LBTC 2828/2008
 IN THE LABOUR TRIBUNAL OF THEHONG KONG SPECIAL ADMINISTRATIVE REGION CLAIM NO. LBTC 2827/2008, 2828/2008 & 2829/2008
__________________________________
 BETWEEN
LBTC 2827/2008LBTC 2828/2008LBTC 2829/2008
KWAN SIU WA BECKYWU YEE MEI VERAHO KIT MAN JENNY
CLAIMANTS


and



CATHAY PACIFIC AIRWAYS LIMITED
DEFENDANT


__________________________________
Coram: Pang Ka Kwong, Esq., Deputy Presiding Officer
Date of Trial: 22, 23 & 24 December 2008, 12 January 2009
Date of Decision on Liability: 12 January 2009
Date of Reasons for Decision on Liability: 12 January2009
__________________________________


Reasons for Decision on Liability

The trial proceedings use the Chinese language.  The parties agree that I can deliver this Reasons for Decision on Liability in the English language.

The parties reserve their respective positions on quantum.


Under paragraph (a) 1 of the Claimants’ respective Form 2, the Claimants stated that their grounds for the claims include :-

(a)	“Failure to grant statutory holidays”
(b)	“Failure to grant annual leaves”.  
The Claimants do not pursue the claims under paragraph (a) 1. 

Claim
The present claims are for "shortfalls" in the amounts of Statutory Holiday Pay ("SHP") and Annual Leave Pay ("ALP") that were paid by Cathay Pacific, such shortfalls allegedly arising from the non-inclusion of Line Duty Allowance ("LDA"), Outport Allowance ("OA"), Ground Duty Allowance ("GDA") and Duty Free Sales Commission ("DFSC") in calculating SHP and ALP.

In material, there is no dispute on the background facts of the cases.

Kwan Siu Wa Becky ("Becky")
By a letter of appointment dated 20th September 1975, Becky joined Cathay Pacific as a Junior Flight Hostess of the cabin crew.

She was promoted to the post of Chief Purser L1011 on 18th September 1987.  The post was retitled to Inflight Service Manager on 1st April 1999 and she remains in the same position to date.  She is required to perform duties in air and on ground as Cathay Pacific directs.  

Becky is a monthly paid cabin crew.  She receives a basic salary and title allowance of HK$23,883 and HK$11,501 respectively 
each month.  In addition, she receives various allowances such as LDA and OA.

By 2002 Becky has served Cathay Pacific for more than 10 years and therefore she is entitled to 5 weeks' paid annual leave and 94 Guaranteed Days Off ("GDOs") each year.

Additionally, Cathay Pacific provides Becky with the following days without work :-

(a)	Short Break - A period, at or away from base, of at least 34 hours and including 2 local nights during which a crew members are not required to perform any duty.
(b)	Stop over in outports - A period commencing after the scheduled arrival time of crew at an outport until 60 minutes before the scheduled departure time.  Crew members are not required to perform any duty during the stop over.
(c)	Standby duty also known as reserve duty (without being called out) – Crew members are scheduled for standby duty period specified on the front sheet of the roster.  The actual period scheduled varies from roster to roster.  Crew members will be notified within their standby period to operate a flight if it is required. 
(d)	Guaranteed Days Off ("GDOs") - these are essentially days without work and are further explained below.

Clause 16(C) of Conditions of Service 1986 (“COS 1986”) provides :-

"Guaranteed Days Off (GDO) - the annual GDO count for cabin crew on line flying will be based on two days off per week less the period of the cabin crew member's annual leave entitlement, i.e. those cabin crew entitled to three weeks annual leave per year will be entitled to 98 GDO's, those cabin crew with four weeks annual leave per year will be entitled to 96 GDO's and those cabin crew entitled to five weeks annual leave will be entitled to 94 GDO's.
Cabin crew required to operate on a 'G' day will be given the option of having another 'G' day at a mutually convenient time or payment at the rate of HK$40 per flying hour for the duration of the flight.  Such payment will be made only for the first 24 hours involved.  If payment is made then these GDOs will be deducted from the annual GDO entitlement.

Rules contained in Operations Manual.  Volume 1 Part 2 will apply."

Wu Yee Mei Vera ("Vera")
By a letter of appointment, dated 12th June 1995, Vera joined Cathay Pacific as a cabin attendant.  She was promoted to the post of purser on 1st December 2000 and remains in the same position to date.  She is required to perform duties in air and on ground as Cathay Pacific directs.

Vera is a monthly paid cabin crew.  She receives a basic salary and title allowance of HK$20,139 and HK$2,370 respectively each month.  In addition, she receives various allowances such as LDA and OA.


Between June 1995 and May 2000, Vera is entitled to 3 weeks' paid annual leave and 98 GDOs each year.  Between June 2000 and May 2005, she is entitled to 4 weeks' paid annual leave and 96 GDOs each year.  By June 2005, she is entitled to 5 weeks' paid annual leave and 94 GDOs each year.

Additionally, Cathay Pacific provides Vera with the following days without work :-
(a)	Short Break;
(b)	Stop over in outports;
(c)	Standby duty also known as reserve duty (without being called out);
(d)	Guaranteed Days Off ("GDOs") (see explanation below).

Clause 13(b) of Conditions of Service 1993 (“COS 1993”) provides :-
"Those Cabin Attendants entitled to three weeks annual leave per year will be entitled to 98 GDOs, those Cabin Attendants entitled to four weeks annual leave per year will be entitled to 96 GDOs and those Cabin Attendants entitled to five weeks annual leave will be entitled to 94 GDOs.  In any of the above case, the number of GDOs granted includes days off in lieu of the statutory holidays to which a Cabin Attendant would otherwise be entitled pursuant to the Employment Ordinance of Hong Kong"

The details of the Short Break, Stop over in outports, Standby duty also known as reserve duty and GDOs are the same in Vera's case as 
in Becky's case.

Ho Kit Man Jenny ("Jenny")
By a letter of appointment, dated 19th January 2005, Jenny joined Cathay Pacific as a Flight Attendant of the Inflight Services Department and she remains in the same position to date.  She is required to perform duties in air and on ground as Cathay Pacific directs.

Cathay Pacific pays Jenny Minimum Guaranteed Flying Pay ("MGFP") at the value of 70 Block Hours (see explanation below) i.e. 70 hours X HK$146.4 per hour = HK$10,248 per month.

