KWAN SIU WA BECKY v. CATHAY PACIFIC AIRWAYS LTD

HCLA 3-5 and 7-9/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEALS Nos. 3, 4, 5, 7, 8 & 9 of 2009

(ON APPEAL FROM LABOUR TRIBUNAL CLAIMS Nos. 2827-9 of 2008)

----------------------

HCLA 3/2009

----------------------

--------------------------

J U D G M E N T

--------------------------

These appeals

1.  These are appeals and cross-appeals, pursuant to Notices of Originating Motion, from an award dated 12 January 2009 made by Mr Pang Ka Kwong, Deputy Presiding Officer of the Labour Tribunal, wherein the learned Presiding Officer adjudicated a financial dispute between 3 claimant employees and their employer, Cathay Pacific Airways Ltd (‘CPA’).

2.  This dispute concerns what are alleged by the claimants to be shortfalls by their employer in the calculation and payment of statutory holiday pay and annual leave pay.

3.  In outline, the claimants asserted that certain allowances should be, and should have been, included within the relevant calculation of these statutory emoluments, albeit the claims of the 3 employees are not identical.

4.  Becky Kwan and Vera Wu, the claimants respectively in Labour Tribunal Claims 2827 and 2828 of 2008 – whose claims can be taken together – contend that a ‘Line Duty Allowance’ and an ‘Outport Allowance’ should be included in the calculation of the statutory holiday pay and the statutory annual leave pay, whilst Jenny Ho, the claimant in Labour Tribunal Claim No 2829 of 2008, in addition to adopting the ‘Outport Allowance’ contention, further argues that a ‘Ground Duty Allowance’ and a ‘Duty Free Sales Commission’ should be included in the statutory holiday pay and the annual leave pay to which she is entitled; Ms Ho also maintains that she has not received any statutory holiday pay at all.

5.  The trial of these issues in the Labour Tribunal took place on 22, 23 and 24 December 2008, and the learned Deputy Presiding Officer handed down his Reasons for Decision on Liability on 12 January 2009 in what, if I may say so, is a careful and detailed 49 page award.

The decisions reached by the Labour Tribunal

6.  On the matters before him the Deputy Presiding Officer came to the following conclusions in favour of the claimants:

(i)      as to the inclusion of the ‘Line Duty Allowance’ within the calculation of statutory holiday pay and statutory annual leave pay, he held in favour of Becky Kwan and Vera Wu, and against the defendant employer;

(ii)     as to the inclusion of the ‘Ground Duty Allowance’ and the ‘Duty Free Sales Commission’ within the calculation of statutory holiday pay and statutory annual leave pay, he held in favour of Jenny Ho, and against the defendant employer;

(iii)    as to the issue of whether Ms Jenny Ho had received any statutory holiday pay at all, he also held in favour of Ms Ho and against the defendant employer.

7.  As a consequence of these decisions, the Deputy Presiding Officer ordered that the defendant, CPA, should calculate and pay the shortfalls thus decided to have taken place in accordance with the formulae which he prescribed.

8.  However, the claimants did not win every argument.

9.  Upon the issue of the ‘Outport Allowance’, which it was contended by Ms Kwan, Ms Wu and Ms Ho also should have been included within the calculation of statutory holiday pay and annual leave pay, the Deputy Presiding Officer held against the flight attendants and in favour of the defendant employer.

10.  Hence the appeals and cross-appeals now before this court: CPA appeals against the foregoing decisions as made against the company qua employer, and the three flight attendants in turn cross-appeal against the loss of their argument in terms of the ‘Outport Allowance’.

11.  Leave to appeal in all cases was granted by Andrew Cheung J on 27 March 2009, and the skill of counsel in arguing these appeals has resulted in a complex argument occupying somewhat less than one and one half days, the employer, CPA, being represented by Mr Ashley Burns SC, and the claimant employees by Mr Erik Shum.

The three claimants

12.  The identity and Conditions of Service of the three employee claimants have not been matters which have been uppermost in argument, although I am told that the ladies in question have been chosen as representative of particular classes of CPA employee, there being, I understand, significant financial ramifications on either side of this employment divide depending upon the ultimate resolution of this dispute (which, I suspect, is unlikely finally to conclude with the decision of this court).

13.  For the purpose of the present claims the cases of Ms Kwan and Ms Wu may be taken together, whilst that of Ms Ho forms a separate category.

14.  At this preliminary stage, it may be useful to record something of these three ladies’ employment backgrounds.

15.  Ms Becky Kwan was appointed by Letter of Appointment dated 20 September 1975, joining CPA as a Junior Flight Hostess.  She was promoted to Chief Purser L1011 on 18 September 1987, a post retitled ‘Inflight Service Manager’ on 1 April 1999, and she remains in this position to-date.  She is required to perform air and ground duties as directed by her employer.

16.  Ms Kwan receives a basic salary and title allowance each month, and in addition she receives allowances such as the Line Duty Allowance and the Outport Allowance.

17.  She is entitled to 5 weeks’ paid annual leave and 94 Guaranteed Days Off per year.

18.  Her Conditions of Service are those issued in 1986.

19. Ms Vera Wu was appointed by Letter of Appointment dated 12 June 1995, joining CPA as a Cabin Attendant.  She was promoted to Purser on 1 December 2000, and remains in that position to-date, being required to perform air and ground duties as directed by CPA.

