Ho Kit Man Jenny v. Cathay Pacific Airways Limited
Read the full judgment text of LBTC 2827/2008 on BabelCite. This LBTC judgment was delivered on 12 January 2009.
1. The trial proceedings use the Chinese language. The parties agree that I can deliver this Reasons for Decision on Liability in the English language.
Cites 7 cases
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LBTC 2829/2008 IN THE LABOUR TRIBUNAL OF THE __________________________________ BETWEEN
__________________________________ Coram: Pang Ka Kwong, Esq., Deputy Presiding Officer Date of Trial: 22, 23 & 24 December 2008, 12 January 2009 Date of Decision on Liability: 12 January 2009 Date of Reasons for Decision on Liability: 12 January2009 __________________________________ Reasons for Decision on Liability 1.The trial proceedings use the Chinese language. The parties agree that I can deliver this Reasons for Decision on Liability in the English language. 2.The parties reserve their respective positions on quantum. 3.Under paragraph (a) 1 of the Claimants’ respective Form 2, the Claimants stated that their grounds for the claims include :-
The Claimants do not pursue the claims under paragraph (a) 1. Claim 4.The present claims are for "shortfalls" in the amounts of Statutory Holiday Pay ("SHP") and Annual Leave Pay ("ALP") that were paid by Cathay Pacific, such shortfalls allegedly arising from the non-inclusion of Line Duty Allowance ("LDA"), Outport Allowance ("OA"), Ground Duty Allowance ("GDA") and Duty Free Sales Commission ("DFSC") in calculating SHP and ALP. 5.In material, there is no dispute on the background facts of the cases. Kwan Siu Wa Becky ("Becky") 6.By a letter of appointment dated 20th September 1975, Becky joined Cathay Pacific as a Junior Flight Hostess of the cabin crew. 7.She was promoted to the post of Chief Purser L1011 on 18th September 1987. The post was retitled to Inflight Service Manager on 1st April 1999 and she remains in the same position to date. She is required to perform duties in air and on ground as Cathay Pacific directs. 8.Becky is a monthly paid cabin crew. She receives a basic salary and title allowance of HK$23,883 and HK$11,501 respectively each month. In addition, she receives various allowances such as LDA and OA. 9.By 2002 Becky has served Cathay Pacific for more than 10 years and therefore she is entitled to 5 weeks' paid annual leave and 94 Guaranteed Days Off ("GDOs") each year. 10.Additionally, Cathay Pacific provides Becky with the following days without work :-
11.Clause 16(C) of Conditions of Service 1986 (“COS 1986”) provides :-
Wu Yee Mei Vera ("Vera") 12.By a letter of appointment, dated 12th June 1995, Vera joined Cathay Pacific as a cabin attendant. She was promoted to the post of purser on 1st December 2000 and remains in the same position to date. She is required to perform duties in air and on ground as Cathay Pacific directs. 13.Vera is a monthly paid cabin crew. She receives a basic salary and title allowance of HK$20,139 and HK$2,370 respectively each month. In addition, she receives various allowances such as LDA and OA. 14.Between June 1995 and May 2000, Vera is entitled to 3 weeks' paid annual leave and 98 GDOs each year. Between June 2000 and May 2005, she is entitled to 4 weeks' paid annual leave and 96 GDOs each year. By June 2005, she is entitled to 5 weeks' paid annual leave and 94 GDOs each year. 15.Additionally, Cathay Pacific provides Vera with the following days without work :-
16.Clause 13(b) of Conditions of Service 1993 (“COS 1993”) provides :-
17.The details of the Short Break, Stop over in outports, Standby duty also known as reserve duty and GDOs are the same in Vera's case as in Becky's case. Ho Kit Man Jenny ("Jenny") 18.By a letter of appointment, dated 19th January 2005, Jenny joined Cathay Pacific as a Flight Attendant of the Inflight Services Department and she remains in the same position to date. She is required to perform duties in air and on ground as Cathay Pacific directs. 19.Cathay Pacific pays Jenny Minimum Guaranteed Flying Pay ("MGFP") at the value of 70 Block Hours (see explanation below) i.e. 70 hours X HK$146.4 per hour = HK$10,248 per month. 20.The payment structure of Jenny is set out in Clause 3 of the COS 2003, Clause 3.1 of which provides :-
21.Credits that Jenny may earn include :-
22.The credit of 3.25 block hours for each day of leave is calculated by reference to the following mathematical formula. Cathay Pacific assumes that a cabin crew works 85 credit hours (inclusive of Block Hours flown) and 25.5 ground duty hours (see explanation in paragraph 83 below) each month. Ground duty hours worth 50% of Block Hours. Therefore, total monthly credit hours for such crew member are :- 85 + (25.5 ÷ 2) = 97.75 This figures is then averaged over 30 days to give a standard credit of 3.25 block hours for each day of leave taken. 23.In addition, Jenny receives various allowances such as OA, GDA and DFSC. Jenny does not receive LDA, whilst Becky and Vera do not receive GDA or DFSC. 24.With less than 5 years’ service, she is entitled to 21 days' paid annual leave. 25.Additionally, Cathay Pacific provides Jenny with the following days without work :-