The payment structure of Jenny is set out in Clause 3 of the COS 2003, Clause 3.1 of which provides :-
"Salary
Cabin Attendants will (subject to any provisions stated in the Letter as to probation or otherwise) receive a salary calculated on a monthly basis.

Salary will be calculated with reference to the Minimum Guaranteed Flying Pay.  If the total value of a Cabin Attendant's Block Hours and Credits in the relevant month exceeds the Minimum Guaranteed Flying Pay, he or she will receive a salary calculated by reference to the actual Block Hours flown and Credits earned in that month.

The applicable payment rate of a Block Hour, and the number of Block Hours assigned to Cabin Attendants, will be determined by the Company from time to time and notified to the Cabin Attendant.

For the purposes of these COS:

Block Hours are the hours between Departure Time and Arrival Time (or otherwise, as amended or determined by the Company in its absolute discretion from time to time).

Credits comprise :
(i)	Work Credits : these are credits received for absences from flight duties by reason of, for example, Reserve Duty or Special Duties; and

(ii)	Leave Credits : these are credits received for absences from flight duties by reason of leave.  Leave Credits may include payment additional to the paid time off that a Cabin Attendant receives as such leave pursuant to these COS.  (However, for the avoidance of doubt, the Company's use of a formula which records Leave Credits for the purpose of computation of salary does not create any entitlement to payment additional to the actual paid time off taken, except and to the extent determined by the Company from time to time.)

The type and value of credits available to Cabin Attendants will be determined by the Company and notified to the Cabin Attendants, from time to time, having regard to relevant Company Policies." 

Credits that Jenny may earn include :-
(i)	Work Credits : Jenny earns credits for absences from flight duties by reason of :-
Training - 4.65 credit hours for each calendar day of training;
Special duties - 4.65 credit hours for each 
calendar day of special duties;
Standby duties - 1 credit hour for each 3 hours of standby duties;
Duty travel - 0.5 credit hour for each 1 hour of duty travel.

(ii)	Leave credits : Jenny earns 3.25 credit hours for each day of leave taken.

The credit of 3.25 block hours for each day of leave is calculated by reference to the following mathematical formula.  Cathay Pacific assumes that a cabin crew works 85 credit hours (inclusive of Block Hours flown) and 25.5 ground duty hours (see explanation in paragraph 83 below) each month.  Ground duty hours worth 50% of Block Hours.  Therefore, total monthly credit hours for such crew member are :-
	85 + (25.5 ÷ 2) = 97.75
This figures is then averaged over 30 days to give a standard credit of 3.25 block hours for each day of leave taken.

In addition, Jenny receives various allowances such as OA, GDA and DFSC.  Jenny does not receive LDA, whilst Becky and Vera do not receive GDA or DFSC.

With less than 5 years’ service, she is entitled to 21 days' paid annual leave.

Additionally, Cathay Pacific provides Jenny with the following days without work :-

(a)	Short Break 
(b)	Stop over in outports 
(c)	Standby duty also known as reserve duty (without being called out) 
(d)	Days Without Duties - see explanation below.

The details of Short Break, Stop over in outports and Standby duty are the same in Jenny’s case as in Vera and Becky’s case.

Clause 2.4(3) of the Conditions of Service 2003 (“COS 2003”) provides :-
"Days Without Duties
The company will periodically issue rosters for Cabin Attendant Days Without Duties.  These rosters will apply for the stated time period.
The Days Without Duties will include any statutory holidays (or alternative holidays) and rest days, as the case may be, to which a Cabin Attendant is entitled under the Employment Ordinance.
For operational reasons, the Company reserves the right to require Cabin Attendants to work on any Day Without Duties subject to and in accordance with the provisions of the Employment Ordinance."

The Issues
Despite that Becky and Vera are employed under different COS, they are in the same position for the purpose of the present claims.  They contend that Cathay Pacific should include OA and LDA in the calculation of their ALP and SHP in accordance with the old ss.41 and 41C of the Employment Ordinance (“EO”).  Jenny contends that Cathay 
Pacific should include OA, GDA and DFSC in the calculation of her ALP and SHP in accordance with the old ss.41 and 41C of EO.  Jenny also contends that as she is hourly paid, Cathay Pacific has not paid her any SHP on her statutory holidays.  

Cathay Pacific denies that OA, LDA, GDA and DFSC are required to be included in the calculation of SHP and ALP.  Cathay Pacific also contends that Jenny is paid a monthly salary that is calculated with reference to the MGFP and, therefore, it has already paid Jenny’s SHP.  

The Employment Ordinance ("EO")
The following provisions are relevant to the present claims :
“2.   Interpretation
(1)	In this Ordinance, unless the context otherwise requires 
	"wages"(工資), subject to subsections (2) and (3), means all remuneration, earnings, allowances including traveling 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
(d) any sum payable to the employee to defray special expenses incurred by him by the nature of his employment;”


The old s.41 of the EO (prior to the changes introduced by the Employment (Amendment) Ordinance ("EAO") in July 2007) provides :
"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.

(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 holiday."

The old s.41C of EO (prior to the changes introduced by the EAO) provides :
"41C.	Rate of Annual LeavePay
(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.

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." 

Following the introduction of the EAO, the provisions for calculating SHP and ALP are :-
	(i)	SHP
"41.	Rate of Holiday pay
(1)	For the purposes of subsections (2), (3) and (4), "wages"(工資) includes any sum paid by an employer in respect of -
(a)	a day of maternity leave, a rest day, a sickness day, a holiday or a day of annual leave taken by the employee;
(b)	a day of leave taken by the employee with the agreement of his employer;
(c)	a normal working day on which the employee is not provided with work;
(d)	a day of absence from work of the employee due to temporary incapacity for which compensation is payable under section 10 of the Employees' Compensation Ordinance (Cap 282).


(2)	The daily rate of holiday pay is a sum equivalent to the daily average of the wages earned by the employee during -
(a)	a period of 12 months immediately before the holiday or first day of the holidays (as appropriate); or
(b)	if the employee has been employed by the employer concerned for a period shorter than 12 months immediately before the holiday or first day of the holidays (as appropriate), the shorter period.