20. She is paid on a monthly basis, receiving a basic salary and title allowance, and also allowances such as the Line Duty Allowance and the Outport Allowance.

21. Ms Wu is currently entitled to 5 weeks’ paid annual leave and 94 Guaranteed Days Off per year.

22. Ms Jenny Ho, the third in this triumvirate of claimants, was appointed by Letter of Appointment dated 19 January 2005, joining CPA as a Flight Attendant of the Inflight Services Department, a position in which she currently remains.  She is required to perform air and ground duties as CPA directs.

23. Ms Ho’s Conditions of Service are those issued in 2003, under which she enjoys a different payment structure from that of her colleagues; this structure is set out in Clause 3.1 of the relevant Conditions of Service.  This involves, inter alia, a salary on a monthly basis, which salary is calculated with reference to detailed calculations which take into account the concepts of ‘Minimum Guaranteed Flying Pay’, ‘Block Hours’ and ‘Work Credits’ and ‘Leave Credits’ earned within each month.

24. In company with her claimant colleagues, Ms Ho similarly receives an Outport Allowance.  However, unlike Ms Kwan and Ms Wu, in addition she receives a ‘Duty Free Sales Commission’ and a ‘Ground Duty Allowance’.

25. With less than 5 years’ service with CPA, Ms Ho receives 21 days’ paid annual leave, and also is provided with days without work, which variously enjoy the title of ‘short break’, ‘stop over in outports’, ‘standby duty’, and ‘days without duties’.

26. For present purposes, there is, I think, no necessity to go into further detail (of which there is much) within the various Conditions of Service under which these 3 claimants are employed; suffice to say that in his ‘Reasons for Decision’ the learned Deputy Presiding Officer helpfully has included more information.

The allowances in question

27. Also relevant in setting the scene is an indication of the nature of the allowances the subject of these claims.  The sources of information come from the relevant Conditions of Service, CPA’s Operations Manual, and evidence adduced on behalf of CPA at the tribunal hearing.  Once more the Deputy Presiding Officer has gone into detail on these allowances in his award, but for present purposes the following brief description will suffice.

Line Duty Allowance

28. The Line Duty Allowance (‘LDA’) – relevant only to the claims of Becky Kwan and Vera Wu – is basically a rate paid to all cabin attendants for each hour spent on flying duty; it is not part of basic salary and is not paid for any other duty or non-flying activities including sick leave travel.  This allowance is calculated and paid on the basis of a ‘Flying Duty Period’ as defined within CPA’s Operations Manual.

29. The LDA is paid only if the crew member in question is rostered with flying duties and, for purposes of calculation of the LDA, time begins to run when the cabin crew in question reports for flying duty, and finishes when the engine is turned off at the end of the final sector flown.

30. LDA is calculated to the minute, and is paid on the total number of line duty hours operated by each crew member.  It follows that no two flights produce the like amount of LDA, which varies based on the flight the crew member is rostered to operate, and the length of time spent on that flight.

Ground Duty Allowance

31. The features of the Ground Duty Allowance (‘GDA’) – which in the present case represents a claim relevant solely to Ms Jenny Ho – are fundamentally similar to those of LDA, save that they are referable to time spent in undertaking ground duties as opposed to flying duties.

32. Once again, for present purposes the precise details do not greatly matter; essentially, GDA is payable due to time spent on the ground preparing to fly, such time being calculated from the time when the cabin attendants are required to report for duty and the time from which the aircraft commences to move under its own power.  

33. Thus, whilst LDA and GDA clearly refer to differing activities integral to the flying process, for the purpose of the present claims there is little or no practical difference in terms of the arguments advanced under these heads.

Outport Allowance

34. Inclusion of the Outport Allowance (‘OA’) – which is the subject of the cross-appeals by these 3 claimants – essentially is an allowance which is calculated by reference to a formula agreed with the Flight Attendants’ Union, which takes account of the actual cost of meals and services at the relevant crew hotel in each layover port.

35. The amount of the OA payable is a genuine pre-estimate of the amount of that which the particular expense (be it meals, taxis, laundry etc) is likely to be, and such pre-estimate of miscellaneous out of pocket expenses relating to the staff layover between flying duties varies according to the particular port.

36. The OA is paid in the form of a fixed allowance calculated in accordance with specific rates laid down in the company Operations Manual, as opposed to an actual reimbursement against receipts, and is non-accountable – thus, if, for example, the particular crew member wishes not to eat at any particular layover, this does not affect payment of that part of the allowance referable to the cost of meal(s) at that port.

Duty Free Sales Commission

37. This element (‘DFSC’) solely is relevant to the case of Ms Jenny Ho; once assigned to the sale of duty free items, Ms Ho is required to perform the same as part of her duties.

38. This allowance comprises no more than it says, namely a commission paid to the attendant based upon the inflight duty free sales she has achieved.

39. As the Deputy Presiding Officer records in his written award, the details of DFSC are set out in CPA’s Inflight Sales Commission Policy, and individual cabin crew who are thus involved earn a flat rate of 3.5% of sales made by each such individual.  The commission is paid at the end of the month following the sale, and there is a system of incentives: thus, for example, an award is given to the top team with the best inflight sales performance, and individuals receive awards for top performers.