26.The details of Short Break, Stop over in outports and Standby duty are the same in Jenny’s case as in Vera and Becky’s case. 27.Clause 2.4(3) of the Conditions of Service 2003 (“COS 2003”) provides :-
The Issues 28.Despite that Becky and Vera are employed under different COS, they are in the same position for the purpose of the present claims. They contend that Cathay Pacific should include OA and LDA in the calculation of their ALP and SHP in accordance with the old ss.41 and 41C of the Employment Ordinance (“EO”). Jenny contends that Cathay Pacific should include OA, GDA and DFSC in the calculation of her ALP and SHP in accordance with the old ss.41 and 41C of EO. Jenny also contends that as she is hourly paid, Cathay Pacific has not paid her any SHP on her statutory holidays. 29.Cathay Pacific denies that OA, LDA, GDA and DFSC are required to be included in the calculation of SHP and ALP. Cathay Pacific also contends that Jenny is paid a monthly salary that is calculated with reference to the MGFP and, therefore, it has already paid Jenny’s SHP. The Employment Ordinance ("EO") 30.The following provisions are relevant to the present claims :
31.The old s.41 of the EO (prior to the changes introduced by the Employment (Amendment) Ordinance ("EAO") in July 2007) provides :
32.The old s.41C of EO (prior to the changes introduced by the EAO) provides :
33.Following the introduction of the EAO, the provisions for calculating SHP and ALP are :- (i) SHP
The EAO 34.Since the EAO takes effect, Cathay Pacific has included LDA, GDA and DFSC in calculating SHP and ALP. OA is not included in the calculation of SHP and ALP even after the introduction of the EAO. Analysis and Findings OA 35.Becky is employed under Conditions of Service 1986 ("COS 1986"). 36.Clause 5(C) of COS 1986 provides :
37.OA is known as "Overnight allowances" in Operations Manual, Volume 1, Part 4, which provides (among other things) :
38.Vera is employed under Conditions of Service 1993 ("COS 1993"). 39.Clause 15(ii) of the COS 1993 provides,
40.Jenny is employed under Conditions of Service 2003 ("COS 2003"). 41.Clause 1.3 of the COS 2003 provides :-
42.Clause 4.1 of the COS 2003 provides :-
43.Clause 10 of the COS 2003 provides that "Company Policies" means :-
44.Clause 5.1 of the Operations Manual, Volume 6, Part 1 provides :-
45.Although their entitlement is arising from difference contractual provisions, the details of OA are the same in all Claimants’ case. 46.OA is calculated by reference to a formula agreed with the Fight Attendants Union (“FAU”) that takes account of the actual cost of meals and services at the relevant crew hotel. The amount of each item of OA is determined by reference to the costs in the designated crew hotel in each port. In practice, reviews of the allowance are held twice a year and adjustments will also be made whenever there is a change in crew hotel. The allowance may decrease as well as increase. OA includes :-
47.Meal allowance will be paid if crew members are rostered on flight that requires a stopover at an outport that exceeds 2 hours and the stopover includes any part of the following period :
48.When the stopover time falls between 0600-0859 of the local time, crew members will be paid an amount in respect of breakfast. The calculation is based on the hotel coffee shop prices for full American breakfast consists of fruit juice, two eggs with ham or bacon or sausage, toast with jam or marmalade and coffee, or the breakfast set rate covering all the above items, whichever the least expensive. 49.When the stopover time falls between 1200-1359 of the local time, the amount paid in respect of lunch will not be less than a set lunch menu consisting of soup of the day, a chicken dish, medium priced dessert and coffee in the medium priced Western style restaurant in the crew hotel. 50.When the stopover time falls between 1800-2159 of the local time, crew members will be paid an amount in respect of dinner. The calculation of the amount in respect of dinner is based on the crew hotel medium priced Western style restaurant. If no medium restaurant exists in the hotel then the prices will be based on the most expensive hotel coffee shop price or the lower end of the top class hotel restaurant. The amount covers a medium priced steak, a medium priced dessert and coffee in a set menu. 51.Delayed flights allowance will be paid if crew members are in the airport and the flight delays for more than 30 minutes. Operations Manual Volume 1, Part 4, Clause 2.1C(a) provides :
52.As to rescheduled flight allowance, if crew members are required to stay at the airport, meal vouchers will be given. When crew members are required to stay at the hotel, meal allowance will be provided if the rescheduled stopover includes any part of the period stated in the above. 53.In respect of IA, Clause 2.1(D) of Operations Manual, Volume 1, Part 4 provides :
