Lam Pik Shan v. Hong Kong Wing on Travel Service Ltd
Read the full judgment text of CACV 394/2007 on BabelCite. This Court of Appeal judgment was delivered on 9 May 2008.
1. I agree with the judgment of Le Pichon JA. I would merely add that as is stated in that judgment it was Mr Yuen SC’s submission that this court was constrained to decide in his client’s favour by reason of the terms of the judgment of the Court of Final Appeal in Lisbeth Enterprises Ltd. v Mandy Luk (2006) 9 HKFAR 131. In that judgment the Court of Final Appeal came to the conclusion that the provisions in the Employment Ordinance, Cap. 57 relating to commission were unworkable where the co
Cites 2 cases
|
CACV 394/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 394 OF 2007 (ON APPEAL FROM HCLA NO. 19 OF 2006) ----------------------
---------------------- Before: Hon Rogers VP, Le Pichon JA and Suffiad J in Court Date of Hearing: 2 May 2008 Date of Handing Down Judgment: 9 May 2008 ---------------------- J U D G M E N T ---------------------- Hon Rogers VP: 1.I agree with the judgment of Le Pichon JA. I would merely add that as is stated in that judgment it was Mr Yuen SC’s submission that this court was constrained to decide in his client’s favour by reason of the terms of the judgment of the Court of Final Appeal in Lisbeth Enterprises Ltd. v Mandy Luk (2006) 9 HKFAR 131. In that judgment the Court of Final Appeal came to the conclusion that the provisions in the Employment Ordinance, Cap. 57 relating to commission were unworkable where the commission was calculated at rates that varied on a monthly basis. That is not the situation in this case, which relates to tips which are based on a daily rate. In the second place it is quite clear that the legislature intended that tips should be taken into account in calculating wages. That is the clear intention emerging from the Ordinance itself. I am fortified in that conclusion because in passing the Employment (Amendment) Ordinance 2007, and in particular sections 10-15, the legislature has removed any difficulty there might be in making the relevant calculations. In the absence of the new provisions, had there some supposed difficulty in the method of calculation, it would have been the function of this court to give effect to the manifest intention of the legislature that tips should be taken into account in the calculation. 2.I also feel constrained to add that the argument on behalf of the defendant that the tips in this case did not come within the meaning of tips as defined in the Ordinance because they were not recognised by the employer as part of the employee’s wages verges on the disengenuous to say the least. It is abundantly clear that the defendant not only recognised the tips as part of the wages but ran its business on the basis that they would be paid. Putting an argument to the contrary does no credit to those prepared to advance it and those who wish to have it advanced on their behalf. Hon Le Pichon JA: Introduction 3.This is an appeal from an order dated 11 June 2007 of Yam J allowing the appeal of the 15th claimant from the decision of the deputy Presiding Officer dated 11 April 2006. 4.The 15th claimant and 14 other claimants were former employees of the Hong Kong Wing On Travel Service Ltd (“the defendant company”), a tour operator. They were employed as “counter sales/escorts”. The principal dispute between the parties and which led to the claimants making claims in the Labour Tribunal was whether “tips” received by the claimants from package tour members should be taken into account when calculating the annual leave pay and holiday pay of the claimants. 5.The Labour Tribunal dealt with the claim of the 14th claimant as a test case. That claim was dismissed as was the application for review. As the 14th claimant was unable to obtain legal aid to take the matter further, the 15th claimant proceeded with her claim which was likewise dismissed by the deputy Presiding Officer. On appeal, Yam J allowed her appeal and remitted the case to the Labour Tribunal for assessment of the 15th claimant’s daily wages. Background facts 6.The 15th claimant entered into an employment contract with the defendant company on 7 April 1997 for the position of a “counter sales/escort” at a salary of $1800 per month. When she left in 2003, her salary was $2000 per month. These salaries could be said to be barely at subsistence level. 7.So far as working hours are concerned, the contract set out schedules of the hours of work for counter sales staff which do not apply when the employee is escorting a tour overseas. In such a case, clause 4 of the contract stipulated that “24 hours full-time attendance to customers is expected.” Clause 11 of the contract then provided as follows:
8.The Staff Handbook contained, inter alia, the following provisions:
9.The undisputed facts as recorded in § 5 of the deputy Presiding Officer’s Reasons for Judgment dated 28 January 2005 are as follows:
