. ⁽¹⁾. That was a case which was decided when the English Redundancy Payments Act of 1965 was in force.

20. The facts are set out in the headnote as follows :-

"         The employee was employed as a boiler staler from 1948, doing specific jobs for the same employers in between which he was laid off for short periods only. In February 1971 he became ill and was unable to work for a time. In January 1972 he served notice on his employers under section 6(1) of the Redundancy Payments Act 1965 of his intention to claim a redundancy payment on the ground that he had been laid off within section 1(1)(b) of the act of 1965. The employee gave one week's notice to terminate his employment and the employers served a counter-notice disputing the claim.

        On the employee's application for a redundancy payment the sole ground on which it was opposed by the employers was that the contract had been frustrated by reason of his illness.

 

        The industrial tribunal rejected that contention holding that the contract had not been frustrated before the statutory four week lay-off period. The tribunal found, however, that there was no continuing contract of employment between the employers and the employee after February 1971 because to constitute a contract of employment there must be on implied obligation on the employer to provide the employee with a reasonable amount of work and since the employers were under no such obligation the employee's contract came to an end after each successive job; and that since the employee had not worked since February 1971, the question of lay-off could not arise. They accordingly dismissed the claim for a redundancy payment .

 

On appeal by the employee -

 

        Held, allowing the appeal, (1) that the tribunal were correct in finding that there was no evidence that the contract of employment had been frustrated (post, p. 460-F).

 

        Marshall v. Harland & Wolff Ltd. [1972] . I.C.R. 101, N.I.R.C. applied.

 

        (2)      That it was not a necessary term of a contract of employment, where the employee was paid by work done, that the employer provide the employee with a reasonable amount of work to do if the parties have agreed, as in the present case, that the employee would carry out all work of a particular kind actually provided for him by the employer in consideration of the employer giving all work of that kind which he had to the employed (post, pp. 461F-H, 462A -C); and that, therefore, there was a continuing contract of employment after February 1971 which subsisted until the employee's notice in January 1972 terminating the contract expired, and accordingly, the employee was entitled to a redundancy payment (post, p. 463A-B).

 

        Fitzgerald v. Hall, Russell & Co. Ltd. [1970] A.C. 984, H.L. (Sc.) and Hunter v. Smith's Dock Co. Ltd. [1968]1 W.L.R. 1865, D.C. distinguished."

 

21. It is to be appreciated that under the Redundancy Payments Act of 1965 as in our Employment Ordinance, the employee had to be continuously employed for a specific period of time to qualify for payment. The Industrial Tribunal in that case took the view that on the facts the employee had not been continuously employed for that period. The National Industrial Relations Corm on the appeal were concerned to show that by reason of the implied term, the employee had been continuously employed during that period.

22. That is not a problem which concerns the courts in Hong Kong because section 31E(2) provides :-

"The continuity of a contract of employment of an employee shall not be treated as broken by any lay-off as a result of which no severance payment has been

23. I do not consider that Puttick 's case ⁽¹⁾ really helps the Appellant at all in the present appeal.

24. In my view it is a fallacy to regard lay offs under section 11(3) as being something different from lay offs under section 31E. Section 11(3) is a provision of general application and governs all types of lay offs under express or implied terms of the contract of employment. Section 31E is a section which deals specifically with severance pay and relates to the particular type of lay off prescribed therein. But these two provisions are not mutually exclusive. Clearly the 31E type of lay off falls within the section 11(3) provisions and would be limited to 12 normal working days in the 4-week period but that does not mean that section 11(3) will somehow enlarge the period of lay off required before one ca claim severance pay.

25. It is therefore wrong to regard the expression "normal working days" in Section 31E as not including days of lay off under Section 11(3). Indeed this expression is used in both sections and must have the same meaning in both sections.

26. For these reasons I do not accept the contentions of the Appellant and the appeal against the orders for severance payment must fail.

Wages in lieu of notice

27. So far as the awards for wages in lieu of notice are concerned there has been no attempt to argue these as a separate issue from that of the right to receive severance pay. It seem to have been assumed by the Appellant on the appeal that if it failed to disturb the orders of the presiding Officer in respect of severance payments, it would also fail in respect of the orders on the claim for wages in lieu of notice.

28. It is my judgment that a lay off beyond the permitted period amounts to a constructive dismissal and the employee is in these circumstances entitled to wages in lieu of notice.

29. In the circumstances the appeal of the Appellant is dismissed and the costs of the appeal will be to the Respondents.

(1) [1972] I.C.R. 457