54.Crew members on "shuttle" duties are deemed to be on continuous duty for the purpose of qualifying for overnight allowance. An example of a "shuttle" duty is Paris-Manchester-Paris. No allowance is paid for crew members operating shuttle duties from their homeports. 55.IA is calculated based on two times flag fall in an air-conditioned taxi to and from places for a beer or drinks, eight km or five miles total, two small local beers in the crew hotel bar or crew lounge and a tip for one small suitcase. 56.The provision of IA is similar to that of "Overnight Allowance" in Clause 5.5 of the Operations Manual, Volume Part 1. There is no provision on IA in Operations Manual, Volume 6 Part 1. 57.Laundry allowance is paid on the 3rd night and consecutive nights away from home base. The laundry allowance calculation is based on costs in the crew hotel to launder one shirt, one undershirt, one pair of underpants, one pair of socks and one handkerchief. 58.Taxi allowance will be paid if crew members incur cost on taxi journey between the airport and the hotel. Taxi allowance will not normally be paid when Cathay Pacific or the hotel provides transport or where the hotel operates regular shuttle bus service between the airport and the hotel. 59.Indian port allowance is simply the overnight allowances where crew members fly into Indian ports. The only difference is that the allowance for Indian ports is paid in Hong Kong instead of overseas. 60.The parties dispute where crew members are put in a hotel that is more expensive than the designated crew hotel in an ad hoc situation, if they want to receive OA that is calculated according to the higher of the different hotel tariffs, whether receipts are required to prove that extra out-of-pocket expenses are incurred. The Claimants testified that in their personal experience, receipts were never required. Ms Li Ka Lia Elizabeth, Cathay Pacific’s representative do not have personal experience in the matter. I accept that the Claimants are honest witnesses and their testimony is reliable. After having carefully considered all evidence, I accept that in such case, in practice, receipts will not be required. 61.Usually, crew members are not required to demonstrate that they actually incur any expense while working away from home base. 62.The Claimants produced a 1994 Year and Review Agreement between Cathay Pacific and FAU the contents of which show that there were discussions to change the manner of calculation of OA from meals basis to time basis. In this respect, however, no change has been agreed. 63.The rate of LDA(A) is four times more than that of LDA(B) (See paragraph 86 below). Becky explained that it is because crew members do not earn OA when they perform duties on day turnaround and split duty flights. Becky said that the purpose of the division being to compensate crew members’ loss of OA, it shows that Cathay Pacific recognizes that OA is a source of income of crew members. 64.Cathay Pacific denies that OA is required to be included in calculating SHP and/or ALP on the following basis :
65.Firstly, I deal with the question on whether OA is wages within the definition of "wages" in s.2 of the EO. 66.The Claimants contend that OA is wages because it is described in the COS and the Operations Manual as an item of allowance and that it is represented by Cathay Pacific in its advertisements as forming part of a cabin crew's income. 67.The above considerations relate to how the parties label OA. It is trite that the court does not only look at the label of a payment to determine its true nature. The label is not conclusive. It is not what the parties call it but what it is in substance that matters. One has to look into the nature of the payment, the reasons therefore and the circumstances under which the payment is made. 68.In practice, the Claimants have never paid salary tax on income earned by OA. 69.OA (except for the allowance for Indian ports) is paid overseas. Due to foreign exchange restrictions, allowance for Indian ports is paid when crew members report duty at the Hong Kong airport as they start the flying duty. In my view, the above arrangement is congruent with the intention that OA is to cover out of pocket expenses. 70.OA is calculated by reference to a formula agreed with FAU, which takes account of the actual cost of meals and services at the relevant crew hotel in each port. Periodical reviews of the allowance are held. It appears that the amount of OA payable is a genuine pre-estimate of what the amount of the expense is likely to be. 71.I am aware that OA forms a substantial part of the Claimants' total income and it arises in the course of flying duties performed by them at outports. 72.After having carefully considered all evidence, I accept that the purpose of OA is to cover meals and miscellaneous out-of-pocket expenses relating to the Claimants' layover overseas between flying duties. 73.OA is however paid in the form of a fixed allowance instead of an actual reimbursement against receipts and, it is on this basis (and on the basis that the allowance is non accountable rather than an accountable reimbursement) that the Claimants seek to argue that OA constitutes wages within the meaning of s.2 of the EO and, does not fall within exception (d). 