40. However, not all flights have duty free sales, and even if a cabin attendant is rostered on a flight with such service, there is no certainty that she will be assigned responsibility for such sales; moreover, even if rostered and assigned, there is no guarantee that any such sales will be effected by the individual concerned.

The relevant statutory provisions

41. It is common ground that the legislative provisions applicable to the present dispute are those in the Employment Ordinance as it stood prior to its amendment subsequent to the decision of the Court of Final Appeal in Lisbeth Enterprises Ltd v Mandy Luk (2006) 9 HKFAR 131.

42. Accordingly, this appeal falls to be decided under the ‘old’ provisions of that Ordinance, namely the definition of ‘wages’ in section 2, and section 41, relating to the rate of holiday pay, and section 41C, relating to the rate of annual leave pay.  I set out these sections hereunder.

43. In relevant part section 2 defines “wages” as meaning

“all remuneration, earnings, allowances including travelling allowances and attendance allowances, attendance bonus, commission, overtime pay, tips and service charges, however designated or calculated, capable of being expressed in terms of money, payable to an employee in respect of work done or to be done under his contract of employment, but does not include –

………..

(d)     any sum payable to the employee to defray special expenses incurred by him in the nature of his employment;

………”

Section 41 of the Ordinance reads:

“(1)  Holiday pay shall be a sum equivalent to the wages which the employee would have earned on a full working day.

 (2)    Notwithstanding subsection (1), where an employee on piece rates or where the daily wages of an employee vary from day to day, the holiday pay shall be a sum equivalent to the average daily wage earned by the employee, and for the purposes of this subsection the average daily wage shall be the average of the daily wages earned by the employee on each day on which he worked during each complete wage period, comprising not less than 28 days and not more than 31 days, immediately preceding or expiring on the holiday or the first day of the holidays.”

Section 41C reads:

“(1)  Annual leave pay shall, subject to subsection (2), be a sum equivalent to the wages which the employee would have earned if he had worked every day during the period of annual leave.

 (2)    Where an employee is employed on piece rates or where the wages of an employee vary from day to day, the annual leave pay shall be calculated by reference to the average daily wage earned by the employee, and for the purposes of this subsection the average daily wage shall be the average of the daily wages earned by the employee on each day on which he worked during every complete wage period, comprising not less than 28 days and not more than 31 days, immediately preceding or expiring on the first day of the annual leave or on the day on which the contract of employment terminates, as the case may be.”

The CPA appeals

(a)   Against the Tribunal holding in favour of Ms Betty Kwan and Ms Vera Wu in relation to Line Duty Allowance

44. As earlier noted, the Deputy Presiding Officer concluded that in terms of the claims of Ms Betty Kwan and Ms Vera Wu that LDA should be included within the calculation of their statutory holiday pay and of their annual leave pay.

45. It is the defendant employer’s case that in so holding the learned Officer erred in law, and that each of these claimants have been fully paid in respective of their entitlements to holiday and annual leave pay; and further and in any event, that the formulae prescribed by the Presiding Officer for calculating the shortfalls as found to have occurred were and are not in accordance with the statutory provisions of the ‘old’ sections 41(2) and 41C(2).

46. In holding as he did, the reasoning of the learned Presiding Officer went as follows: he held (at para 95 of his Reasons) that LDA – and GDA – was not something that the claimants “would have earned” within the meaning of section 41(1) and 41C(1), since these allowances were paid only if the cabin crew have performed flying duties and, as he noted, the claimants were not always thus assigned.

47. There is no appeal against this finding.

48. However, the Deputy Presiding Officer chose to ground his conclusion (at paragraphs 99-102 of his Reasons) that LDA and GDA nevertheless should be included within the calculation of annual leave pay and statutory holiday pay on the basis that the provisions of sections 41(2) and 41C(2) were satisfied because, in effect, these allowances fell within the rubric of “daily wages” by reason of the fact that these allowances were susceptible to daily calculation; he expressed the position thus (at paragraph 99):

“…LDA and GDA are calculated by minutes.  There should be no difficulty in calculating the LDA and the GDA already earned by the Claimants on any given day.  Therefore, even if the Claimants do not receive LDA and GDA until the end of the month, given that LDA and GDA is calculable daily and therefore can be said to accrue daily, in my view they can be said to be daily wages that vary from day to day…”

49. In reaching his conclusion the Deputy Presiding Officer had recourse to reliance upon several authorities, in particular those of Lisbeth Enterprises, op cit.; Lam Pik Shan v Hong Kong Wing On Travel Services Ltd., CACV 394 of 2007, unreported, CA judgment dated 9 May 2008; and Wong Yin Fong & ors v ISS Hong Kong Services Ltd [2005] 2 HKLRD 648.

50. This approach was attacked by Mr Burns SC for CPA, who submitted that the learned Deputy Presiding Officer’s conclusion as to ‘daily accrual’ is wholly erroneous; equally and to the contrary, this selfsame approach strongly was affirmed by Mr Shum, for the claimants, who submitted that the Presiding Officer had identified and upheld the salient point, noting that the calculation of holiday pay and annual leave pay by averaging out on a daily basis was eminently “workable” and created no practical problem.

