TAI HING COTTON MILL LTD. v. WONG PING KONG AND OTHERS

CACV000215/1993

H E A D N O T E

An “attendance bonus” payable to an employee under his contract of employment only if the employee has attended at his place of workon every day during a wage period(except Sundays) is “payable to an employee in respect of work done…under his contract of employment”within the meaning of “wage” in section 2(1) of the Employment Ordinance (Cap. 57), and is therefore to be included in the calculation of an employee’s severance payment.

IN THE COURT OF APPEAL

1993, No. 215
(Civil)

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BETWEEN
WONG PING KONG & 41 OTHERS Claimants
(Respondents)
AND
TAI HING COTTON MILL LTD Defendant
(Appellant)

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Coram: Mortimer, J.A., Keith, J. and Leonard, J. in Court

Date of hearing: 29 July 1994

Date of judgment: 29 July 1994

Date of handing down reasons for judgment: 10 August 1994

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J U D G M E N T

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Keith, J. (giving the judgment of the Court):

1. In December 1991, Tai Hing Cotton Mill Ltd. (“the company”) dismissed a number of its employees. They became entitled to variouspayments from the company. Those payments included severance payments under the Employment Ordinance (Cap. 57) (“the Ordinance”). The amount of a severance payment is calculated by reference to an employee’s “wages”.

However, there is a dispute whether an attendance bonus payable to the employees is a payment which comes within the definition ofan employee’s wages in the Ordinance. The company says that it does not. The Presiding Officer in the Labour Tribunal agreed withit. The employees say that it does. Deputy Judge Yeung agreed with the employees on their appeal to the High Court. The company appealedto this Court seeking to restore the decision of the Presiding Officer. We had to decide who was right.

2. At the conclusion of the hearing, we dismissed the company’s appeal. We said that we would give our reasons in due course, and thiswe now do.

3. The facts are not in dispute. The company paid its employees on the basis of a wage period of 15 days. The payments made to themfor each wage period fell into three categories:

(i) A basic wage for each day on which the employee attended at his place of work and was given work to do.

(ii) A sum of $10 for each day on which the employee attended at his place of work, but was not given any work to do, and was thereforeunable to earn a basic wage for that day.

(iii) An attendance bonus which was only payable if the employee attended at his place of work on every day of the wage period exceptSundays.

4. The attendance bonus represented a significant proportion of the employee’s total earnings, though the amount of the bonus variedaccording to the shift on which the employee worked. If the employee worked on the morning shift, his attendance bonus would be 23%of his basic wage for that wage period; if on the evening shift, it would be 26.6%; and if on the night shift, it would be 30%.

5. It is not difficult to see the reasoning behind the attendance bonus. In a company in which the availability of work for employeesto perform fluctuated from day to day, the company wanted to have a sufficient pool of employees to call upon every day. The attendancebonus represented a powerful incentive to the employees to attend their place of work every day.

6. The term “wages” is defined in section 2(1) of the Ordinance as follows:

“‘wages’ … means all remuneration, earnings, allowances, tips and service charges, however designated or calculated, capable ofbeing 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 [various payments which are not material to this appeal].”

Thus, how the payment is described or calculated is not a material consideration. The only question is whether the attendance bonuswas “payable to an employee in respect of work done or to be done under his contract of employment”.

7. The company’s core contention is that the attendance bonus was not payable to the employees in respect of work, whether work alreadydone or work to be done in the future. The attendance bonus was payable in respect of their attendance at their place of work. Theargument is so simple that it is not susceptible to any greater elaboration than that.

8. In our view, however, this beguiling argument does not stand up to close scrutiny. We analyse the position in this way. At the endof each wage period, the employee received his pay for the work he had done in that wage period. His pay fluctuated because it dependedon a number of variable factors. One of those factors was his attendance at his place of work. If he attended at his place of workregularly, he qualified for a higher rate of pay for the work he had done. The higher rate of pay for the work he had done to whichhis regular attendance at his place of work entitled him was reflected in the attendance bonus. His regular attendance at his placeof work, in other words, was one of the factors which determined the amount of his pay for the work he had done in the wage period,and the attendance bonus was the component in his pay for the work he had done which was attributable to his regular attendance athis place of work.