74.Cathay Pacific contends that the meaning of the words "to defray" means "to reimburse" or "to provide money to cover the costs or expenses". Therefore, the exception in subparagraph (d) applies to a non-accountable allowance as well as to an allowance that is available on a reimbursement basis only. 75.Cathay Pacific lends support from the judgment of Deputy High Court Judge To in Star Express Limited v Cheng Tak and Ors, Labour Tribunal Appeal No. 86/1998, unreported, 11 May 1999. In that case, it was held that on the basis that pre-determined and non-accountable fixed monthly payments made to drivers of tourist coaches to cover parking fees were genuine pre-estimates of what the amount of the parking fees was likely to be, such payments constituted the reimbursement of expense and did not constitute "wages". 76.The Claimants contend that the term "special expenses" in subparagraph (d) to the definition of "wages" in s.2 of the EO denotes something that is of a non-recurrent nature and should be an one-off expenditure pertinent to the nature of the employment. I note that there is no requirement under the EO that such "special expenses" should be non-recurrent in nature. Though some OA components such as meals and traveling expenses are daily expenses that are incurred whether the Claimants are inside or outside Hong Kong, the Claimants should accept that probably they will incur extra meal and traveling expenses when they stay overseas. Plainly such extra expenses can be regarded as special expenses incurred by them by the nature of their employment. 77.During the trial hearing, the Claimants did not pursue the contention that as IA does not relate to out-of-pocket expenses, IA is a hardship allowance. Anyway, such assertion is not borne out by the relevant provisions of the COS and the Operations Manual. In my view, there is no suggestion that IA is in the nature of a hardship allowance as alleged by the Claimants. 78.After having carefully considered all evidence, I hold that OA is not "wages" within the definition of s.2 of the EO because it falls within the exception in subparagraph (d) being "a sum payable to the employee to defray special expenses incurred by him by the nature of his employment." 79.I do not need to deal with the second leg of Cathay Pacific's argument (See para. 64(b) above). LDA and GDA 80.The details of LDA and GDA are as follows. 81.Clause 5(A) of the COS 1993 provides :-
82.Clause 3.2 of the COS 2003 provides :-
83.Clause 3.2(A) of the COS 2003 provides that GDA is payable for ground duty hours spent on ground, being :-
84.Crew members' duty comprises of time on ground and time in air. LDA is payable due to time in air (line duty hours). GDA is payable due to time on ground preparing to fly (ground duty hours). They both relate to duty time that is dependant on a number of different factors. While LDA and GDA are different, I consider that I can deal with them at the same time for the purpose of the present claims. 85.In the Statement of Defence filed in these proceedings, Cathay Pacific said that as the COS provides that the Claimants “may” be entitled to OA, LDA, GDA and DFSC, there is a strong argument that the Claimants does not have any contractual entitlement to the same. During the trial hearing, Cathay Pacific's representative accepted that LDA and GDA are part of the Claimants' wages, although she maintained that they are not wages that the Claimants would have earned for the purpose of the old ss.41(1) and 41C(1) of EO. There is no provision in COS 1986 that provides for entitlement to LDA. Clause 5(A) of COS 1986 provides that Becky was entitled to Inflight Meal Compensation Allowance. Clause 5(B) of COS 1986 provides that Becky was entitled to Ground Allowance. Loosely speaking, since about 1988, the Inflight Meal Compensation Allowance and Ground Allowance have been replaced by LDA. Clause 5(A) of COS 1993 provides Vera’s entitlement to LDA. Details of when LDA is payable are set out in Clause 6 of the Operations Manual Volume 6, Part 1. Clause 3.2 of COS 2003 provides Jenny’s entitlement to GDA. Details of when GDA is payable are set out in Clause 3.2(A) of COS 2003. After having carefully considered all evidence, I consider that Jenny receives GDA pursuant to Company Policies rather than Cathay Pacific’s discretion. On the whole, LDA and GDA are not of a gratuitous nature or payable only at Cathay Pacific's discretion. LDA and GDA represent a component in the Claimants' wages for work that they have done. In my view, it is indisputable that LDA and GDA are part of the Claimants' wages. The real issue is whether they are wages that the Claimants would have earned for the purpose of the old s.s41(1) and 41C(1) of the EO. 86.LDA is paid on two scales that are LDA(A) and LDA(B). LDA(A) is payable for day turnaround and split duty flights at HK$60.5 per hour. LDA(B) is payable for all other flights at HK$15.125 per hour. Such division is again a deal struck between Cathay Pacific and FAU. 87.Becky and Vera receive LDA on the total number of line duty hours that they operate in an aircraft. LDA is calculated based on the total number of line duty hours that starts when a cabin crew reports duty and finishes on blocks or engines off on the final sector. The duty hours start when the cabin crew reports duty and finishes 30 minutes after on blocks or engines off on final sector. The cabin crew will have a 30 minutes debriefing after the engines are off. Therefore, the line duty hours are 30 minutes less than the duty hours. LDA varies based on the flight that the cabin crew is rostered to operate and the length of time spent on a flight. 