29 May 2012
Whether a worker is an employee or an independent contractor is a debate that features in many employment cases in Hong Kong.
The modern approach is for the Court to examine all the features of the parties' relationship against a list of factors and decide whether, as a matter of overall impression, the relationship is one of employment. However, the answer to this question can sometimes be elusive.
This is demonstrated by a recent High Court case where the Court found a pool of workmen who shared a contract sum for completing the required tasks to be employees instead of independent contractors.
SkyTech Construction Limited v. Mr. Liu Sau Wai (2012)
In this case, a sub-contractor contracted with a pool of workmen to undertake certain renovation work to a residential estate. Under this arrangement, the payment to the group of workmen was made by one cheque and the total sum was determined by the work they did as a group. The harder they worked, the more they were paid. The payment was not split amongst the workmen based on each person's contribution but was apportioned in equal share. There was no attendance record, and the workmen were not obliged to turn up for work everyday.
The issues in the case was whether there existed an employer and employee relationship between the workmen and the sub-contractor.
The case was initially heard in the Labour Tribunal. The Labour Tribunal found that the workmen were employees as opposed to independent contractors. The sub-contractor then appealed, and the appeal was heard in the High Court.
The workmen were found by the High Court to be employees.
The High Court Judge opined that the collective appointment of a group of workmen was an employment arrangement. The workmen, like casual employees, were paid by the work they completed. The pool arrangement was merely designed for the sub-contractor’s administrative convenience, given the workmen were paid collectively and not individually. The fact that the workmen were at liberty to abstain from working was not a strong enough feature that turned the workmen into independent contractors, because in the Judge's view, employees could also take leave from time to time.
Accordingly, the appeal by the sub-contractor was dismissed.
As demonstrated by this case, the overall impression of whether an employer-employee relationship exists can be elusive as well as subjective. The dividing line is blurred. Arrangements that are designed to save costs and give the workers the appearance of independent contracts are nowadays more prone to being attacked as sham arrangements. Such cost saving measures may not necessarily end up saving any costs at all!
For inquiries related to this Legal Update, please contact Duncan Abate, Hong Tran, Anita Lam or your usual contacts with our firm.