(3)	In calculating the daily average of the wages earned by an employee during the period of 12 months or the shorter period -
(a)	any period therein for which the employee was not paid his wages or full wages by reason of -
(i)	any maternity leave, rest day, sickness day, holiday or annual leave taken by the employee;
(ii)	any leave taken by the employee with the agreement of his employer;
(iii)	his not being provided by his employer with work on any normal working day; or
(iv)	his absence from work due to temporary incapacity for which compensation is payable under section 10 of the Employees' Compensation Ordinance (Cap 282); and
(b)	any wages paid to him for the period 
referred to in paragraph (a).

(4)	For the avoidance of doubt, if the amount of the wages paid to an employee in respect of a day specified in subsection (1) is only a fraction of the amount earned by the employee on a normal working day, the wages and the day are to be disregarded in accordance with subsection (3).
….."

(ii)	ALP
"41C	Rate of annual leave pay
 (1)	For the purposes of subsections (2), (3) and (4), "wages"(工資) includes any sum paid by an employer in respect of -
(a)	a day of maternity leave, a rest day, a sickness day, a holiday or a day of annual leave taken by the employee;
(b)	a day of leave taken by the employee with the agreement of his employer;
(c)	a normal working day on which the employee is not provided with work;
(d)	a day of absence from work of the employee due to temporary incapacity for which compensation is payable under section 10 of the Employees' Compensation Ordinance (Cap 282).
(2)	The daily rate of holiday pay is a sum equivalent to the daily average of the wages earned by the employee during -
(a)	a period of 12 months immediately before the holiday or first day of the holidays (as appropriate); or

(b)	if the employee has been employed by the employer concerned for a period shorter than 12 months immediately before the holiday or first day of the holidays (as appropriate), the shorter period.

(3)	In calculating the daily average of the wages earned by an employee during the period of 12 months or the shorter period -
(a)	any period therein for which the employee was not paid his wages or full wages by reason of -
(i)	any maternity leave, rest day, sickness day, holiday or annual leave taken by the employee;
(ii)	any leave taken by the employee with the agreement of his employer;
(iii)	his not being provided by his employer with work on any normal working day; or
(iv)	his absence from work due to temporary incapacity for which compensation is payable under section 10 of the Employees' Compensation Ordinance (Cap 282); and
(b)	any wages paid to him for the period referred to in paragraph (a).

(4)	For the avoidance of doubt, if the amount of the wages paid to an employee in respect of a day specified in subsection (1) is only a fraction of the amount earned by the employee 
on a normal working day, the wages and the day are to be disregarded in accordance with subsection (3).
….."

The EAO
Since the EAO takes effect, Cathay Pacific has included LDA, GDA and DFSC in calculating SHP and ALP.  OA is not included in the calculation of SHP and ALP even after the introduction of the EAO.

Analysis and Findings
OA
Becky is employed under Conditions of Service 1986 ("COS 1986").

Clause 5(C) of COS 1986 provides :
Outport Allowance
"Overnight, meal and laundry allowances will be paid in accordance with the rates laid down in Operations Manual, Volume 1, Part 4."
	
OA is known as "Overnight allowances" in Operations Manual, Volume 1, Part 4, which provides (among other things) :
"Overnight allowances are reviewed bi-annually and on any change of hotel.  They are intended to cover reasonable out-of-pocket expenses.

Vera is employed under Conditions of Service 1993 ("COS 1993").  


Clause 15(ii) of the COS 1993 provides,
"Whilst Cabin Attendants are on duty in outports, they will receive overnight, meal and laundry allowances in accordance with the policy and rates laid down in Operations Manual, Vol. 1 Part 2 and 4 as amended from time to time and/or such other allowances or meal arrangements a published from time to time.

Jenny is employed under Conditions of Service 2003 ("COS 2003").  

Clause 1.3 of the COS 2003 provides :-
"In addition to the duties and obligations set out in these COS, the Cabin Attendant is also required to comply with Company Policies."

Clause 4.1 of the COS 2003 provides :-
"4.1		Outport facilities and reimbursement
Subject to Company Policies in force from time to time, a Cabin Attendant who is required to stay at an Outport between flying duties may be provided:

(i)	rest facilities and accommodation; and

(ii)	reimbursement of expenses for necessary meals and other expenditure incurred during the stay.
4.2	Other benefits
A Cabin Attendant may be entitled or eligible to receive other benefits offered or provided by the Company in accordance with the relevant Company Policies."


Clause 10 of the COS 2003 provides that "Company Policies" means :-
"the provisions of that document produced by the Company entitled the Operations Manual, as in force from time to time, and any other policies, schemes, rules and regulations relating to or arising from employment which may be issued, and amended or varied by the Company in its discretion from time to time.  Such Operations Manual, policies, schemes, rules and regulations are collectively referred to in these COS as "Company Policies", and references in these COS to Company Policies shall where the context permits be construed accordingly."

Clause 5.1 of the Operations Manual, Volume 6, Part 1 provides :-
"At each outport a schedule of meal and overnight allowance has been established.  These allowances are reviewed bi-annually in order to meet price changes.  The allowances are intended to meet reasonable costs.  Upon arrival at an outport where a stopover is scheduled crew members will be issued with the cash allowance by the hotel in accordance with the schedule, and based on a telex from Crew Control."

Although their entitlement is arising from difference contractual provisions, the details of OA are the same in all Claimants’ case.

OA is calculated by reference to a formula agreed with the Fight Attendants Union (“FAU”) that takes account of the actual cost of meals and services at the relevant crew hotel.  The amount of each item 
of OA is determined by reference to the costs in the designated crew hotel in each port.  In practice, reviews of the allowance are held twice a year and adjustments will also be made whenever there is a change in crew hotel.  The allowance may decrease as well as increase.  OA includes :-
meal allowance;
allowance in case of delayed and rescheduled flight;
incidental allowance ("IA");
laundry allowance;
duty travel expenses and management crew allowance;
taxi allowance; and
Indian port allowance.

Meal allowance will be paid if crew members are rostered on flight that requires a stopover at an outport that exceeds 2 hours and the stopover includes any part of the following period :
(i)	Breakfast - 0600 to 0859;
(ii)	Lunch - 1200 to 1359;
(iii)	Dinner - 1800 to 2159.

When the stopover time falls between 0600-0859 of the local time, crew members will be paid an amount in respect of breakfast.  The calculation is based on the hotel coffee shop prices for full American breakfast consists of fruit juice, two eggs with ham or bacon or sausage, toast with jam or marmalade and coffee, or the breakfast set rate covering all the above items, whichever the least expensive.