88.LDA is calculated down to the minute. No two flights produce the same amount of LDA. There are various factors that affect the number of the line duty hours of a flight and therefore LDA a cabin crew earns. These factors include weather, wind speed, location of the gate, delay or cancellation of flights etc. 89.When a flight is cancelled due to adverse weather, the cabin crew will not earn any LDA even if she is rostered on a flight on that day. If the flight is delayed because of some technical problems, the line duty hours will be longer and the cabin crew will earn more LDA. 90.The rate of GDA is HK$73.2 per hour. 91.Jenny receives GDA on the total number of ground duty hours. Very rarely would two flights depart at the same time. Again, factors such as weather, delay or cancellation of flights etc affect the Departure Time of a flight and therefore the GDA a cabin crew earns. 92.If a cabin crew reports for duty and the flight is subsequently cancelled due to adverse weather, the cabin crew will earn GDA for the period between the time she reports duty and the time Cathay Pacific announces that the flight is cancelled. The ground duty hours could be longer or shorter than the period between the time required to report duty and the scheduled departure time. If the flight is cancelled before the time required to for report duty, the cabin crew will not receive any GDA. If the flight is delayed because of, say, some technical problems, the ground duty hours will be longer and the cabin crew will receive more GDA. Some flights depart earlier than others. There is no certainty on the number of ground duty hours. 93.A cabin crew will not earn any LDA or GDA if she reports sick on a day that she is rostered with flying duties. Crew members may swap duties among themselves and Cathay Pacific has the right to alter, vary or substitute the roster issued to a crew, as it considers appropriate to meet its operational requirements. 94.Cathay Pacific pays LDA and GDA monthly at the end of the following month. 95.Cathay Pacific contends that LDA and GDA are not "wages" that the Claimants "would have earned", rather it is something that the Claimants "might have earned" because there is no certainty on the amount of LDA or GDA that the Claimants will earn each month; that both LDA and GDA are paid only if a cabin crew has performed flying duties and that the Claimants are not always assigned with flying duties. 96.After having carefully considered all evidence, I accept that LDA and GDA should not be regarded as wages that would have earned for the purpose of ss.41(1) and 41C(1) of the old EO because there is no workable mode of calculation for working out the amount of LDA and GDA that the Claimants would have earned during the leave period. 97.I now turn to the question on whether LDA and GDA should be included in the calculation of the ALP and SHP in accordance with the old ss.41(2) and 41C(2) of the EO. In Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd., CACV 394/2007, unreported, 9 May 2008, the Court of Appeal upheld the decision of the High Court that tips received by the Plaintiff (Respondent), a travel escort, should be included in the calculation of ALP and SHP. In the paragraph (1) of the Judgment, Hon. Rogers VP held,
98.In the following paragraphs, Hon. Le Pichon JA held,
99.Notably, in Lam Pik Shan v. Hong Kong Wing On travel Services Ltd, the travel escort, like Becky and Vera, received a monthly salary. In Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd, the travel escort was paid tips that were based on a daily rate. In the present case, LDA and GDA are not calculated at daily rate. It seems to me that for the old ss.41(2) and 41C(2) of EO to apply, however, it is not necessary that the wages shall be calculated at daily rate. The old ss.41(2) and 41C(2) of EO apply where an employee is employed on piece rates or where the daily wages of an employee vary from day to day. I hold that LDA is part of Becky and Vera's wages and GDA is part of Jenny's wages. In my view, inasmuch as an employee's wages are calculable daily, the old ss.41(2) and 41C(2) of EO may apply. As Hon Le Pichon JA held, "The real question is whether a workable mode of calculation exists for working out … and whether it can be said to accrue daily". LDA and GDA are calculated by minutes. There should be no difficulty in calculating the LDA and 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 next 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. 100.In Wong Yin Fong & Others v. ISS Hong Kong Services Ltd [2005] 2 HKLRD 648, Labour Tribunal Appeal 56 of 2003, 17-19 May and 28 June 2005, Court of First Instance, J Lam J held,
101.The above-mentioned Judgment was delivered before Lisbeth Enterprises Ltd v Mandy Luk [2006] 9 HKFAR 131. It is worthy of noting that when the case went further to the Court of Appeal, Wong Yin Fong & Others v. ISS Hong Kong Services Ltd [2008] 1 HKLRD 63, 28 November 2007, Court of Appeal, Hon Cheung JA said,