9. In the course of his submissions, Mr. Edward Chan Q.C. for the company criticised the reasoning by which the judge reached his conclusionthat the attendance bonus amounted to a payment “in respect of work done or to be done”. We should mention three of those criticisms:

(i) The judge laid considerable emphasis on the fact that the attendance bonus was calculated as a percentage of the employee’s basicwage. The fact that it was linked to the basic wage was, so the judge reasoned, a strong indicator that it was payable in respectof work done by the employee. We agree with the judge’s reasoning, but we think there is force in Mr. Chan’s argument that his reasoningcould not be taken into account. That is because the reasoning involved looking at how the attendance bonus was calculated, and thatis not a permissible factor to be taken into account when determining whether the attendance bonus comes within the definition of”wages”.

(ii) The judge noted that there were circumstances in which it was possible for an employee who attended at his place of work on everyworking day during the wage period to be denied an attendance bonus, i.e. if he was not given any work to do on any of those days,and was therefore unable to earn a basic wage at all for the wage period. We were told that that had never happened in practice,but if (in theory, at any rate) regular attendance did not necessarily entitle an employee to an attendance bonus, the attendancebonus, so the judge reasoned, could not have been payable for attendance at his place of work. Again, we think there is considerableforce in the judge’s reasoning, but we are inclined to agree with Mr. Chan that it suffers from a similar vice. The only circumstancein which regular attendance might in theory not have resulted in the employee’s entitlement to an attendance bonus is where no basicwage was earned in the wage period, and the only reason why that circumstance would have disentitled an employee to an attendancebonus was because the attendance bonus was calculated as a percentage of the basic wage. It follows that the argument is dependenton taking account of how the attendance bonus is calculated, and that cannot be taken into account for the purpose of determiningwhether the attendance bonus comes within the definition of “wages”.

(iii) The judge’s analysis of the facts was as follows:

“… by working on a particular day, the worker would earn not only his basic wages, but also a percentage of his basic wages termedas attendance bonus which would be forfeited should the worker fail to attend for work on any working day during a wage period.”

Mr. Chan argued that, in using that language, the judge was in error, because he was saying that a proportion of the attendance bonuswas earned each working day during the wage period, but that accrued right would be “forfeited” by just one day’s absence from theplace of work. It is plain that the right to an attendance bonus did not accrue from day to day. The right crystallised at the endof the wage period, but only if there had been regular attendance on the part of the employee. We think there is some force in thatcriticism, and in the criticism that this was another example of the judge using the fact that the attendance bonus was calculatedby reference to the basic wage as justifying the conclusion that the attendance bonus came within the definition of “wages”.

10. We have not reached any final conclusions on these points, as we did not call upon Mr. Dennis Mitchell Q.C. for those of the employeeswho were represented on the appeal to address us. However, even if these criticisms of the judge are well-founded, they do not inany way affect our analysis – which is that regular attendance at his place of work qualified the employee for a higher rate of payfor the work he had done, and that the attendance bonus represented the component in his pay for the work he had done which was attributableto his regular attendance at his place of work. A different conclusion would have given us little satisfaction. The Presiding Officer’sview would have given the green light to unscrupulous employers to structure their employees’ contractual payments in such a wayas to render the valuable right to a severance payment as little more than worthless.

11. For these reasons, this appeal was dismissed. We ordered the company to pay the costs of the appeal of the three employees who hadbeen legally represented on this appeal, to be taxed in accordance with the legal Aid Regulations if not agreed.

(J.B. Mortimer) (Brian Keith) (D.J. Leonard)
Justice of Appeal Judge of the High Court Judge of the High Court

Representation:

Mr. E. Chan Q.C. leading Mr. Y.C. Mok inst’d by Messrs. T.S. Tong & Co. for Appellant/Defendant.

Mr. D. Mitchell Q.C. leading Mr. P.H. Wong inst’d by Messrs. Poon & Cheung for 1st, 40th and 41st Respondents/1st, 35th and 42ndClaimants.

All other Respondents/Claimants in person.