WONG MAN SUM v. WONDERLAND SEA FOOD RESTAURANT O/B LONG YIELD CO LTD

HCLA133/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

LABOUR TRIBUNAL APPEAL NO.133 OF 2002

(ON APPEAL FROM LBTC NO.9531 OF 2001)

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J U D G M E N T

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Background

1. The respondent/employee was employed by the appellant/employer company as a captain or headwaiter by a written employment contract dated 20 March 1999 which employment commenced on 1 April 1999 for 18 months until 30 September 2000 (“the 1^st Contract”).  

2. The employee accumulated certain holidays and leave before the expiry of the 1^st Contract on 30 September 2000 and it was agreed that he would take his accrued holidays or leave after 30 September 2000 until 15 October 2000.  

3. On 5 October 2000, the employee signed a declaration of resignation (「離職聲明書」) confirming that he would be leaving the employment on 15 October 2000.  It should be noted here that there was no reason why the employee should sign such a declaration of resignation when it was agreed that the contract of employment would come to an end by 15 October 2000 anyway.  This superfluous move was an indication, which will be considered later, that the employer company would like to make sure that the employee ceased his employment by 15 October 2000.

4. Between 15 October 2000 and 31 October 2000, the employee did not work with the employer company at all.  

5. On 1 November 2000, the employee signed another contract of employment with the employer company for another period of 18 months from 1 November 2000 to 30 April 2002 (“the 2^nd Contract”). 

6. It should also be noted here that there was a break of about 16 days between 15 October 2000 and 31 October 2000 between the two contracts of employment.

7. However, by 8 September 2001, the employee was dismissed for having acted in disobedience of the employer’s instructions/ regulations.

8. The Labour Tribunal held that the employee’s acts of disobedience were probably caused by misunderstandings.  In any event, they were not so serious as to entitle the company to dismiss the employee summarily.  Accordingly, the company was held to be liable to pay the employee wages in lieu of notice, statutory holidays pay and rest day pay.  There was no appeal to this part of the Tribunal’s award.

9. The Tribunal also ordered the appellant to pay the respondent a sum of $12,565.80 by way of severance payment.  It was held that between the two contracts of employment, although there was a short break of about 16 days, it did not break the continuity of the employee’s employment.  Accordingly, it was held that the period of employment under the 1^st Contract should be counted with the 2^nd Contract until the employee left the company, and the employee was therefore entitled to severance payment.

10. The company appealed against this part of the Tribunal’s findings and award.  However, the employee had been declared bankrupt for reasons wholly unconnected with the present case.  The Official Receiver, who is the Trustee in Bankruptcy, decided not to take any active step to resist the present appeal and would not attend the appeal hearing to argue the appeal.  The appeal was therefore heard only ex parte from the appellant company.

Continuous employment

11. Under section 31B of the Employment Ordinance, Cap.57, severance payment is only payable to an employee who has been “employed under a continuous contract for a period of not less than 24 months” if the employee is dismissed by reason of redundancy.

12. The relevant part of the First Schedule to the Employment Ordinance provides for the statutory definition of “continuous contract” as follows :

“	2.	Subject to the following provisions, where at any time an employee has been employed under a contract of employment during the period of 4 or more weeks next preceding such time he shall be deemed to have been in continuous employment during that period.
	3.	(1)	For the purposes of paragraph 2, no week shall count unless the employee has worked for 18 hours or more in that week, and in determining whether he has worked in any hour the provisions of sub-paragraph (2) shall apply.
		(2)	If any hour the employee is, for the whole or part of the hour-
			(a)	….
			(b)	Absent from work in circumstances such that, by law, mutual arrangement or the custom of the trade, business or undertaking, he is regarded as continuing in the employment of his employment for any purpose.
			then, save as provided in paragraph 4, that hour shall count as an hour in which he has worked.”

