Lesson no. 6
Ref: 08 CX Judgment
FACV No.5 of 2012
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 5 OF 2012 (CIVIL)
(ON APPEAL FROM CACV NO. 92 OF 2010)
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Between :
CATHAY PACIFIC AIRWAYS LIMITED Appellant
and
KWAN SIU WA BECKY
WU YEE MEI VERA
HO KIT MAN JENNY 1st Respondent
2nd Respondent
3rd Respondent
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Before: Chief Justice Ma, Mr Justice Bokhary PJ,Mr Justice Chan PJ, Mr Justice Ribeiro PJ and Lord Neuberger of Abbotsbury NPJ
Date of Hearing: 6 September 2012
Date of Judgment: 26 September 2012
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JUDGMENT
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Chief Justice Ma :
A INTRODUCTION
1. A number of aspects of employment law relating to holiday pay and annual leave pay fall to be determined in this appeal. The ordinance which has to be considered is the Employment Ordinance Cap 57 (“the EO”) as it stood prior to the Employment (Amendment) Ordinance 2007. The particular provisions are the former ss 41 and 41C. In the determination of the issues in the appeal, it will also be necessary to clarify the decision of the Court in Lisbeth Enterprises Ltd v Mandy Luk (2006) 9 HKCFAR 131. Clarification of this decision is required, particularly in the light of the way the courts below (and other courts) have treated it.
2. The EO was amended in 2007 following the decision in Lisbeth. Although the statutory provisions relating to holiday pay and annual leave pay have been amended (the amended ss 41 and 41C do not fall to be considered in this appeal), the old provisions (which I shall simply refer to in the remainder of this judgment as ss 41 and 41C) continue to apply to contracts of employment made prior to the 2007 amendments. In the appellant’s application for leave to appeal, it was contended that over 4,000 other employees of the appellant were employed on the same or similar terms as the respondents and therefore await the result of the present appeal. It is said that the judgment of this Court will be determinative of those cases. It was for these reasons that the Appeal Committee granted leave on 23 February 2012 on three questions which reflected (as the appellant contends) the errors made by the Court of Appeal.
3. These three questions were as follows:-
“1. The Court of Appeal erred in holding:
(1) that Line Duty Allowance (“LDA”), Ground Duty Allowance (“GDA”) and Duty Free Sales Commission (“DFSC”) should be included in the calculation of statutory holiday pay and statutory annual leave pay (under, respectively, s.41 and s.41C of the Ordinance[1]);
(2) that, where the contracts of employment provide for periods of annual leave in excess of those prescribed by the Ordinance, in the absence of provision to the contrary, the parties must be taken to have intended that the statutory rate of annual leave pay (under s.41C of the Ordinance) would apply to the excess contractual annual leave period;
(3) that Jenny Ho had worked overtime and in remitting to the Labour Tribunal the question of whether she earned overtime pay in such sum as to fall within the second limb of the exception to s.2(2) of the Ordinance, for the purpose of computing her statutory holiday pay under s.41 of the Ordinance.
4. As can be seen, the questions arise from the decision of the Court of Appeal in their judgment dated 17 March 2011, on appeal from the decision of Stone J dated 6 November 2009 (who had in turn heard an appeal from the decision of the Labour Tribunal dated 12 January 2009).
5. Before dealing with the relevant statutory provisions and facts in the present case, I can quickly dispose of the third question relating to overtime. It would appear that the discussion on the aspect of overtime and the order to remit to the Labour Tribunal came from the Court of Appeal entirely of its own initiative. The appellant has appealed that order and the respondents now support the appellant’s position (they had adopted a neutral position in their written Case). No question of principle arising, I am content to allow the appeal on this aspect and set aside the order to remit the question of overtime to the Labour Tribunal.
B THE RELEVANT STATUTORY PROVISIONS
6. As stated above, we are concerned in the present appeal with the EO prior to the 2007 amendments, and specifically with those provisions relating to holiday pay and annual leave pay. The references made in this judgment to provisions in the EO refer of course to the old EO. There are similarities in the present (post-2007 amendments) version, but, as I have said earlier, the current statutory provisions do not fall to be considered in this appeal.
7. Part VIII of the EO is headed “HOLIDAYS WITH PAY”. Section 39 sets out the 12 statutory holidays (such the Lunar New Year Holidays etc) to which every employee is entitled. Section 40 provides that an employee who has been employed under a continuous contract of three months prior to a statutory holiday, will be entitled to holiday pay for that holiday. The rate of holiday pay is dealt with s 41, this being one of the two provisions engaged in the present appeal:-
41 Rate of holiday pay
“(1) Holiday pay shall be a sum equivalent to the wages which the employee would have earned on a full working day. (Amended 41 of 1990 s.18)
(2) Notwithstanding subsection (1), where an employee is employed 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 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 holidays.”
8. Part VIIIA of the EO deals with “ANNUAL LEAVE WITH PAY”. Annual leave is the leave which an employee is entitled beyond the statutory holidays, rest days and maternity leave. Section 41AA provides that, just as in the case of statutory holidays under s 41, an employee (who has been employed under a continuous contract of not less than 12 months) should be entitled to be paid for each day of annual leave. A formula is provide in s 41AA setting out the number of days of paid leave to which an employee is entitled, ranging between seven and fourteen days, dependent on the number of years of service. I would observe here that the EO sets out the minimum period of annual leave pay to which an employee is entitled. Individual employers may (and often do) allow more annual leave, as the appellant has done in relation to the respondent, but employers cannot go below the statutory minimum.
