MAK WAI MAN v. RICHFIELD REALTY LTD

HCLA 28/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 28 OF 2015

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 2308 OF 2014)

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HCLA 29/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 29 OF 2015

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 2309 OF 2014)

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HCLA 30/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 30 OF 2015

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 2310 OF 2014)

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HCLA 31/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO 31 OF 2015

(ON APPEAL FROM LABOUR TRIBUNAL CLAIM NO 2311 OF 2014)

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(Heard together)

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DECISION
(Leave to Appeal)
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Introduction

1.  This is an application for leave to appeal by the defendant Richfield Realty Limited (“D”) against a decision of Mr Raymond Chow, Presiding Officer of the Labour Tribunal (“Presiding Officer”) allowing the claims of four claimants for Holiday Pay and Annual Leave Pay, and for one of the claimants, also Sickness Allowance (collectively “Statutory Entitlements”) under sections 35, 41 & 41C of the Employment Ordinance, Cap 57 (“EO”).

2.  The Presiding Officer handed down the reasons for its decision on 15 September 2015 (“Reasons”).

Brief Background

3.  The 4 claimants shall be simply called by their respective surnames, namely Mak, Tsang, Mo and Fung (collectively “Claimants”). They commenced their employment with D in the marketing department in the year of either 2007 or 2008.  They had each entered into an employment contract with D (“Employment Contract”), which was terminated in April or May 2014.

4.  The Employment Contract in respect of each of the Claimants provided for, among other things,

(i) A monthly basic salary of about HK$10,000 (“Basic Salary”);

(ii) Travelling allowance of HK$1,000 (“Travel Allowance”);

(iii) Commissions, being 50% of commissions from the vendors accrued and calculated on the 25^th day of each month and payable on the 1^st day of every month (“Commissions”);

(iv) The employee would be entitled to 7 days annual leave after serving 12 months of employment and would be entitled to 14 days annual leave as from the 2^nd year of employment (“Annual Leave”).

5.  It was the Claimants’ case that during their periods of employment, D had failed to calculate their Statutory Entitlements based on all the components of their wages, and they lodged claims in the Labour Tribunal against D in October 2014[1] for the alleged shortfall.

6.  The Claimants’ case was that their wages should include (i) the Basic Salary, (ii) the Commissions, (iii) the Travel Allowance and (iv) 奬金/Bonuses, which consisted of 地盤奬金/Site Bonus and 組長奬金/ Team Leader Bonus, and that the calculations for the Daily Average Wage (“DAW”) for the purposes of their Statutory Entitlements should be based on the total amount.  The payment of the Bonuses was not part of the terms of the Employment Contract, but such payment of Bonuses to employees was announced in various notices issued by D[2].

7.  There was no dispute from D that the Claimants’ wages should include the Basic Salary and Commissions but in the proceedings in the Labour Tribunal, D had disputed that the Travel Allowance or the Bonuses should be included.

8.  It was also D’s case that part of the Commissions paid to the Claimants could be used to reduce the Statutory Entitlements, and that the Commissions paid to the Claimants in a particular month should be averaged out by reference to the number of days of that particular month, such that the averaged-out Commissions could be used to reduce the Statutory Entitlements of the specified dates of that particular month.  The Claimants, on the other hand, disagreed that any part of the Commissions could be used to reduce the Statutory Entitlements.

9.  Further, it is D’s practice to close all its offices during the Chinese New Year holidays (“CNY Holidays”), and between 2008 and 2011, D had deducted the CNY Holidays from employees’ Annual Leave in those relevant years.  D said it later discovered that in respect of such deduction of CNY Holidays, it had failed to comply with the requirement of giving notice under section 41F of EO.  D thus decided to treat those deducted CNY Holidays as “free holidays” in the relevant years, and to give the Claimants additional Annual Leave of equivalent days in subsequent years, namely  as  additional Annual Leave days in 2013 or 2014 (“Replacement Arrangement”).  

10.  As pointed out by the Presiding Officer, the practical effect of the Replacement Arrangement was that originally the Claimants could have obtained the Statutory Entitlements based on the calculations for the DAW prior to the CNY Holidays for each relevant year, but under the Replacement Arrangement, the calculations would be based on the DAW prior to the date of their respective date of termination of employment[3].

11.  It was D’s case that the Claimants had agreed or acquiesced to the Replacement Arrangement but this was disputed by the Claimants.

