HKSAR v. Weisheng Transportation Limited (Court of First Instance)

In brief:

Weisheng Transportation Limited (“Appellant”) was prosecuted at the Magistrate’s Court on 14 charges which included for failure to ensure an employee (Mr Shek) became a member of a registered MPF scheme and for failing to make MPF contributions. The Appellant pleaded not guilty to all charges but was convicted after a trial and its appeal was dismissed by the Court of First Instance.

The Appellant alleged that Mr Shek was not an employee and relied upon the fact that it had contracted with a company called Traffic Logistics to undertake the work. It was held that the contracts between the Appellant and Traffic Logistics were false agreements whose purpose was to disguise the actual employer-employee relationship. The Appellant had also argued that it was entitled to rely on Mr Shek’s deceiving behaviour as a “reasonable excuse” under the Mandatory Provident Fund Schemes Ordinance and the Mandatory Provident Fund Schemes Authority. However this was rejected on the basis that the Appellant was found to have turned a blind eye on issues of lawfulness and legitimacy and was not entitled to rely on its own unreasonable behaviour as a reasonable excuse to defend itself.

Take away points:

This case demonstrates the level of scrutiny that employers are expected to apply to contractor arrangements. The Appellant was cross examined on their knowledge of Traffic Logistics’ corporate structure, financial position and mode of operation and was criticized for failing to request copies of relevant meeting minutes and resolutions in relation to the contract.

It is evident that all the questions that an employer would face at court should be put to the contractor prior to engaging their services in order to avoid criminal liability in relation to MPF obligations. Employers should also be aware that independent contractors challenging their employment status may bring claims for unreasonable termination and for failure to pay other statutory entitlements including severance payments.