When the stopover time falls between 1200-1359 of the local time, the amount paid in respect of lunch will not be less than a set lunch 
menu consisting of soup of the day, a chicken dish, medium priced dessert and coffee in the medium priced Western style restaurant in the crew hotel.

When the stopover time falls between 1800-2159 of the local time, crew members will be paid an amount in respect of dinner.  The calculation of the amount in respect of dinner is based on the crew hotel medium priced Western style restaurant.  If no medium restaurant exists in the hotel then the prices will be based on the most expensive hotel coffee shop price or the lower end of the top class hotel restaurant.  The amount covers a medium priced steak, a medium priced dessert and coffee in a set menu.

Delayed flights allowance will be paid if crew members are in the airport and the flight delays for more than 30 minutes.  Operations Manual Volume 1, Part 4, Clause 2.1C(a) provides :
"Delayed Flights
If the crew are at the airport, refreshment chit or reimbursement up to a maximum of HK$90 will be authorized if the delay exceeds 30 minutes."

As to rescheduled flight allowance, if crew members are required to stay at the airport, meal vouchers will be given.  When crew members are required to stay at the hotel, meal allowance will be provided if the rescheduled stopover includes any part of the period stated in the above.

In respect of IA, Clause 2.1(D) of Operations Manual, Volume 1, Part 4 provides :

"D.	Incidental Allowance
An incidental allowance will be paid when a stopover exceeds 6 hours.  If a stopover exceeds 30 hours, a second incidental allowance will be paid.  A third incidental allowance will be paid if a stopover exceeds 54 hours and so on.  During a continuous duty period if a stopover exceeds 6 hours an incidental allowance will be paid."

Crew members on "shuttle" duties are deemed to be on continuous duty for the purpose of qualifying for overnight allowance.  An example of a "shuttle" duty is Paris-Manchester-Paris.  No allowance is paid for crew members operating shuttle duties from their homeports.

IA is calculated based on two times flag fall in an air-conditioned taxi to and from places for a beer or drinks, eight km or five miles total, two small local beers in the crew hotel bar or crew lounge and a tip for one small suitcase.

The provision of IA is similar to that of "Overnight Allowance" in Clause 5.5 of the Operations Manual, Volume Part 1.  There is no provision on IA in Operations Manual, Volume 6 Part 1.

Laundry allowance is paid on the 3rd night and consecutive nights away from home base.  The laundry allowance calculation is based on costs in the crew hotel to launder one shirt, one undershirt, one pair of underpants, one pair of socks and one handkerchief.

Taxi allowance will be paid if crew members incur cost on taxi journey between the airport and the hotel.  Taxi allowance will not 
normally be paid when Cathay Pacific or the hotel provides transport or where the hotel operates regular shuttle bus service between the airport and the hotel.

Indian port allowance is simply the overnight allowances where crew members fly into Indian ports.  The only difference is that the allowance for Indian ports is paid in Hong Kong instead of overseas.

The parties dispute where crew members are put in a hotel that is more expensive than the designated crew hotel in an ad hoc situation, if they want to receive OA that is calculated according to the higher of the different hotel tariffs, whether receipts are required to prove that extra out-of-pocket expenses are incurred.  The Claimants testified that in their personal experience, receipts were never required.  Ms Li Ka Lia Elizabeth, Cathay Pacific’s representative do not have personal experience in the matter.  I accept that the Claimants are honest witnesses and their testimony is reliable.  After having carefully considered all evidence, I accept that in such case, in practice, receipts will not be required.  

Usually, crew members are not required to demonstrate that they actually incur any expense while working away from home base.

The Claimants produced a 1994 Year and Review Agreement between Cathay Pacific and FAU the contents of which show that there were discussions to change the manner of calculation of OA from meals basis to time basis.  In this respect, however, no change has been agreed.  

The rate of LDA(A) is four times more than that of LDA(B) 
(See paragraph 86 below).  Becky explained that it is because crew members do not earn OA when they perform duties on day turnaround and split duty flights.  Becky said that the purpose of the division being to compensate crew members’ loss of OA, it shows that Cathay Pacific recognizes that OA is a source of income of crew members.

Cathay Pacific denies that OA is required to be included in calculating SHP and/or ALP on the following basis :
(a)	OA is not "wages" within the definition of "wages" in s.2 of the EO as it falls within the exception in subparagraph (d) of s.2 being a "sum payable to the employee" to defray special expenses incurred by him by the nature of his employment", and

(b)	further and in the alternative, if OA is "wages" under s.2 of the EO (which is denied):

(i)	OA is not "wages" which the Claimants "would have earned" for the purposes of ss.41(1) and 41C(1) of the EO, and

(ii)	OA is not "daily wages" for the purposes ss.41(2) and 41C(2) of the EO and/or it is impossible to calculate OA on a daily basis.

Firstly, I deal with the question on whether OA is wages within the definition of "wages" in s.2 of the EO.

The Claimants contend that OA is wages because it is described in the COS and the Operations Manual as an item of allowance 
and that it is represented by Cathay Pacific in its advertisements as forming part of a cabin crew's income.

The above considerations relate to how the parties label OA.  It is trite that the court does not only look at the label of a payment to determine its true nature.  The label is not conclusive.  It is not what the parties call it but what it is in substance that matters.  One has to look into the nature of the payment, the reasons therefore and the circumstances under which the payment is made.

In practice, the Claimants have never paid salary tax on income earned by OA.

OA (except for the allowance for Indian ports) is paid overseas.  Due to foreign exchange restrictions, allowance for Indian ports is paid when crew members report duty at the Hong Kong airport as they start the flying duty.  In my view, the above arrangement is congruent with the intention that OA is to cover out of pocket expenses.

OA is calculated by reference to a formula agreed with FAU, which takes account of the actual cost of meals and services at the relevant crew hotel in each port.  Periodical reviews of the allowance are held.  It appears that the amount of OA payable is a genuine pre-estimate of what the amount of the expense is likely to be.

I am aware that OA forms a substantial part of the Claimants' total income and it arises in the course of flying duties performed by them at outports.


After having carefully considered all evidence, I accept that the purpose of OA is to cover meals and miscellaneous out-of-pocket expenses relating to the Claimants' layover overseas between flying duties.

