HUI SING PAN v. ROSE KNITTING (ASIA) LIMITED DCEC 178/2002

S’s words:-
Whether the year-end payment is to be counted for the assessment is always the issue that we have to decide. Not only the Employment Ordinance alone but the actual agreement of the parties have to be considered.
Besides, in the present case, the label of such year-end payment just like “double pay” on a pro rata basis in this case do have supported the reliance of Section 11AA(1) that such payment is not payable only at the discretion of the employer.
Thus, if an employer does not want an employee to suggest any bonus or payment to be regarded as of gratuitous nature, the words like discretionary bonus or an express term saying the same is of a gratuitous or discretionary nature is required.
It is highly probable that not only Labour Tribunal but also the Employees’ Compensation jurisdiction of the District Court and the common law claims would come to the same conclusion.

--- quote from the judgment ---

Date of handing down judgment: 9 July 2007

The Applicant contended that the year-end payment (i.e., the 13th month’s salary) should be taken into account in computing his pre-accident monthly income for the purpose of the present assessment. The Respondent objected, contending that such payment was and could only be gratuitous in nature.

Both parties referred to Part IIA of the Employment Ordinance, Cap.57 which governs the liability of an employer to make the year-end payment. Section 11B(1) reads as follows:

“Subject to any agreement to the contrary and to subsection (2) [which is not relevant to the present case], this Part shall apply to an employee employed under a continuous contract if an end of year payment is payable by the employer to that employee by virtue of a term or condition (whether written or oral, express or implied) of the contract of employment.”

If the end of year of payment is contractually payable as aforesaid, the presumption under section 11AA(1) applies. It reads as follows:

“It shall be presumed that an annual payment or annual bonus is not of a gratuitous nature and is not payable only at the discretion of the employer unless there is a written term or condition in the contract of employment to the contrary.”

Parties’ argument therefore focused on whether it was agreed (expressly or impliedly) that there would be the end of year payment.

Upon his dismissal, the pro rata year-end payment was documented in the Respondent’s letter to the Applicant dated 21 June 2000. It contained the “layoff payment breakdown” including this amount labelled as “double pay pro-rata”.

Obviously the letter was drafted in a meticulous manner with a view to bearing the intended legal effect for the benefit of the Respondent. I can hardly accept that in the same document, the Respondent for some reason would be so care free to label the payment as pro rata year-end payment if it was never intended as such. Further, if this sum were only meant to be gratuitous, the Respondent would not have had to compute the amount as the “double pay” on a pro rata basis.

I find that the Respondent always understood its contractual obligation to make the end of year payment to the Applicant. The presumption under section 11AA of Cap.57 applies so that the Applicant would have been entitled to such payment had the employment not terminated.