12.  The Presiding Officer had summarised the 3 issues between the Claimants and D, namely[4]:

(i) Whether the Travel Allowance and Bonuses were part of  the Claimants’ wages for the purposes of calculating the DAW;

(ii) Whether the Commissions paid had included the Statutory Entitlements;

(iii) Whether the CNY Holidays should be remitted as part of Claimants’ Annual Leave.

13.  The Presiding Officer then made determinations on the above 3 issues, namely:

(i) For the purpose of calculating the DAW of the Claimants’ Statutory Entitlements under sections 35(2), 41(2) and 41C(2) of EO, the Claimants’ Travel Allowance and the Team Leader Bonus should be taken into account (“1^st Determination”);

(ii) The Commissions earned by the Claimants did not include payment in respect of the Statutory Entitlements, and thus under sections 35(4), 41 (6) and 41C(6) of EO , the Statutory Entitlements payable to the Claimants should not be reduced by any part of the Commissions (“2^nd Determination”);

(iii) The CNY Holidays previously given to the Claimants in breach of section 41F of EO should be treated as part of the Claimants’ Annual Leave in the relevant years, and that D was not entitled to unilaterally treat them as “free holiday” and impose the Replacement Arrangement without the Claimants’ consent (“3^rd Determination”).

14.  D had sought leave to amend its application for leave to appeal (From 14) filed herein on 6 August 2015.  At the present hearing, D sought leave to rely on a further revised amended application.  Leave was so given by this court at the hearing.  D only sought to challenge the 2^nd Determination and the 3^rd Determination.

15.  Senior Counsel Mr Anson Wong appeared for D in the present leave application.

Applicable Principles for Leave to Appeal from Labour Tribunal

16.  The applicable principles for deciding whether leave to appeal ought to be granted are well settled.  Mr Wong had referred to Chan Kwok Hung v Hotel Pennell Rama Company Ltd, HCLA 30/2009 (unrep, 19 November 2009) at §13 (per Chu Ju, as she then was), Wong Mei Ning Gloria v Xie Eng International Holdings Ltd t/a Amis, HCLA 38/2009 (unrep, 18 March 2010) at §11 (per Au J); Wai Mei Lai Stella v Viya Pramita, HCLA 3/2010 (unrep, 28 June 2011) at §16 (per Au J); Chan Chi Ling Elwyn v Richfield Realty Ltd [2014] 1 HKLRD 70 at §10 (per DHCJ M Ng)).  Mr Wong summarised the principles as follows:-

(1) Under s 32 of the Labour Tribunal Ordinance, a party may only apply for leave to appeal on the ground that the award of the Tribunal is erroneous on point of law or outside its jurisdiction;

(2) The threshold onus of an application for leave is to show that the intended appeal has arguable grounds;

(3) Apart from errors of law, leave will also be granted if the Tribunal’s determination (a) was made without regard to relevant factors, (b) was made without evidence, or (c) there was failure to discharge the statutory duty to investigate and such failure has given rise to injustice, in that a fair and proper determination of the claim cannot be attained.

2^nd Determination

17.  Mr Wong submitted that the question as to whether part of the Commissions paid to the Claimants could be deducted from their Statutory Entitlements is a question of law, and that the Presiding Officer erred or failed to consider relevant facts in making his determination.

18.  D relied on a statutory provision which appears in all the relevant sections in the EO concerning the calculation of the rate for Sickness Allowance, Holiday Pay, and Annual Leave Pay, namely  sections 35(4), 41(6) and 41C (6) of EO,  which states as follows:

“If, pursuant to the terms of his contract of employment or any other agreement or for any other reason, an employee is paid by his employer a sum of money in respect of a paid sickness day/a holiday/a day of annual leave* taken by him, the sickness allowance payable to the employee in respect of that sickness day/holiday/annual leave* is to be reduced by the sum.”

(*depending on which sub-section)

19.  The above sections 35(4), 41(6) and 41C (6) (“Relevant Statutory Provisions”) were only added to EO by the Employment (Amendment) Ordinance 2007.

20.  Mr Wong referred the court to the legislative intent of the Relevant Statutory Provisions, as gleaned from the explanatory paper submitted to the Bills Committee of the Legislative Council[5], which was to avoid double payment by the employer.