OA is however paid in the form of a fixed allowance instead of an actual reimbursement against receipts and, it is on this basis (and on the basis that the allowance is non accountable rather than an accountable reimbursement) that the Claimants seek to argue that OA constitutes wages within the meaning of s.2 of the EO and, does not fall within exception (d).

Cathay Pacific contends that the meaning of the words "to defray" means "to reimburse" or "to provide money to cover the costs or expenses".  Therefore, the exception in subparagraph (d) applies to a non-accountable allowance as well as to an allowance that is available on a reimbursement basis only.

Cathay Pacific lends support from the judgment of Deputy High Court Judge To in Star Express Limited v Cheng Tak and Ors, Labour Tribunal Appeal No. 86/1998, unreported, 11 May 1999.  In that case, it was held that on the basis that pre-determined and non-accountable fixed monthly payments made to drivers of tourist coaches to cover parking fees were genuine pre-estimates of what the amount of the parking fees was likely to be, such payments constituted the reimbursement of expense and did not constitute "wages".

The Claimants contend that the term "special expenses" in subparagraph (d) to the definition of "wages" in s.2 of the EO denotes something that is of a non-recurrent nature and should be an one-off 
expenditure pertinent to the nature of the employment.  I note that there is no requirement under the EO that such "special expenses" should be non-recurrent in nature.  Though some OA components such as meals and traveling expenses are daily expenses that are incurred whether the Claimants are inside or outside Hong Kong, the Claimants should accept that probably they will incur extra meal and traveling expenses when they stay overseas.  Plainly such extra expenses can be regarded as special expenses incurred by them by the nature of their employment.

During the trial hearing, the Claimants did not pursue the contention that as IA does not relate to out-of-pocket expenses, IA is a hardship allowance.  Anyway, such assertion is not borne out by the relevant provisions of the COS and the Operations Manual.  In my view, there is no suggestion that IA is in the nature of a hardship allowance as alleged by the Claimants.

After having carefully considered all evidence, I hold that OA is not "wages" within the definition of s.2 of the EO because it falls within the exception in subparagraph (d) being "a sum payable to the employee to defray special expenses incurred by him by the nature of his employment."

I do not need to deal with the second leg of Cathay Pacific's argument (See para. 64(b) above).

LDA and GDA
The details of LDA and GDA are as follows.  

Clause 5(A) of the COS 1993 provides :-

"A Line Duty Allowance will be paid at the rate published from time to time from each flying duty hour.  This allowance will be paid to all Cabin Attendants for each hour spent on flying duty.  It is not part of basic salary and will not be paid for any other duty or non-flying activities including sick leave travel.
The Line Duty Allowance will be calculated and paid on the basis of Flying Duty Period (FDP) as defined in the Operations Manual Vol. 6."

Clause 3.2 of the COS 2003 provides :-
"Allowances
A Cabin Attendant may also receive, in addition to salary, other payments or allowances, in respect of any special or other duties or circumstances arising from the Cabin Attendant's employment, in accordance with any Company Policies or as determined by the Company's discretion.
Such allowances may include … [Ground Duty Allowance]."

Clause 3.2(A) of the COS 2003 provides that GDA is payable for ground duty hours spent on ground, being :-
“(i)	the time between when Cabin Attendants are required by the Company to report for duty and the time from which the aircraft commences to move whether under its own power or not ("Departure Time");

(ii)	15 minutes after the time when the aircraft is finally stationary after landing ("Arrival Time") in the last single sector a cabin crew operates prior to the Rest Period ("the Final Sector") or (as the case may be), in situations of extended delay after the Arrival Time where a cabin crew is required to remain on an aircraft in excess of one hour after arrival in the Final Sector, the actual 
time the cabin crew is required to carry out duties in relation to the extended delay; and

(iii)	save in relation to extended delays which are covered by paragraph (ii) above, within a Flight Duty Period any time on ground which is not considered as Rest Period.”

Crew members' duty comprises of time on ground and time in air.  LDA is payable due to time in air (line duty hours).  GDA is payable due to time on ground preparing to fly (ground duty hours).  They both relate to duty time that is dependant on a number of different factors.  While LDA and GDA are different, I consider that I can deal with them at the same time for the purpose of the present claims.

In the Statement of Defence filed in these proceedings, Cathay Pacific said that as the COS provides that the Claimants “may” be entitled to OA, LDA, GDA and DFSC, there is a strong argument that the Claimants does not have any contractual entitlement to the same.  During the trial hearing, Cathay Pacific's representative accepted that LDA and GDA are part of the Claimants' wages, although she maintained that they are not wages that the Claimants would have earned for the purpose of the old ss.41(1) and 41C(1) of EO.  There is no provision in COS 1986 that provides for entitlement to LDA.  Clause 5(A) of COS 1986 provides that Becky was entitled to Inflight Meal Compensation Allowance. Clause 5(B) of COS 1986 provides that Becky was entitled to Ground Allowance.  Loosely speaking, since about 1988, the Inflight Meal Compensation Allowance and Ground Allowance have been replaced by LDA.  Clause 5(A) of COS 1993 provides Vera’s entitlement to LDA.  Details of when LDA is payable are set out in Clause 6 of the Operations Manual Volume 6, Part 1.  Clause 3.2 of COS 2003 provides Jenny’s entitlement to GDA.  
Details of when GDA is payable are set out in Clause 3.2(A) of COS 2003.  After having carefully considered all evidence, I consider that Jenny receives GDA pursuant to Company Policies rather than Cathay Pacific’s discretion.  On the whole, LDA and GDA are not of a gratuitous nature or payable only at Cathay Pacific's discretion.  LDA and GDA represent a component in the Claimants' wages for work that they have done.  In my view, it is indisputable that LDA and GDA are part of the Claimants' wages.  The real issue is whether they are wages that the Claimants would have earned for the purpose of the old s.s41(1) and 41C(1) of the EO.

LDA is paid on two scales that are LDA(A) and LDA(B).  LDA(A) is payable for day turnaround and split duty flights at HK$60.5 per hour.  LDA(B) is payable for all other flights at HK$15.125 per hour.  Such division is again a deal struck between Cathay Pacific and FAU.    