51. Who is correct?

Decision

52. I am unable to share the enthusiasm of the learned Deputy Presiding Officer for the utility of the provisions of s 41(2) and s 41C(2) with regard to his upholding of the ‘LDA element’ of the claim.

53. In the prevailing circumstances I decline to accept the contention that LDA which is paid to Ms Betty Kwan and to Ms Vera Wu for their flying hours can be characterized as “daily wages”, which was the rationale adopted by the Tribunal for the success of the claimants’ argument below.

54. Mr Burns SC clearly was factually correct in his submission that both LDA (and, for that matter, GDA) consisted of “intermittent blocks of time” during which the relevant duties are performed, blocks of time which themselves are punctuated by other intermittent and variable blocks of time wherein the cabin attendant is engaged in duties which do not attract LDA (or GDA).

55. Nor is there any doubt but that the salaries of Ms Kwan and Ms Wu – which contain the variable LDA allowance pertaining to the relevant period – are paid monthly.

56. The fact that clearly it is possible, as a mathematical exercise, post facto to calculate a sum certain within a monthly salary as a cumulative function of averaged daily amounts (dependent always upon the number of days used to divide the sum), and within such averaged daily figures further to identify and calculate the averaged daily LDA component of such individual calculated figure, does not seem to me to enable this to fall within the section 41(2) rubric of “the daily wages of an employee” or the section 41C(2) rubric of “the wages of an employee [which] vary from day to day”.

57. In no sense do Ms Kwan and Ms Wu earn “daily wages” properly so-called, and to maintain otherwise sees to me to misinterpret the language and intent of the statute. 

58. With respect, that which the learned President appears to have done in his reasoning on this issue is to elide the concept of ‘daily calculability’ with that of ‘daily accrual’; indeed, he says so expressly, observing that “…given that LDA and GDA is calculable daily and therefore can be said to accrue daily, in my view they can be said to be daily wages that vary from day to day.” [emphasis added]

59. As Mr Burns commented, this is a non-sequitur.  LDA and GDA are not calculated and do not accrue on a daily basis, both being calculated and accruing on the basis of variable and intermittent time segments during which other specific duties may be being performed by the cabin attendants.

60. In my judgment the concept of ‘calculability’ does not assist the analysis (even if there was to be agreement upon the number of days to be employed as the dividing figure), and the potential for calculation on a daily basis is not to be regarded as synonymous with ‘daily accrual’ – which, of course, represents the desired position of the claimants, since this would achieve the result that the statutory provisions as now invoked would be regarded as satisfied, and thus that a figure representing the daily averaged LDA would be susceptible to characterisation as constituting “daily wages” within the ‘old’ section 41(2), or as “wages of an employee [which] vary from day to day” within the ‘old’ section 41C(2).

61. In my view the position is to the contrary, and that to proceed otherwise is to err in law.

62. Support for this conclusion may be found in Lisbeth Enterprises, op cit., a case in which the question arose as to whether contractual commission fell to be included within the calculation of statutory holiday pay or annual leave pay, Mr Justice Bokhary PJ delivering the judgment of the Court of Final Appeal, with which judgment the other members of that Court agreed.

63. It was assumed in Lisbeth Enterprises (in favour of the claimant beautician) that for the purpose of the ‘old’ sections 41(2) and 41C(2) that the term “daily wages” extended to contractual commission notwithstanding that Bokhary PJ doubted that the expression “daily wages” extended to contractual commission – “perhaps the term ‘daily wages’ applies only to wages in the sense of salary…” – but in any event the learned Permanent Judge stated that although wages may not actually have to be paid on a daily basis before they can be regarded as ‘daily wages’, nevertheless he Lordship further observed (op cit., at paragraph 24): “But I do not see how wages can be so regarded unless they at least accrue and are calculated on a daily basis…”

64. Accordingly, in that case those subsections were found not to have catered for commission, and thus it followed that statutory holiday pay and annual leave pay formed a context which required that the word “wages” should be read as excluding commission, save possibly for commission accruing and calculated on a daily basis – which factually was not the situation in Lisbeth Enterprises since the claimant’s commission accrued and was calculated on a monthly basis, with the result that in that case no commission was to be included in the calculation of statutory holiday or annual leave pay.

65. In my view, therefore, for the purpose of ss. 41(2) and 41C(2) the references to “wages which vary from day to day” or to “daily wages” do not encompass anything beyond basic salary, and if this be correct the term does not extend to allowances such as LDA (or GDA).

66. With respect, it strikes me as tolerably clear that the term “daily wages” as used in the ‘old’ statutory terminology means precisely that, and connotes a form of employment patently different from monthly wages. 

67. The short point is that ‘calculability’ is not indicative of status, and the fact that the terms “daily wages” is used in the subsection 41C(2) co-terminus with the term “piece rates” serves to underline this basic point.

68. I also agree with the submission of Mr Burns to the effect that these subsections in themselves do not permit of a ‘splitting’ of the term “wages” into something with a ‘daily element’ and a ‘non-daily element’, with a consequent differences in characterization between a variable ‘daily element’ and the monthly basic salary which is fixed in amount. 

69. Even if this be incorrect – and I do not consider that it is – in any event, just as the CFA held in Lisbeth Enterprises, op cit., that commission accruing and calculated on a monthly basis did not fall to be included in the calculation of statutory holiday pay and annual leave pay, so in the present instance neither LDA nor GDA fall to be included on the ground that neither can be said to accrue on a daily basis.