13. The concept of continuous employment has been the subject matter of a number of judicial decisions.  In David Hot Blocking Press Ltd v. Ho King Yam [1996] 1 HKC 270, at 276C, I had said, by way of obiter, that :

“In other words, in order to defeat the purposes of this part of the Ordinance, an employer must dismiss an employee for four or more weeks or during those four weeks preceding, the employee was not asked to work for 18 or more hours. ….”

14. I am afraid this part of my judgment is quite misleading.  From the whole of my judgment and the provisions in the First Schedule, it actually meant that “… the employee was not asked to work for 18 or more hours” in any one of those four weeks.  Otherwise, it would not stand to reason that during the four preceding weeks the employee would only be required to work for 18 or more hours in order to have a continuous contract even there was a break of four solid weeks.

15. Subsequent decisions were made to the same effect :

(1)	Leung Wan Kee Shipyard v. Lik Shau Foo [1995] 3 HKC 229 per Waung J.
(2)	I n Wong Man Kwan and others v. Chun Shing Holdings Ltd (unreported), HCLA29/2002, at para.27, Deputy High Court Judge Lam (as he then was) decided that :
	“The combined effect of paragraphs 2 and 3 [of the First Schedule] is that so long as an employee has worked for 4 weeks preceding the relevant date and worked at least 18 hours for each week, he would be deemed to be in a continuous employment, or in other words, deemed to be employed under a continuous contract.”
(3)	In Lui Lin Kam and others v. Nice Creation Development Ltd (unreported), HCLA106/2002, 9 July 2003, Deputy Judge Lam decided to the same effect.

16. Thus it is quite settled law that in deciding whether a person is in continuous employment, a period of not less than four weeks before the relevant date, the employee must have worked for 18 hours at least in each of those weeks, unless the case falls within the exceptions provided under paragraph 3(2).

17. One of the exceptions was by way of mutual arrangement or trade custom under paragraph 3(2)(b).  The case of Lui Lin Kam was a case within the exceptions.  It was decided in that case that :

“…. the whole point of this arrangement of successive contracts was a scheme to avoid liabilities for severance payment or long service payment. … It is clearly a case caught by Section 32A(1)(a) of the Employment Ordinance reading together with Section 32B(1)(b).  The Defendant clearly intended to extinguish or reduce the Claimants’ right to severance payment or long service payment. …”

18. In the end, I accept the appellant’s submission that since there was a period of discontinuity of two weeks in which the employee did not work at all, the two contracts cannot be taken as continuous contract unless it falls within the exception of mutual arrangement.

Mutual arrangement

19. The Presiding Officer below held that :

(i)	the employee’s absence from work was pursuant to some “mutual arrangement” (「雙方面的安排」) within the meaning of paragraph 3(2)(b);
(ii)	at the same time such mutual arrangement was unlawful and unreasonable and in breach of section 70 of the Employment Ordinance; and
(iii)	the short break in the employment (「短暫離職」) did not amount to a break in the continuity of the employment in law.

The Presiding Officer had decided in this case that it was a break in the contract of employment by mutual arrangement.  This is similar to the case of Lui Lin Kam. 

20. There were ample evidence for the Presiding Officer to come to his conclusion.  He accepted the evidence of the employee and his witness, one Mr Tsang.  They both said that they were forced to sign the declaration of resignation (「離職聲明書」).  There was no reason why this has to be done when the contract would have come to its end by itself. 

21. The Presiding Officer further accepted the evidence of the employee that if he did not sign this declaration of resignation, he would not have a chance to be re-employed.  The arrangement of each contract of 18 months only was simply designed to avoid the consequence of continuous employment for the purpose of severance pay or, later, long service payment as decided by the Presiding Officer.  There is no reason why this court should disturb the findings of the Presiding Officer.

Conclusion

22. For the aforesaid reason, this appeal is dismissed.  Since the respondent did not appear in the appeal, I will make an Order Nisi of no order as to costs of the appeal.