9. Section 41C provides for the rate of annual leave pay (this is the other provision directly engaged in the present appeal):-
41C Rate of annual leave pay
“(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.”
10. Sections 41 and 41C are virtually identical in wording. Both sections will have to be analyzed in due course. For the time being, I draw attention only to the definition of “wages”. This is to be found in the definition section of the Ordinance: s 2. Section 2(1) defines wages in the following way:-
“(1) In this Ordinance, unless the context otherwise requires -
….
“wages” (工資) subject to subsections (2) and (3), means 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-
(a) the value of any accommodation, education, food, fuel, light, medical care or water provided by the employer;
(b) any contribution paid by the employer on his own account to any retirement scheme;
(c) any commission which is of a gratuitous nature or which is payable only at the discretion of the employer; (Replaced 74 of 1997 s.3)
(ca) any attendance allowance or attendance bonus which is of a gratuitous nature or which is payable only at the discretion of the employer;
(cb) any travelling allowance which is of a non-recurrent nature;
(cc) any travelling allowance payable to the employee to defray actual expenses incurred by him by the nature of his employment
(cd) the value of any travelling concession;
(d) any sum payable to the employee to defray special expenses incurred by him by the nature of his employment;
(da) any end of year payment, or any proportion thereof, which is payable under PartIIA;
(e) any gratuity payable on completion or termination of a contract of employment; or
(f) any annual bonus, or any proportion thereof, which is of a gratuitous nature or which is payable only at the discretion of the employer;”
It is a definition in very wide terms, restricted only by the situations enumerated in sub-paras (a) to (f) thereof.
11. For the purposes of ss 41 and 41C, wages should be given their statutory meaning. In Lisbeth, this Court also considered these same provisions. Nothing in the judgment of the Court in that case suggests that the reference to wages in these sections would in any way exclude the statutory definition. I shall return to that decision presently. I must first deal with the facts of the present case germane to the two questions and the relevant statutory provisions.
C THE RELEVANT FACTS RELATING TO THE QUESTIONS
12. The appellant is Cathay Pacific Airways Ltd (“Cathay”). The three respondents were at all material times employees of Cathay. Where convenient to do so in this judgment, I shall refer to them as Ms Kwan (Kwan Siu Wa Becky), Ms Wu (Wu Yee Mei Vera) and Ms Ho (Ho Kit Man Jenny). The respondents were apparently chosen as being representatives of particular classes of Cathay employees. Ms Kwan joined Cathay in 1975 first as a Junior Flight Hostess. She was promoted to Chief Purser on 1987 (later this title was renamed Inflight Services Manager). Ms Wu joined in 1995 as a Cabin Attendant and was promoted to the position of Purser in 2000. Ms Ho joined in 2005 as a Flight Attendant of the Inflight Services Department.
13. Each of the respondents is paid a basic salary under her contract with Cathay. The terms of the individual contracts for the respondents vary but have this feature in common: apart from the basic salary, provision is made for the payment of various allowances, bonuses and benefits.
14. The first question on which leave to appeal was given relates to Line Duty Allowance (“LDA”), Ground Duty Allowance (“GDA”) and Duty Free Sales Commission (“DFSC”). These allowances and commission are contractual. The appellant’s written Case describes them in the following way:-
“24. LDA is essentially an allowance paid to cabin attendants for time spent while on flying duties. Time begins to run when the cabin crew reports for flying duty and finishes when the engine is turned off at the end of the final sector flown. LDA varies based on the flight that the cabin crew is rostered to operate and the length of time spent on the flight. LDA is calculated down to the minute. No two flights produce the same amount of LDA.
25. GDA is essentially an allowance paid to cabin attendants for 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 until the time when the aircraft commences to move under its own power) and time spent on the ground immediately after landing. GDA is also calculated down to the minute.
26. DFSC is a commission paid to the cabin attendant based on the inflight duty free sales she has achieved. DFSC is earned at a rate of 3.5% of each sale made. The commission is paid at the end of the month following the sale. The commission is discounted by any late payment of bar cash, discrepancies, lost credit card payments etc. There is also a system of incentives in the form of awards, an award being given to the top team with the best inflight sales performance and individuals receiving awards for top performance. The awards are earned on a quarterly basis and made or paid 3 months after the end of each quarter.”
15. LDA is relevant only to Ms Kwan and Ms Wu. GDA and DFSC apply only to Ms Ho.
16. Under the first question, a consideration of LDA, GDA and DFSC is relevant to the calculation of both statutory holiday pay (under s 41) and statutory annual leave pay (under s 41C). Can they be taken into account? The appellant says no, the respondents contend that they should be taken into account in the computation of statutory holiday pay and statutory annual leave pay.
17. In relation to the second question, the particular feature common to all three respondents is that under their contracts of employment with the appellant, each respondent was entitled to more annual leave days than the statutory minimum. Ms Kwan and Ms Wu were entitled to five weeks’ paid annual leave, Ms Ho to three weeks.