70. I should not leave this discussion without making brief reference to the recent Court of Appeal case of Lam Pik Shan v Hong Kong Wing On Travel Service Ltd, CACV 394 of 2007, unreported, judgment dated 9 May 2008 – a case upon which the learned Deputy Presiding Officer relied in coming to the decision which he reached in the Tribunal below.

71. In Lam Pik Shan, op cit., the Court of Appeal (Hon Rogers VP, Le Pichon JA, Suffiad J) held that tips received by a travel escort should be included in the calculation of statutory holiday pay and annual leave pay.  This was on the premise that the rate of recommended tips was expressed on a per person per day basis for the duration of each tour, which was for a fixed number of days, and whilst the amount of such tips received at the end of each month might vary, such tips accrued on a daily basis and were readily calculable on that basis, and thus a workable mode of calculation existed for determining the average daily tips received by the travel escort for the purpose of the ‘old’ ss. 41(2) and 41C(2).

72. Had this latter case been on all fours with the present this court would have been bound by this decision, but with respect I do not consider that this is the situation since Lam Pik Shan clearly is distinguishable on its facts, given that the tour escorts’ tips plainly and obviously accrued on a daily basis, and thus the test propounded by Bokhary PJ in the CFA in Lisbeth Enterprises remains unsatisfied. 

73. In light of this significant factual distinction, I do not read the decision in Lam Pik Shan as binding authority for the broad proposition that, for the purpose of calculation of statutory holiday pay or annual leave pay, the ‘splitting’ of wages into a ‘daily element’ and a ‘non-daily element’ is the correct approach, although Mr Burns was at pains to state that if – which he did not accept – this conclusion should be wrong, he wished to reserve this point for argument in a higher court.

74. Nor do I consider the additional case relied upon by the Deputy Presiding Officer to be of assistance in the confines of this particular debate.  This authority is that of Wong Yin Fong & ors v ISS Hong Kong Services Ltd [2005] 2 HKLRD 648, Labour Tribunal Appeal 56 of 2003 (Hon Lam J); on appeal at [2008] 1 HKLRD 63, judgment dated 28 November 2007, a decision at first instance decided prior to Lisbeth Enterprises, op cit., in the CFA, which now is the leading authority in this area.

75. In summary, therefore, I have concluded that it cannot properly be said that either LDA, or GDA, accrue on a daily basis, and thus there is no basis for including either within the calculations of statutory holiday pay or annual leave pay pursuant to the ‘old’ ss. 41(2) and 41C(2).

76. The inapposite nature of the approach adopted by the learned Deputy Presiding Officer is, perhaps, accentuated by the learned Officer himself rhetorically pondering (at paragraph 102 of his Reasons) the appropriate manner in which average daily wages could be determined in circumstances wherein neither LDA nor GDA is an allowance necessarily earned on a day in/day out basis during any particular wage period, and concomitantly a situation wherein working days during any particular wage period inevitably will include working days wherein no primary eligibility for LDA or GDA will arise.

Order

77. The appeal by CPA against the holding of the Tribunal that Line Duty Allowance is to be included within the calculation of the statutory holiday pay and annual leave pay of Ms Becky Kwan and Ms Vera Wu is allowed, and the order in this regard in the Tribunal below is set aside.

(b)   Against the Tribunal holding in favour of Ms Jenny Ho as to the inclusion of GDA and DFSC within the calculation of statutory holiday pay and annual leave pay

78. As to the element of GDA, it seems to me that the learned Deputy Presiding Officer’s conclusion (at paragraph 102 of his Reasons) that this should be included within the calculation of Ms Ho’s statutory holiday pay and annual leave pay also must be in error for the reasons herinbefore set out in justifying rejection of the like argument as to the inclusion of LDA in the cases of Ms Kwan and Ms Wu.  In the circumstances, therefore, there is no necessity for further elaboration.

79. I turn therefore to consider the other head of Ms Ho’s personal claim, which is the issue of the inclusion of the Duty Free Sales Commission (‘DFSC’) allowance within statutory holiday pay and annual leave pay.

80. The Deputy Presiding Officer specifically dealt with this aspect at paragraphs 103-108 of his Award, noting that it can be said to “accrue daily” (at paragraph 108), and Mr Burns’ submission on this part of the claim was that for much the same reasons as were advanced in relation to the issues relating to LDA and GDA, the Presiding Officer’s decision with regard to DFSC was in error and that, in common with LDA and GDA, DFSC does not accrue on a daily basis.

81. In arguing this aspect of the case Mr Burns did not seek to resile from the concession as made below by CPA’s representative before the Tribunal (adverted to by the Deputy Presiding Officer at paragraph 105 of his Reasons) to the effect that DFSC is part of Ms Ho’s wages, and thus is not to be regarded as ‘a payment of a gratuitous nature’ payable only at CPA’s discretion.

82. However, Mr Burns did attack the conclusion of the Presiding Officer that when Ms Ho performed the Duty Free sales that she was employed on ‘piece rates’ and therefore, on that basis, DFSC fell to be included in the calculation for the determination of statutory holiday pay and annual leave pay pursuant to the ‘old’ ss. 41(2) and 41C(2), and that as a consequence there would be “no difficulty” in calculating the amount of DFSC already made by Ms Ho on any given day, thereby leading to the conclusion that the DFSC could be regarded as accruing daily.