Becky and Vera receive LDA on the total number of line duty hours that they operate in an aircraft.  LDA is calculated based on the total number of line duty hours that starts when a cabin crew reports duty and finishes on blocks or engines off on the final sector.  The duty hours start when the cabin crew reports duty and finishes 30 minutes after on blocks or engines off on final sector. The cabin crew will have a 30 minutes debriefing after the engines are off.  Therefore, the line duty hours are 30 minutes less than the duty hours.    LDA varies based on the flight that the cabin crew is rostered to operate and the length of time spent on a flight.

LDA is calculated down to the minute.  No two flights produce the same amount of LDA.  There are various factors that affect 
the number of the line duty hours of a flight and therefore LDA a cabin crew earns.  These factors include weather, wind speed, location of the gate, delay or cancellation of flights etc.

When a flight is cancelled due to adverse weather, the cabin crew will not earn any LDA even if she is rostered on a flight on that day.  If the flight is delayed because of some technical problems, the line duty hours will be longer and the cabin crew will earn more LDA.

The rate of GDA is HK$73.2 per hour.

Jenny receives GDA on the total number of ground duty hours. Very rarely would two flights depart at the same time.  Again, factors such as weather, delay or cancellation of flights etc affect the Departure Time of a flight and therefore the GDA a cabin crew earns.

If a cabin crew reports for duty and the flight is subsequently cancelled due to adverse weather, the cabin crew will earn GDA for the period between the time she reports duty and the time Cathay Pacific announces that the flight is cancelled.  The ground duty hours could be longer or shorter than the period between the time required to report duty and the scheduled departure time.  If the flight is cancelled before the time required to for report duty, the cabin crew will not receive any GDA.  If the flight is delayed because of, say, some technical problems, the ground duty hours will be longer and the cabin crew will receive more GDA.  Some flights depart earlier than others. There is no certainty on the number of ground duty hours.

A cabin crew will not earn any LDA or GDA if she reports 
sick on a day that she is rostered with flying duties.  Crew members may swap duties among themselves and Cathay Pacific has the right to alter, vary or substitute the roster issued to a crew, as it considers appropriate to meet its operational requirements.

Cathay Pacific pays LDA and GDA monthly at the end of the following month.

Cathay Pacific contends that LDA and GDA are not "wages" that the Claimants "would have earned", rather it is something that the Claimants "might have earned" because there is no certainty on the amount of LDA or GDA that the Claimants will earn each month; that both LDA and GDA are paid only if a cabin crew has performed flying duties and that the Claimants are not always assigned with flying duties.

After having carefully considered all evidence, I accept that LDA and GDA should not be regarded as wages that would have earned for the purpose of ss.41(1) and 41C(1) of the old EO because there is no workable mode of calculation for working out the amount of LDA and GDA that the Claimants would have earned during the leave period.

I now turn to the question on whether LDA and GDA should be included in the calculation of the ALP and SHP in accordance with the old ss.41(2) and 41C(2) of the EO.  In Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd., CACV 394/2007, unreported, 9 May 2008, the Court of Appeal upheld the decision of the High Court that tips received by the Plaintiff (Respondent), a travel escort, should be included in the calculation of ALP and SHP.  In the paragraph (1) of the Judgment, Hon. Rogers VP held,

"In that judgment (Lisbeth Enterprises Ltd. v. Mandy Luk (2006) 9 HKFAR 131) the Court of Final Appeal came to the conclusion that the provisions in the Employment Ordinance, Cap. 57 relating to commission were unworkable where the commission was calculated at rates that varied on a monthly basis.  That is not the situation in this case, which relates to tips which are based on a daily rate.  In the second place it is quite clear that the legislature intended that tips should be taken into account in calculating wages.  That is the clear intention emerging from the Ordinance itself.  I am fortified in that conclusion because in passing the Employment (Amendment) Ordinance 2007, and in particular sections 10-15, the legislature has removed any difficulty there might be in making the relevant calculations.  In the absence of the new provisions, had there some supposed difficulty in the method of calculation, it would have been the function of this court to give effect to the manifest intention of the legislature that tips should be taken into account in the calculation."

In the following paragraphs, Hon. Le Pichon JA held,
"20.	Prima facie, tips received from tour participants would fall squarely within the statutory definition of "wages".  The real question is whether a workable mode of calculation exists for working out the net tips and whether it can be said to accrue daily.

21.	As already noted, the discretionary nature of tips is not a bar (as distinct from the case of commissions) to their forming part of an employee's wages.  Further any discretion in the payment of a tip would be that of the tour participant and not employer i.e. the tour operator.  While 
the amount of tips received per month may vary, depending on a number of factors including the number of days spent escorting tours, the type of tour, the number of persons joining the tours etc., in the present case, these factors do not pose any particular difficulty in the way of calculating daily wages.  Not only is the rate of recommended tips made on a per person per day basis, the tips the tour guide/escort had to defray in the foreign country are also expressed in a similar fashion.  Even if the tour guide does not receive his tips until the end of the tour, given that the duration of the tour is a fixed number of days, the net tips per day can be said to "accrue" on a daily basis and are readily calculable on the same basis."

  Notably, in Lam Pik Shan v. Hong Kong Wing On travel Services Ltd, the travel escort, like Becky and Vera, received a monthly salary.  In Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd, the travel escort was paid tips that were based on a daily rate.  In the present case, LDA and GDA are not calculated at daily rate.  It seems to me that for the old ss.41(2) and 41C(2) of EO to apply, however, it is not necessary that the wages shall be calculated at daily rate.  The old ss.41(2) and 41C(2) of EO apply where an employee is employed on piece rates or where the daily wages of an employee vary from day to day.  I hold that LDA is part of Becky and Vera's wages and GDA is part of Jenny's wages.  In my view, inasmuch as an employee's wages are calculable daily, the old ss.41(2) and 41C(2) of EO may apply.  As Hon Le Pichon JA held, "The real question is whether a workable mode of calculation exists for working out … and whether it can be said to accrue daily".  LDA and GDA are calculated by minutes.  There should be no difficulty in calculating the LDA and GDA already earned by the Claimants on any 
given day.  Therefore, even if the Claimants do not receive LDA and GDA until the end of the next month, given that LDA and GDA is calculable daily and therefore can be said to accrue daily, in my view, they can be said to be daily wages that vary from day to day.