102.Taking that the legislative intention is to achieve through s.41C that employees will not suffer any accompanying economic loss for not working during the leave period, given that s.41 is parallel to s.41C at this end, I am satisfied that Cathay Pacific should include LDA and GDA in the calculation of the Claimants’ ALP and SHP by using the following formulas, in accordance with the old ss.41(2) and 41C(2) of EO :
I reckon that probably the parties will propound different modes of calculation for working out the number of working days for the purpose of the formulas. Becky and Vera are monthly salaried while Jenny is hourly paid. Does it mean that the whole month immediately preceding or expiring on the holiday or first day of the leave (i.e. 30 or 31 days) should be counted as working days of Becky and Vera? Further or in the alternative, should only the days on which the Claimants are required to perform duties (in air and on ground) be counted as working days; should only the days on which Becky and Vera are required to perform duties in air (but not on ground) be counted as their working days, as LDA is payable due to time in air; should only the days on which Jenny is required to perform duties on ground (but not in air) be counted as her working days, as GDA is payable due to time on ground preparing to fly; should the days during which the Claimants are put on Standby duties be counted as working days; should the days during which the Claimants are put on Stop over in outports be counted as working days; and/or should the days during which Jenny earns Work credits and Leave credits be counted as her working days, for the purpose of the formulas? The parties reserve their respective positions on these questions. I shall leave them to be dealt with when the question of quantum arises. In any case, once these questions are resolved, the parties will have no difficulty in working out the amount that Cathay Pacific is liable to pay in compensation to the Claimants. DFSC 103.Cathay Pacific would assign hourly paid crew members to conduct inflight duty free sales. Once an hourly paid crew is assigned, she has no choice but to perform the same as part of her duties. 104.The details of Duty Free Sales Commission (“DFSC”) are set out in Cathay Pacific's Inflight Sales Commission Policy. DFSC is separated into Individual Commission, Team Award, BC Star Award and ISM Star Award. Individual cabin crew earns a flat rate of 3.5% of sales made by her. The commission is paid at the end of the following month. Team Award is given to the top team with the best inflight sales performance. Crew members of the top team receive gifts as prizes. BC Star Award is given to top performers. ISM Star Award is given to the top Inflight Services Managers. 105.During the trial hearing, Cathay Pacific’s representative accepted that DFSC is part of Jenny's wages. After having carefully considered all evidence, I am satisfied that DFSC is not of a gratuitous nature or payable only at Cathay's discretion. I hold that DFSC represents a component in Jenny's wages for work that she has done and is part of her wages. 106.Cathay Pacific contends that DFSC is not "wages" that Jenny "would have earned", rather it is something that Jenny "might have earned" because :
107.After having carefully considered all evidence, I accept that DFSC should not be regarded as wages that would have earned for the purpose of the old ss.41(1) and 41C(1) of the EO because there is no workable mode of calculation for working out the amount of DFSC that Jenny would have earned during the leave period. 108.I now turn to the question on whether DFSC should be included in the calculation of the ALP and SHP in accordance with the old ss.41(2) and 41C(2) of the EO. In my view, inasmuch as an employee’s wages are calculable daily, the old ss.41(2) and 41C(2) of the old EO may apply. In Lisbeth Enterprises Ltd v Mandy Luk, the employee who worked in a health and beauty club was entitled not only to a monthly 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. Jenny’s case is different from Lisbeth Enterprises Ltd v Mandy Luk in that Jenny receives DFSC on the flat rate of 3.5% of the sales made by her. The upshot is that there would be no difficulty in calculating the amount of DFSC already made by Jenny on any given day (disregarding the Team Award gifts, BC Star Award and ISM Star Award), and therefore it can be said to accrue daily. Even if the Claimants do not receive DFSC until the end of the next month, given that DFSC can be said to accrue daily, it is daily wages that vary from day to day. Further or alternatively, apparently Jenny is employed on piece rate when she performs the duty free sales duty. By reason of matters aforesaid, I hold that Cathay Pacific should include DFSC in the calculation of Jenny's ALP and SHP by using the following formulas, in accordance with the provisions of the old ss.41(2) and 41C(2) of the EO :
Again, I shall deal with those questions regarding the mode of calculation for working out the relevant number of working days for the purpose of the formulas when the question of quantum arises. Has Jenny received any SHP at all? 109.Clause 2.4(3) of the COS 2003 provides :-