83. Notwithstanding Mr Shum’s valiant efforts to justify and to uphold the approach of the Deputy Presiding Officer, I agree with the submissions made on behalf of CPA on this issue.  I do not consider that there was a ‘daily accrual’ in the sense of the earning of ‘daily wages’ or ‘daily wages that vary from day to day’.

84. Ms Ho was a monthly salaried employee of CPA, and the sale of duty free products on such flights upon which she was rostered and on these occasions on which she was assigned this task did not occur on a daily basis; thus, whilst her monthly salary may (or on occasion perhaps may not) have included an element of DFSC, I fail to understand why this fact enables advantage to be taken of the statutory provisions within the ‘old’ ss. 41(2) and 41C(2), thereby enabling inclusion of the elements of DFSC (or of GDA) in terms of computation of holiday and annual pay as premised by those sections.

85. Nor is it easy to understand why the Deputy Presiding Officer chose to regard remuneration when handling duty free sales as ‘piece rates’, not least since Bokhary PJ in Lisbeth Enterprises, op cit., stated specifically (at paragraph 23 of his judgment) that “piece rates have nothing to do with commission.” 

Decision

86. In my judgment the Deputy Presiding Officer was incorrect in holding as he did with regard to the claim of Ms Ho as to inclusion of the element reflecting GDA and DFSC within the computation of her statutory leave and annual leave pay.

Order

87. The appeal by CPA against the holding of the Tribunal in favour of Ms Ho that GDA and DFSC should be included within the calculation of statutory holiday pay and annual leave pay is allowed, and the order as made by the Tribunal in this regard is set aside.

(c)   Against the holding of the Tribunal in favour of Ms Jenny Ho to the effect that she had received no statutory holiday pay

88. The learned Deputy Presiding Officer came to the conclusion (at paragraph 109 et seq of his Reasons) that Ms Jenny Ho had received no statutory holiday pay at all.

89. He appears to have reached this view upon the basis that CPA used contractual ‘Days Without Duties’ to discharge its obligation to provide Ms Ho with statutory holidays under the Employment Ordinance but that Ms Ho is “an hourly paid employee”, and that an ‘hourly paid employee’ is not paid for those ‘Days Without Duties’ that coincide with statutory holidays.

90. It is not possible to deal with this aspect without reference to Ms Ho’s contractual Conditions of Service; in this context there are two particularly relevant provisions, both of which are quoted in his award by the Presiding Officer, namely:

Clause 2.4(3) of the 2003 Conditions of Service which provides:

‘Days Without Duties’

The Days Without Duties will include any statutory holidays (or alternative holidays) and rest days, as the case may be, to which a Cabin Attendant is entitled under the Employment Ordinance

whilst Clause 5.3 of the like Conditions provide:

‘Statutory Holidays and Rest Days’

Statutory holidays and rest days are allocated to Cabin Attendants as Days Without Duties (please refer to paragraph 2.4(3) of these COS, above)

91. It is clear that the concept of statutory holidays is recognized within the Conditions of Service governing Ms Ho’s employment as being absorbed within the rubric ‘Days Without Duties’.  However, the learned Deputy Presiding Officer was influenced in arriving at the conclusion to which he did by reason of his determination that Ms Ho was employed upon an ‘hourly basis’ – “in my view the payment structure of Jenny plainly shows that she is an hourly paid employee” – and thus, as he then explained (at paragraph 119-120 of his Reasons):

“An hourly paid cabin crew is not paid for those Days Without Duties that coincide with statutory holidays.  In other words, in a month if there is a statutory holiday, she is still paid 70 flying hours plus the extra flying hours she has performed (if any) without any SHP.  In my view, the corollary is that she does not receive any SHP”.

One can deduce from Jenny’s salary structure that she does not receive any payment for the Days Without Duties.  In so far as Cathay Pacific uses Days Without Duties to discharge its obligation to provide Jenny with statutory holidays under the EO, Jenny does not receive any SHP”.

92. With respect, I am unable to agree with this reasoning, which in my view once more has led the learned Tribunal into error.

93. There is no dispute but that Ms Ho was and is a full-time employee of CPA, and in fact her contract of employment – which must always form the starting point for any analysis of this nature – expressly states that she would receive a salary calculated on a monthly basis (Conditions of Service, Clause 3.1). 

94. As Mr Burns pointed out, Ms Ho’s employment status was no different conceptually from that of Ms Kwan (employed under Conditions of Service 86) or of Ms Wu (employed under Conditions of Service 93), and in fact Ms Ho’s terms of employment obliged her to perform a variety of duties, both in the air and on the ground, whenever rostered so to do.

95. In determining, as a primary building block in his analysis, that Ms Ho was ‘hourly paid’, it seems to me that the learned Presiding Officer failed to appreciate that Ms Ho received a monthly salary which was calculated with reference to a specific formula which assumed a minimum guaranteed number of flying hours each month, and also embodied certain ‘credits’ by reason of other work-related duties, and thus that this represented no more than a computing formula for the calculation of Ms Ho’s monthly salary.