10.In §§ 14 and 15 of his Reasons, the deputy Presiding Officer elaborated on the “head tax” referred to in § 5(6). Tour operators such as the defendant company required tour escorts to pay the tour company a fee (known in the industry as the “head tax”) in cash or by credit card before they would be given information relating to the tour they would be escorting. In other words, the tour escorts had to pay the head tax upfront. The arrangement is not recorded in any document. The tour company decided what the head tax would be for any particular tour. For tours at the normal price, the evidence before the deputy Presiding Officer was that it would generally represent 20% of the recommended service tips listed in the tour package price list. For discounted or special tours, the percentage would be greater. 11.Given section 6.4 of the Handbook, those employed as counter sales/escorts such as the 15th claimant would be in breach of their contracts of employment if they refused to lead tours assigned by the defendant company albeit that taking the tours so assigned entailed making upfront head tax payments which could make substantial inroads into, if not deplete, basic salaries (depending on the tour and number of tour participants) although the head tax would ultimately be recouped out of tips given by the tour participants at the end of the tour. Indeed it will be seen from Form 2 filed by the claimants that in each case, the net tips earned in a month would be several multiples of the basic salary and in some cases, they exceeded 10 times the basic salary. The statutory provisions 12.The Employment Ordinance, Cap. 57 contains specific provisions relating to the rate of holiday pay and annual leave pay. Section 41 provides as follows:
Section 41C makes similar provisions (with appropriate adaptations but no difference in substance) relating to the rate of annual leave pay. 13.The interpretation section defines “wages” as meaning
The list of specific exclusions is long and although paragraph (c) excludes any commission that is gratuitous or discretionary, no parallel provision exists in relation to tips, no doubt recognising its discretionary nature. 14.The phrase “tips and service charges” is itself defined. In relation to wages, it means
This appeal 15.The principal issue arising is whether net tips received by the claimants as tour guides or escorts form part of their “wages” for the purposes of calculating the rate of holiday pay and of annual leave pay in section 41 and section 41C respectively. The subsidiary issue relates to the claim for rest day pay.
16.Put shortly, Mr Yuen SC who appeared for the defendant company submitted that given the decision of the Court of Final Appeal in Lisbeth Enterprises Ltd v Mandy Luk (2006) 9 HKFAR 131, this court has no option but to allow the appeal. It is therefore necessary to look closer at the Lisbeth case. In that case the employee who worked in the health and beauty club operated by the company was entitled not only to a salary but also to a commission on sales made by her. The contractual commission was calculated on a monthly basis, payable according to fluctuating monthly results on a sliding scale. The Court of Final Appeal held that contractual commission was not to be included in the calculation of holiday pay and annual leave pay. The reasoning appears from the following passage in the judgment of Bokhary PJ:
17.The first matter to note is that the present case is not about contractual commission. As will have become apparent, factually, the present case is very different. 18.In this connection, it should be noted that it is common ground that the defendant company provides the patrons of their package tours with its recommendation as to the amount of tips to be paid to the tour guide or escort. A typical example is to be found in a document headed “Note to Tourists to Australia or New Zealand” given to package tour patrons. Item 5 of “Special things to note” reads as follows
19.It is also common ground that the defendant company issues to its tour guides/escorts documents written on the notepaper of the defendant company with information relating to ‘tipping’ for countries to which it offered package tours. The following is a representative sample:
20.Prima facie, tips received from tour participants would fall squarely within the statutory definition of “wages”. The real question is whether a workable mode of calculation exists for working out the net tips and whether it can be said to accrue daily. 21.As already noted, the discretionary nature of tips is not a bar (as distinct from the case of commissions) to their forming part of an employee’s wages. Further any discretion in the payment of a tip would be that of the tour participant and not employer i.e. the tour operator. While the amount of tips received per month may vary, depending on a number of factors including the number of days spent escorting tours, the type of tour, the number of persons joining the tours etc., in the present case, these factors do not pose any particular difficulty in the way of calculating daily wages. Not only is the rate of recommended tips made on a per person per day basis, the tips the tour guide/escort had to defray in the foreign country are also expressed in a similar fashion. Even if the tour guide does not receive his tips until the end of the tour, given that the duration of the tour is a fixed number of days, the net tips per day can be said to “accrue” on a daily basis and are readily calculable on the same basis. 