Facts

In the case of Voahanginiaina Aimee Chantal v Leung Man Kai (HCLA27/2016), the Defendant (“D”) was an ordinary worker at the time of the trial, and the Claimant (“C”) was a domestic helper from Madagascar, employed by D and his wife to care for their daughter.

In January 2016, C had lodged a claim in the Labour Tribunal against D for HK$37,781.17 being, wages in lieu of notice, arrears of wages, annual leave pay, air ticket, food and travelling allowance for returning home, and underpayment of wages of HK$24,640.

C succeeded in her claims in respect of the annual leave pay, air ticket and underpayment of wages, totalling HK$30,356.39 along with interests and costs (“Award”). The present case is an appeal from D against the part of the Award in relation to the HK$24,640 sum being the alleged underpayment of wages.

The wages amounting to HK$24,640 were paid to Toyo Finance and Credit Limited (“Toyo Finance”) to discharge a loan (the “Loan”). There was a dispute of fact with regards to whether C actually entered into a loan agreement with Toyo Finance. D appealed on grounds of error in finding that:

(i) The sum of $24,640 amounted to unlawful deduction of wages (“Unlawful Deduction Ground”); and

(ii) Failing to recognise the legal significance behind the fact that repayment of the Loan was done upon C’s request, hence equating to direct payment to C (“Failing to Investigate Ground”).

Was There a Deduction At All?

D argued that there was no deduction to C’s wages, as C paid full value of wages, albeit indirectly – D did not retain the wages, instead paid it to Toyo Finance.

Section 26 of the Employment Ordinance (“EO”) provides that with the consent of the employee, wages may be paid to his duly appointed agent.

It was the judge’s findings that C had not consented and/or appointed Toyo Finance as her agent to receive the sum of HK$24,640, hence in this regard, there was a deduction made.

Unlawful Deduction of Wages

Section 32 of the EO provides that no deductions shall be made by an employer from the wages or any sum due to the employee other than in accordance with the Ordinance.

There are exceptions to section 32 which permit deductions of an employee’s wages upon the employee’s request. As for deductions that are not authorised under those exceptions, an employer may seek the approval of the Commissioner under section 32(2)(i) which is a catch-all provision.

The judge was of the view that deductions made from C’s wages to repay the Loan fell outside the authorised exceptions under section 32, and D did not rely on the catch-all provision of 32(2)(i) to seek the Commissioner’s approval to make such deductions – hence such deductions were not lawful under the EO.

Failure to Investigate

D also argued that the Tribunal Officer had failed to acknowledge the documentation that C had signed, indicating her request to enter into the loan agreement with Toyo Finance (the “Loan Agreement”).

The Judge accepted that the Tribunal Officer had omitted the evidence of the documentation in his reasoning. However, the Judge found that the documents were undated and inconsistent with each other in terms of the purpose of the Loan. Further, there was no evidence that the sum of the Loan was ever paid to C.

The Judge was of the view that even if there was failure on the part of the Tribunal Officer to investigate and make proper enquiries, it had been concluded that there was an unlawful deduction of HK$24,640, thus there was no need to further inquire into the existence of or C’s consent to the Loan and respective deductions.

Takeaway

This case has clarified the position of the EO in regard to protection of employees’ wages, especially the operation of Section 32 of the EO and the permissible circumstances for deduction of wages. Specifically, this case has confirmed that any deductions that fall outside the scope of permitted deductions must seek the approval of the Commissioner, otherwise they will be deemed unlawful.

Employers should be particularly cautious when deducting wages of employee’s for any reason, and should always ensure that they obtain the employee’s informed consent beforehand or any of the permissible exceptions in Section 32 of EO would be applicable. Otherwise, a claim for unlawful deductions of wages could be triggered as a result.