96. In this regard Mr Burns surely must be correct in his submission that undue regard was paid to the fact that Ms Ho might in fact perform more than 70 flying hours monthly, and that whilst such eventuality admittedly would result in an increase in the basic salary of Ms Ho by an amount equivalent to the increased hours flown, this is a far cry from the proposition that Ms Ho was to be regarded as ‘hourly paid’; to the contrary, it strikes me that this payment mechanism is little different from that of an office worker remunerated monthly on the basis, say, of a 40 hour week, but who would receive overtime pay in relation to hours worked in excess of the stipulated number of hours underpinning the basic salary.

97. In this context, however, I am in difficulty in accepting the alternative submission of CPA to the effect that, upon a true construction of section 40, of the Employment Ordinance, if and in so far as Ms Ho actually works on a statutory public holiday, then by virtue of the provisions of section 40, the wages earned by her in respect of that statutory holiday on which she in fact worked thus constituted her full statutory entitlement to such holiday on the basis that she thus had received the amount she “would have earned” upon such statutory holiday pursuant to the provisions of the ‘old’ s 41(2).

98. I reject this argument, which during the hearing took me some time properly to grasp; in fact, during dialogue with the Bench Mr Burns was minded to accept that perhaps this was not his best point.  It seems to me that to say, in effect, that because the employee in fact worked on the day designated as a statutory holiday that she thus has enjoyed that holiday is an unsound proposition and, if indeed I properly have understood the point, I am surprised that this argument was seen fit to be made. 

99. In my view this obvious answer in this situation is to accord to the employee a substitute holiday to be taken in lieu of the statutory holiday upon which she actually worked, and I decline to interpret section 40 as producing the wholly unattractive result for which Mr Burns alternatively contended.  Accordingly, in this regard I agree with and accept the interpretation adopted by the learned Deputy Presiding Officer in the Tribunal below.

Decision

100. It follows from the foregoing that I respectfully disagree with the conclusion of the Presiding Officer that in the circumstances Ms Ho has received no statutory holiday at all on the basis that she is ‘hourly paid’. Nevertheless I consider it appropriate to add that if as a matter of practice CPA had implemented this alternative contention – that is, via invocation of the ‘section 40 point’ – so that, by an employee actually working on the statutory holiday in question, and in being paid therefor, CPA regarded itself as having fulfilled the statutory obligation imposed upon an employer to provide such a holiday, and had such argument underpinned the Tribunal’s ruling below (which it did not), on this point I should have found in favour of Ms Ho.

Order

101. Subject to any submissions by counsel on the form of this Order on this element of the case, it seems to me that the Order on this appeal should be in the following terms:

The appeal of CPA against the holding of the Employment Tribunal to the effect that the 3^rd claimant, Ms Ho, was employed on an hourly basis, and that as a consequence she has received no statutory holiday pay, is allowed, and the Order in this regard in the Tribunal below is set aside.

(d)   Finally

102. Before leaving the issue of CPA’s appeals against the determination of the Labour Tribunal, I should refer to the argument, which has found its way into the skeleton submissions, concerning the relationship between the statutory provisions relating to annual leave pay, and the contractual entitlement to such as contained within the contractual arrangements between employer and particular employee.

103. I apprehend that this has arisen because in the course of his Award the Deputy Presiding Officer expressed the view that the calculation of contractual annual leave pay must be the same as the calculation of statutory annual leave pay.  I consider this view to be incorrect.

104. Section 41AA of the Ordinance provides the statutory origin for the award of paid annual leave, and section 41C provides for calculation of statutory annual leave pay, whilst “annual leave” is defined in section 2 of the Ordinance.

105. Given the terms of the Conditions of Service of the 3 claimants now before the court, it is not immediately clear how this issue directly impacts on the appeals presently under consideration, but in any event it seems to me that the provisions of the Ordinance in relation to annual leave and annual leave pay are applicable only to statutory annual leave (that is, a maximum of 14 days), and that these statutory provisions have no application to leave contractually granted by an employer in excess of the statutory requirement for annual leave.

106. Thus, in so far as it be relevant, I accept the submission of Mr Burns that the entitlement of a cabin attendant to contractual annual leave in excess of the period of statutory annual leave to which such attendant may be entitled is governed by the express or implied terms of the particular employee’s employment contract, and in respect of such the provisions of the Ordinance have no application.

107. I turn now to the appeals mounted by the claimants against the decision of the Labour Tribunal.

The Claimants’ cross-appeals

108. The claimants’ cross-appeals relate to the Presiding Officer’s decision to the effect that the ‘Outport Allowance’ (‘OA’) is not to be regarded as “wages” within the meaning of section 2(1) of the Employment Ordinance, and thus should be excluded from the calculation of statutory holiday pay and annual leave pay.

109. The Deputy Presiding Officer found (at paragraph 70, Reasons for Decision) that the OA is calculated by reference to a formula agreed with the Flight Attendants’ Union which takes into account the actual cost of meals and associated services at the relevant crew hotel in each port, that there are “periodical reviews” of the quantum of such allowance, and further, that the amount of the Outport Allowance is a genuine pre-estimate of the amount which such expense is likely to be in any particular instance.