22.Mr Ho SC who appeared for the 15th claimant referred the court to subsection (2) of section 41 which is quoted in § 12 above. That provision is applicable where the daily wages of the employee vary from day to day. In that event, the holiday pay is a sum equivalent to the “average daily wage” earned by the employee and the subsection sets out a self-contained formula for calculating that average daily wage. Mr Ho submitted, and I agree, that section 41(2) is applicable to the calculation of the rate of holiday pay and, mutatis mutandis, section 41C(2) is applicable to the calculation of the annual leave pay. Contrary to Mr Yuen’s submissions, in my view, a workable mode of calculation does exist for working out the net tips on a daily basis on days that the escort is leading a tour. The objection based on the absence of a workable mode is thus misconceived. 23.Mr Yuen also submitted that the judge went beyond his jurisdiction in reaching a different conclusion from the deputy Presiding Officer on two matters, namely, that there was a collateral contract which enabled the tour guide/escort to earn tips and that the defendant company never recognized the tips as part of the employee’s wages. 24.The deputy Presiding Officer’s reasoning can be found in § 32 of his Reasons dated 28 January 2005:
25.Plainly, in reaching the conclusion as to the existence of a collateral contract, the deputy Presiding Officer had overlooked the critical fact that it was part of the contractual duties of the employee engaged as counter sales/escort to “lead tours”. Regulation 6.4 of the Handbook noted in § 8 above does not give him an option to decline to do so. It was thus an error of law which the judge below was perfectly entitled to put right. 26.On the question as to whether the defendant company recognized tips received from the tour participants as part of the tour guide’s wages, on the facts, on any objective view, there can only be one answer and that answer has to be in the affirmative. In other words, the only reasonable inference to be drawn from the facts is that the defendant company did recognize that tips would be part of the tour guide’s wages. 27.It is sufficient to highlight a few salient facts. The claimants were employed to act in a dual capacity: when required to lead tours abroad they would be on duty for 24 hours without any overtime pay; when they were not leading tours, they would work normal working hours as counter sales staff. They were paid subsistence level salaries. It was recognized that they would receive tips from tour patrons. The head tax arrangement enabled the defendant company to cream off, in advance, a percentage of the tips to be received by the tour guides, and allowing the tour guides to keep the net amount of tips after recouping the head tax paid in advance to the defendant company and local tips which had to be defrayed. Indeed, not only did the defendant company consent to the tour guides receiving tips, under the regulations in the Handbook, they could not refuse to accept tips. The notion that any person would perform the duties of counter sales/escort whose sole income would be the basic salary is simply absurd and defies belief. The reality is that the income of the tour guides comprised not only the basic salary but also the net tips earned through performing their duties for the defendant company.
28.The ordinance permits an employee, by agreement, to work for his employer on a rest day. The terms of such an agreement are obviously a matter between the employer and the employee. The 15th claimant had been paid for working on rest days at a rate based on the basic salary. Her claim in respect of rest day pay was that it should be reckoned by taking into account tips received. 29.The deputy Presiding Officer rejected her claim by reasoning as follows:
See his Reasons for Judgment dated 3 May 2006. The judge, having concluded that the 15th claimant’s wages should include tips, remitted the whole case to the Labour Tribunal for assessment of the daily wages for the purpose of assessing the various items of claims in her application. 30.Mr Yuen submitted that since the deputy Presiding Officer had made a factual finding that the 15th claimant had accepted payment for work done on rest days at a rate based on the basic salary throughout her employment and had never raised any objection, it was not open to the judge to reopen the matter. But one of the reasons that led the deputy Presiding Officer to conclude that tips should not be included as part of rest day pay was his earlier erroneous ruling that tips should not be included as part of the 15th claimant’s salary when calculating annual leave pay and holiday pay. If, as is my view, the deputy Presiding Officer was wrong on that issue, the judge had every reason to remit the matter to the Labour Tribunal for assessment of the 15th claimant’s daily wages. Conclusion 31.For the reasons stated, I would dismiss this appeal. I would also propose that there be an order nisi of costs in favour of the 15th claimant, such costs to be taxed in accordance with the legal aid regulations. Hon Suffiad J: 32.I agree with the judgment of Le Pichon JA and have nothing to add. Hon Rogers VP: 33.There will therefore be an order in terms of paragraph 31 above.
Mr Ambrose Ho SC & Mr Erik Shum, instructed by Messrs K.B. Chau & Co., for the 15th Claimant/Respondent Mr Rimsky Yuen SC & Mr Frederick H F Chan, instructed by Messrs Winnie Mak, Chan & Yeung, for the Defendant/Appellant |
Cases cited in this judgment
Further hearings and rulings under CACV 394/2007