110.Clause 5.3 of the COS 2003 provides :- "Statutory Holidays and Rest Days
111.Cathay Pacific intimates that, in addition to the Days Without Duties, Cathay Pacific also uses Standby duties (Jenny earns 1 credit hour for each 3 hours of Standby duties) to discharge its obligation to provide Jenny with statutory holidays under the EO. I do not agree. It is clear from the above-mentioned contractual provisions that Cathay Pacific uses Days Without Duties to discharge its obligation to provide Jenny with statutory holidays under the EO. 112.Unlike to the other two Claimants who are monthly paid crew, Jenny's wages are calculated on the numbers of flying hours she is able to achieve on a monthly basis. Her salary structure is not governed by the Master Pay Scale like the monthly paid crew members do. She does not enjoy the benefit of automatic annual increment along the Master Pay Scale. 113.Generally, Jenny is rostered to not less than the value of 70 hours of flying duties each month. If she wants to earn more, she may swap flights with colleagues to fly more, thus earning the extra flying hours which are all calculated on the basis of HK$146.4 per hour. In practice, Jenny swapped flights with colleagues to fly less, thus receiving only the MGFP in many months. 114.Her wages are linked to performance of flying duties, Work Credits and Leave Credits. Therefore, Jenny contends that Cathay Pacific has not paid her any SHP at all. 115.Cathay Pacific contends that according to Clause 3.1 of the COS 2003, Jenny receives a monthly salary that is, rather than a specified amount in her contract, calculated with reference to MGFP that is paid regardless of the work or duty she may or may not have undertaken or been assigned to her during the month; that MGFP is payable due to time on duty as well as time not on duty in the same way as a worker is paid a basic monthly salary but may also be entitled to monthly overtime if she works extra hours in that month. 116.Clause 3.1 of the COS 2003 provides that Jenny will receive salaries calculated on a monthly basis. Having salaries calculated on a monthly basis does not mean that she is monthly salaried. Employees employed at piece rate or hourly rate may receive salaries calculated on a monthly basis. In my view, the payment structure of Jenny plainly shows that she is an hourly paid employee. 117.Cathay Pacific pays Jenny MGFP at the value of 70 Block Hours, as it assumes that a cabin crew works 85 credit hours (inclusive of Block Hours flown) and 25.5 ground duty hours each month. It demonstrates that the MGFP relates to crew members’ flying duties rather than the Days Without Duties. 118.For example, when an hourly paid cabin crew performs more than 70 flying hours in a month, she is paid by the actual flying hours plus any credits earned. It means that she will not reap any benefit from the MGFP, notwithstanding that Cathay Pacific may well provide her with Days Without Duties in that month. 119.An hourly paid cabin crew is not paid for those Days Without Duties that coincide with the 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. 120.One can educe 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. Ordinary Wages 121.Prior to the amendments introduced by the EAO, s.42 of the EO provides :-
122.The EAO repealed s.42 of EO. 123.Cathay Pacific contends that the Claimants' monthly basic salary, together with other regular fixed monthly allowance, represents their "ordinary wages" for the purposes of s.42 of the EO. 124.Mr Justice Rogers VP held at paragraph 21 of Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd,
125.Such view was echoed by the Honorable Mr. Justice Cheung JA in Fong Mung Yan v. ISS Hong Kong Service Limited, at paragraph 49 where the learned Judge said,
126.I hold that s.42 of does not assist Cathay Pacific. S.40 of the EO 127.In relation to the payment of SHP, s.40 of the EO provides :
128.This section is applicable both prior to and after the introduction of the EAO. 129.Cathay Pacific contends that by virtue of the provisions of s.40, to the extent that the Claimants worked on a statutory holiday, the wages paid to them in respect of that statutory holiday (which she worked) constitute their full entitlement under the EO in respect of that statutory holiday. In these circumstances, the Claimants will have received the amount they "would have earned" on the statutory holiday. 130.In effect, Cathay Pacific rigidly construes "that holiday" referred to in s.40 as the statutory holiday. In my view, "that holiday" plainly means the holiday actually taken by the employee, whether the employee takes a holiday on the statutory holiday or on an alternative or substituted holiday or a holiday under s.39(4). Were Cathay Pacific's construction acceptable, an employer would have no obligation under the EO to pay SHP in respect of an alternative or substituted holiday. That must be wrong. Contractual Annual Leave Pay 131.Clause 16(A) of the COS 1986 provides :-
132.Clause 12(A) of the COS 1993 provides :-
133.Clause 5.1 of the COS 2003 provides :-