110. The Presiding Officer also found (at paragraph 72) that the purpose of the allowance was to cover meals and miscellaneous out of pocket expenses relating the claimants’ overseas layover between flying duties, and further (at paragraph 73) this allowance is paid in the form of a fixed allowance – calculated in accordance with specified rates laid down in the Operations Manual – and is not in the form of reimbursement against receipts; in other words, as the Presiding Officer neatly expressed the position: “the allowance is non accountable rather than an accountable reimbursement”.

111. Given this factual matrix, and having regard to the nature of the OA, the Deputy Presiding Officer took the view (at paragraph 78) that this allowance is not “wages” within section 2 of the Ordinance because it fell within exception (d), namely “a sum payable to the employee to defray special expenses incurred by him by the nature of his employment”.

112. For the cross-appealing claimants, Mr Shum maintains, in my view correctly, that the real dispute in this instance is whether this non-accountable OA, which it is common ground is not given on a reimbursement basis, falls within exception (d) to “wages” as thus statutorily defined.

113. In this instance counsel cited by analogy the case of Mrs P Lucy & ors v British Airways Plc [2009] WL 6061, a decision of His Honour Judge Burke QC who had held that the flying allowance in that circumstance was a remuneration “earned” if the claimants had carried out the applicable flying duties, and submitted that the holding and reasoning in this case supported the claimants’ position that the Outport Allowance was an ‘allowance’ fitting squarely within the definition of “wages” under section 2 of the Ordinance, that the Presiding Officer wrongly had applied exception (d), and thus that he had erred in finding that the expression “to defray special expenses incurred” meant ‘to reimburse expenses actually spent’.

114. Mr Shum also argued that the Deputy Presiding Officer had failed to consider the nature of the non-expense components of the OA which could not be categorized as payment for ‘special expenses’ incurred by the claimants under section 2 of the Ordinance, and thus he submitted that the error in law committed by the Presiding Officer in holding that this allowance fell within exception (d) was encapsulated by his finding, in favour of CPA’s argument, that exception (d) applied to a non-accountable allowance in addition to an allowance which was available on a reimbursement basis only.

115. For CPA Mr Burns argued to the contrary.  He submitted that the conclusion reached on this issue by the Presiding Officer was soundly based in both fact and in law, and that even on the assumption that for these purposes a relevant distinction could be drawn between a ‘non accountable allowance’ and a ‘reimbursement allowance against receipts’, such a distinction practically was immaterial in light of the proper interpretation of ‘exception (d)’, which expressly related to a sum payable to an employee to “defray” special expenses incurred by that employee as a consequence of his/her employment, and that the concept of ‘accountability’ or otherwise mattered not for the purpose of the application of this exception to the statutory definition of “wages”.

116. In support of this argument Mr Burns cited the decision of Deputy High Court Judge To in Star Express Limited v Cheng Tak & ors, Labour Tribunal Appeal No 86 of1998, unreported, decision dated 11 May 1999, in which it was held, inter alia, that the pre-determined and non-accountable fixed monthly payments made to drivers of tourist coaches to cover parking fees were genuine pre-estimates of that which the amount of such parking fees were likely to be, and that such payments thus constituted the reimbursement of expenses and did not constitute ‘wages’.

117. Counsel submitted that just as the pre-determined and non-accountable fixed monthly payments in Star Express, op cit., were held to fall within exception (d), by parity of reasoning so did the OA in the instant cases.

Decision

118. I agree with the argument mounted on behalf of CPA.  I do not consider that the Deputy Presiding Officer was in error in his assessment of this aspect of the argument, and, it must follow, I am correspondingly unsympathetic to, and accordingly reject, the argument of the 3 claimants on these cross-appeals.

119. The objective observer might find it difficult to understand how or why it should be thought that an allowance for between-flight expenses which have not been incurred in the leave period in question, including for example meals which have not been eaten, laundry which has not been done, taxis which have not been taken and so on, sensibly may be said to form part of the cabin attendants’ ‘wages’ for the purpose of the computation of statutory leave and annual leave pay.

120. In my judgment this allowance falls squarely within exception (d), and thus specifically is excluded from the statutory definition of “wages”.  The contention to the contrary seems to me, with respect, to be both ambitious and erroneous.

Order

121. The claimants’ appeal is dismissed against the holding of the Tribunal below that ‘Outport Allowance’ is not to be included within the definition of “wages”.

Summary

122. As the result of this judgment the overall result of these appeals and cross-appeals, therefore, is as follows:

(i)      The appeals by CPA pursuant to the Notices of Originating Motion dated 21 April 2009 in respectively HCLA No’s 3, 4 and 5 of 2009 are allowed, and the Orders of the Deputy Presiding Officer in the Tribunal below are set aside;

(ii)     The cross-appeals by Ms Becky Kwan, Ms Vera Wu and Ms Jenny Ho pursuant to the Notices of Originating Motion dated 19 May 2009 in respectively HCLA No’s 7,8 and 9 of 2009 are dismissed.

Costs

123. In the circumstances I can see no reason why costs should not follow the respective events, both upon the appeals before this court and in terms of the proceedings in the Tribunal below (wherein costs expressly were reserved), and accordingly I make an order nisi to this effect.

124. If and in so far as counsel for the parties wish to be heard as to the appropriate form of the Order consequent upon these appeals and/or as to variation of the order nisi as to costs, such application can be entertained at a short hearing to be arranged.