In Wong Yin Fong & Others v. ISS Hong Kong Services Ltd [2005] 2 HKLRD 648, Labour Tribunal Appeal 56 of 2003, 17-19 May and 28 June 2005, Court of First Instance, J Lam J held,
"99.	Although there are differences between the statutory scheme for rest days and that for annual leave, I think it is equally plain from the statutory scheme as analyzed above that the protection conferred under Pt. VIIIA by way of annual leave is to protect employees from the evils of continuously working without proper opportunity to rest.  The Legislature obviously considered that it is important that an employer (p.679) should give an employee proper rest by way of annual leave.  This explains the mandatory nature of annual leave, see the observations of A Cheung J in para. 33 of his judgment in Laing & Others v. Lisbeth Enterprises Ltd [2004] 3 HKC 548.  Given its paternalistic nature, the statutory scheme strives to achieve through s.41C that an employee will not suffer any accompanying economic loss for not working during the leave period."

The above-mentioned Judgment was delivered before Lisbeth Enterprises Ltd v Mandy Luk [2006] 9 HKFAR 131.  It is worthy of noting that when the case went further to the Court of Appeal, Wong Yin Fong & Others v. ISS Hong Kong Services Ltd [2008] 1 HKLRD 63, 28 November 2007, Court of Appeal, Hon Cheung JA said,
"52.	Wong Ping Kong and Lam J's decision in the first 
instance on section 41C were referred to by the Court of Final Appeal in Lisbeth Enterprises Ltd v. Mandy Luk [2006] 9 HKCFAR 132.  In my view the Court of Final Appeal not only has not disapproved of these two cases but has actually approved them."

Taking that the legislative intention is to achieve through s.41C that employees will not suffer any accompanying economic loss for not working during the leave period, given that s.41 is parallel to s.41C at this end, I am satisfied that Cathay Pacific should include LDA and GDA in the calculation of the Claimants’ ALP and SHP by using the following formulas, in accordance with the old ss.41(2) and 41C(2) of EO :

ALP - (Total LDA/GDA earned during the month 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) ÷ (Number of working days during the same period)

SHP – (Total LDA/GDA earned during the month immediately preceding or expiring on the holiday or first day of the holiday) ÷ (Number of working days during the same period)

I reckon that probably the parties will propound different modes of calculation for working out the number of working days for the purpose of the formulas.  Becky and Vera are monthly salaried while Jenny is hourly paid.  Does it mean that the whole month immediately preceding or expiring on the holiday or first day of the leave (i.e. 30 or 31 days) should 
be counted as working days of Becky and Vera?  Further or in the alternative, should only the days on which the Claimants are required to perform duties (in air and on ground) be counted as working days; should only the days on which Becky and Vera are required to perform duties in air (but not on ground) be counted as their working days, as LDA is payable due to time in air; should only the days on which Jenny is required to perform duties on ground (but not in air) be counted as her working days, as GDA is payable due to time on ground preparing to fly; should the days during which the Claimants are put on Standby duties be counted as working days; should the days during which the Claimants are put on Stop over in outports be counted as working days; and/or should the days during which Jenny earns Work credits and Leave credits be counted as her working days, for the purpose of the formulas?  The parties reserve their respective positions on these questions.  I shall leave them to be dealt with when the question of quantum arises.  In any case, once these questions are resolved, the parties will have no difficulty in working out the amount that Cathay Pacific is liable to pay in compensation to the Claimants.

DFSC
Cathay Pacific would assign hourly paid crew members to conduct inflight duty free sales.  Once an hourly paid crew is assigned, she has no choice but to perform the same as part of her duties. 

The details of Duty Free Sales Commission (“DFSC”) are set out in Cathay Pacific's Inflight Sales Commission Policy.  DFSC is separated into Individual Commission, Team Award, BC Star Award and ISM Star Award.  Individual cabin crew earns a flat rate of 3.5% of sales 
made by her.  The commission is paid at the end of the following month.  Team Award is given to the top team with the best inflight sales performance.  Crew members of the top team receive gifts as prizes.  BC Star Award is given to top performers.  ISM Star Award is given to the top Inflight Services Managers.

During the trial hearing, Cathay Pacific’s representative accepted that DFSC is part of Jenny's wages.  After having carefully considered all evidence, I am satisfied that DFSC is not of a gratuitous nature or payable only at Cathay's discretion.  I hold that DFSC represents a component in Jenny's wages for work that she has done and is part of her wages.

Cathay Pacific contends that DFSC is not "wages" that Jenny "would have earned", rather it is something that Jenny "might have earned" because :
(1)	Some, but not all, of the flights have inflight sales.  There is no certainty that Jenny will be rostered on a flight that has inflight sales;

(2)	Not all crew members are entitled as of right to earn DFSC.  The computer may assign a crew to be responsible for inflight sales and the Inflight Service Manager can always assign another crew to perform inflight sales;

(3)	The entitlement to DFSC depends on the flight Jenny is rostered on and whether or not she is assigned with the inflight sales duty.

After having carefully considered all evidence, I accept that 
DFSC should not be regarded as wages that would have earned for the purpose of the old ss.41(1) and 41C(1) of the EO because there is no workable mode of calculation for working out the amount of DFSC that Jenny would have earned during the leave period.

I now turn to the question on whether DFSC should be included in the calculation of the ALP and SHP in accordance with the old ss.41(2) and 41C(2) of the EO.  In my view, inasmuch as an employee’s wages are calculable daily, the old ss.41(2) and 41C(2) of the old EO may apply.  In Lisbeth Enterprises Ltd v Mandy Luk, the employee who worked in a health and beauty club was entitled not only to a monthly salary but also to a commission on sales made by her.  The contractual commission was calculated on a monthly basis, payable according to fluctuating monthly results on a sliding scale.  Jenny’s case is different from Lisbeth Enterprises Ltd v Mandy Luk in that Jenny receives DFSC on the flat rate of 3.5% of the sales made by her.  The upshot is that there would be no difficulty in calculating the amount of DFSC already made by Jenny on any given day (disregarding the Team Award gifts, BC Star Award and ISM Star Award), and therefore it can be said to accrue daily.  Even if the Claimants do not receive DFSC until the end of the next month, given that DFSC can be said to accrue daily, it is daily wages that vary from day to day.  Further or alternatively, apparently Jenny is employed on piece rate when she performs the duty free sales duty.  By reason of matters aforesaid, I hold that Cathay Pacific should include DFSC in the calculation of Jenny's ALP and SHP by using the following formulas, in accordance with the provisions of the old ss.41(2) and 41C(2) of the EO :

ALP - (Total DFSC earned during the month 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) ÷ (Number of working days during the same period)

SHP – (Total DFSC earned during the month immediately preceding or expiring on the holiday or first day of the holiday) ÷ (Number of working days during the same period)

Again, I shall deal with those questions regarding the mode of calculation for working out the relevant number of working days for the purpose of the formulas when the question of quantum arises.