21.  The reasons given by the Presiding Officer for the 2^nd Determination were set out in paragraphs 27-38 of the Reasons[6], which were mainly the following:

(i) Although the Commissions were paid every month, this was in fact in relation to commissions earned from past dealings, and the calculation of the Commissions were linked to actual performance of the employee, and was not with reference to the volume of work or hours of work of the employee, and therefore the basis for  payment between the Basic Salary and the Commissions was completely different (paragraph 36);

(ii) D’s calculations would mean that in certain months, there had been excess payment for Statutory Entitlements, and thus there would be a set off between the shortfall and the excess in the following month/s and this was unreasonable (paragraph 37).

22.  Mr Wong submitted that (i) above would not provide a basis in distinguishing the Basic Salary and the Commissions since the Basic Salary was also in respect of “past work”,  as  the Basic Salary was paid in arrears.  In fact, all remunerations, whether the Travel Allowance and the Team Leader Bonus, were paid in arrears.  Further, whether or not the Commissions were performance-related remuneration was irrelevant to the issue as to whether it was paid or was intended to be paid in respect of working as well as non-working days of the Claimant.

23.  As for (ii), Mr Wong submitted there was no mechanism for any set off which the Presiding Officer had referred to in paragraph 37 of the Reasons, and that the Presiding Officer had misunderstood the evidence of D’s case.  D’s calculations only meant that there could be some months that the Claimants would not be entitled to any of the Statutory Entitlements, as such had been “wiped out” by the Commissions, but there would not be any set off in the following month as it was not D’s case that any “excess” would be carried forward to the following month/s.  Thus, there would be Statutory Entitlements payable for certain months and for other months, there would be no Statutory Entitlements payable.  Mr Wong submitted that there was nothing untoward or unreasonable or unusual with this.

24.  Mr Wong further submitted that the Presiding Officer had failed to take into account that the Commissions were “Team Commissions”, and whether a team member was on leave or not, or working or not, on certain days in any particular month, he/she would still be entitled to receive the Commissions. 

25.  Mr Wong informed the court that they had not been able to find any decision giving any guidance on the proper interpretation and application of the Relevant Statutory Provisions.

26.  Mr Wong had referred to Cathay Pacific Airways Ltd v Kwan Siu Wa Becky (2012) 15 HKCFAR 615 and submitted that in line with the approach advocated by Ma CJ in the Cathay case, a periodical payment made to an employee should generally be treated as a payment covering both all working and non-working days during such period unless the nature of such payment is clearly and only attributable to working days only.

27.  Having heard Mr Wong’s submissions, it appears to me that it is arguable that the Presiding Officer had failed to direct himself to consider the Relevant Statutory Provisions and the legislative intent thereof and that it is arguable that the Presiding Officer had made an error of law and/or gave no regard to relevant factors. 

3^rd Determination

28.  The question here is whether or not the Presiding Officer should have given effect to the Replacement Arrangement in calculating the Statutory Entitlements.

29.  The Presiding Officer pointed out that the Replacement Arrangement would not alter the fact that D had already deducted the CNY Holiday from the Claimants’ Annual Leave and was in contravention of Section 41F of EO.  D was therefore guilty of an offence under section 63D of EO and would be liable on conviction to a fine at level 3. 

30.  The Presiding Officer then went on to say that the Claimants could exercise their legal or contractual rights, but they had not done so, and therefore D could not, without the Claimants’ consent, unilaterally made the Replacement Arrangement, particularly when such arrangement would be less favourable to the Claimants in the calculations of their Statutory Entitlements.

31.  Mr Wong had referred to various parts of the transcript of the proceedings before the Presiding Officer on 14 January 2015, and Mak’s evidence that he accepted that he had never expressed any dissatisfaction of the Replacement Arrangement and that he would not protest about the Replacement Arrangement if such arrangement turned out to be more favourable to him in the calculations.  The other Claimants confirmed that they adopted Mak’s evidence as their own evidence.

32.  Mr Wong submitted that based on Mak’s above evidence, it was wrong for the Presiding Officer to describe the Replacement Arrangement as “unilateral” without at the same time analyzing or investigating the legal effect of the Claimants’ conduct, namely whether the Claimants’ conduct had amounted to an acceptance of the replacement Arrangement and/or whether by reason of their conduct they were stopped from contending that they were not bound by the Replacement Arrangement.

33.  Further, Mr Wong complained that the Presiding Officer failed to make a definite ruling on the matter.

34.  Having heard Mr Wong’s submissions, I am of the view it is arguable that the Presiding Officer had failed to investigate and that such failure would give rise to injustice, in that a fair and proper determination of the claim could not be attained.

Conclusion

35.  In light of what I have said above, I am prepared to grant D leave to appeal. Costs in the cause of the appeal.