134.The Company Policy provides Jenny’s AL entitlement as follows :-
135.Section 2 of the EO provides that "annual leave" means the annual leave provided for in Part VIIIA and "annual leave pay" means the annual leave pay required by the EO to be paid in respect of a period of annual leave provided for in Part VIIIA in respect of a period of annual leave required to be paid under section 41D. 136.Therefore, Cathay Pacific contends that the provisions in the EO relation to annual leave and annual leave pay are applicable only to statutory annual leave (a maximum of 14 days); that the statutory provisions do not apply to leave granted by an employer in excess of the statutory annual leave and that leave granted in excess of the statutory requirement. In other words, contractual annual leave, including the taking and the payment of such leave, is therefore governed solely by the terms of the relevant employment contract, which fall to be interpreted and construed in accordance with general contractual principles. 137.Cathay Pacific contends that on the basis of general contractual principles of construction and on the basis of plain common sense, the expression "paid leave" means leave of absence from work with the payment of basic salary and those allowances to which a cabin attendant is entitled by virtue of his or her position i.e. title and appointment allowances, but excluding allowances which arise by virtue of the actual performance of in flight or other specific duties, such as OA, LDA and GDA and which plainly do not arise at all during periods of leave. 138.I accept that the Claimants' contractual AL is governed by the terms of the employment contract. The COS are drafted in details. Upon reading the relevant provisions of the COS, I observe that they do not make any distinction between a cabin crew's statutory and contractual annual leave payment. In practice, there is no way to tell when the Claimants take AL, whether they are on the statutory or contractual AL. As a matter of construction of the employment contract, I take the starting point that the calculation of the ALP regarding all AL provided by the employment contract is equal. 139.In Wong Yin Fong & others v. ISS Hong Kong Services Ltd, J Lam J held that "Given its paternalistic nature, the statutory scheme strives to achieve through s.41C that an employee will not suffer any accompanying economic loss for not working during the leave period". In the present case, Cathay Pacific takes into account of the numbers of days of AL taken by Becky and Vera to calculate their Excess Flying Pay ("EFP") (See Clause 6 of COS 1986 and Clause 5 of COS 1993 for EFP’s meaning). Jenny's situation is similar. Cathay Pacific takes into account the number of hours flown as well as credits earned by reasons of leave (including AL) to calculate MGFP and Jenny's wages. Jenny earns 3.25 leave credits per day of AL. Such arrangements suggest that the parties are also prepared to make provision for making up a cabin crew’s accompanying economic loss for not working during the leave period. Conversely, Cathay Pacific contends that on the basis of plain common sense, allowances that arise by virtue of the actual performance of duties such as LDA and GDA should be excluded in calculating ALP and SHP. Courts will imply terms into individual contracts on the ground of business efficacy but it is nothing to do with making things reasonable or fair. All in all, I am not persuaded by Cathay Pacific's common sense approach. After having carefully considered all evidence, I take the view that there is no contractual basis to calculate the ALP attributable to the statutory and contractual AL differently. Conclusion 140.I hold that Jenny is hourly paid. Therefore, she is employed on daily wages that vary from day to day. In accordance with the old s.41(2) of EO, her holiday pay shall be a sum equivalent to the average of the daily wages earned by her on each day on which she worked during every complete wage period, comprising not less than 28 days and not more than 31 days, immediately preceding or expiring on the holiday or first day of the holiday. In my view, she does not receive any SHP. In accordance with the old s.41C(2) of EO, her annual leave pay shall be calculated by reference to the average of the daily wages earned by her on each day on which she 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. Account will be taken into ALP that were already paid by Cathay Pacific. 141.In conclusion, I hold that Cathay Pacific should calculate and pay Becky and Vera shortfalls in the amounts of ALP and SHP in the manners as set out in the above paragraph 102 and should calculate and pay Jenny shortfalls in the amounts of ALP and SHP in the manners as set out in the above paragraphs 102, 108 and 140, but it is not required to include OA in the calculation of ALP and SHP. 142.The parties shall make arrangements with the case Tribunal Officer for the purpose of fixing a mutually convenient date for a mention hearing on the question of quantum. 143.Costs reserved.
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Cases cited in this judgment
Further hearings and rulings under LBTC 2827/2008