Has Jenny received any SHP at all?
Clause 2.4(3) of the COS 2003 provides :-
"Days Without Duties
The Days Without Duties will include any statutory holidays (or alternative holidays) and rest days, as the case may be, to which a Cabin Attendant is entitled under the Employment Ordinance.

Clause 5.3 of the COS 2003 provides :-
	"Statutory Holidays and Rest Days
Statutory holidays and rest days are allocated to Cabin Attendants as Days Without Duties (please refer to paragraph 2.4(3) of these COS, above.)"

Cathay Pacific intimates that, in addition to the Days Without Duties, Cathay Pacific also uses Standby duties (Jenny earns 1 credit hour 
for each 3 hours of Standby duties) to discharge its obligation to provide Jenny with statutory holidays under the EO.  I do not agree.  It is clear from the above-mentioned contractual provisions that Cathay Pacific uses Days Without Duties to discharge its obligation to provide Jenny with statutory holidays under the EO.

Unlike to the other two Claimants who are monthly paid crew, Jenny's wages are calculated on the numbers of flying hours she is able to achieve on a monthly basis.  Her salary structure is not governed by the Master Pay Scale like the monthly paid crew members do.  She does not enjoy the benefit of automatic annual increment along the Master Pay Scale.

Generally, Jenny is rostered to not less than the value of 70 hours of flying duties each month.  If she wants to earn more, she may swap flights with colleagues to fly more, thus earning the extra flying hours which are all calculated on the basis of HK$146.4 per hour.  In practice, Jenny swapped flights with colleagues to fly less, thus receiving only the MGFP in many months.

Her wages are linked to performance of flying duties, Work Credits and Leave Credits.  Therefore, Jenny contends that Cathay Pacific has not paid her any SHP at all.

Cathay Pacific contends that according to Clause 3.1 of the COS 2003, Jenny receives a monthly salary that is, rather than a specified amount in her contract, calculated with reference to MGFP that is paid regardless of the work or duty she may or may not have undertaken or been assigned to her during the month; that MGFP is payable due to time on duty as well as time not on duty in the same way as a worker is paid a 
basic monthly salary but may also be entitled to monthly overtime if she works extra hours in that month.  

Clause 3.1 of the COS 2003 provides that Jenny will receive salaries calculated on a monthly basis.  Having salaries calculated on a monthly basis does not mean that she is monthly salaried.  Employees employed at piece rate or hourly rate may receive salaries calculated on a monthly basis.  In my view, the payment structure of Jenny plainly shows that she is an hourly paid employee.

Cathay Pacific pays Jenny MGFP at the value of 70 Block Hours, as it assumes that a cabin crew works 85 credit hours (inclusive of Block Hours flown) and 25.5 ground duty hours each month.  It demonstrates that the MGFP relates to crew members’ flying duties rather than the Days Without Duties.

For example, when an hourly paid cabin crew performs more than 70 flying hours in a month, she is paid by the actual flying hours plus any credits earned.  It means that she will not reap any benefit from the MGFP, notwithstanding that Cathay Pacific may well provide her with Days Without Duties in that month.  

An hourly paid cabin crew is not paid for those Days Without Duties that coincide with the statutory holidays.  In other words, in a month if there is a statutory holiday, she is still paid 70 flying hours plus the extra flying hours she has performed (if any) without any SHP.  In my view, the corollary is that she does not receive any SHP.

One can educe from Jenny’s salary structure that she does not 
receive any payment for the Days Without Duties.  In so far as Cathay Pacific uses Days Without Duties to discharge its obligation to provide Jenny with statutory holidays under the EO, Jenny does not receive any SHP.  

Ordinary Wages
Prior to the amendments introduced by the EAO, s.42 of the EO provides :-
"42	Ordinary wages instead of holiday pay, annual leave pay, maternity leave pay or sickness allowance
	Where, pursuant to the terms of his contract of employment or the terms of any other agreement or for any other reason, an employee is paid his ordinary wages in respect of any holidays, annual eave, maternity leave or sickness day, the employee shall not, in addition to such ordinary wages, be entitled to be paid holidays pay, annual leave pay, maternity leave pay or sickness allowance, as the case may be."

The EAO repealed s.42 of EO.

Cathay Pacific contends that the Claimants' monthly basic salary, together with other regular fixed monthly allowance, represents their "ordinary wages" for the purposes of s.42 of the EO.

Mr Justice Rogers VP held at paragraph 21 of Lam Pik Shan v. Hong Kong Wing On Travel Services Ltd,
"21.	As regards section 42 of the Ordinance, I see no 
basis for restricting the meaning of "ordinary wages" to the bare, almost notional, payment under clause 7 of the agreement.  In my view "ordinary wages" has no other meaning than "wages" as used in the Ordinance."

Such view was echoed by the Honorable Mr. Justice Cheung JA in Fong Mung Yan v. ISS Hong Kong Service Limited, at paragraph 49 where the learned Judge said,
"49.	In my view section 42 does not assist the Defendant.  This section merely prevents the worker from receiving a double benefit.  It provides no answer to the question whether wages include attendance bonus.  In my view there is no distinction between the term "wages" as defined by section 2(1) and ''ordinary wages' referred to in section 42."

I hold that s.42 of does not assist Cathay Pacific.

S.40 of the EO
In relation to the payment of SHP, s.40 of the EO provides :
"40.	Payment of holiday pay
Subject to section 12(11), an employee who has been employed by his employer under a continuous contract for a period of 3 months immediately preceding a statutory holiday shall, not later than the day on which the employee is next paid his wages after that holiday, be paid by his employer holiday pay at the rate specified in section 41, whether the employee takes a holiday on the statutory holiday or on an alternative or substituted holiday or a holiday 
under section 39(4)."

This section is applicable both prior to and after the introduction of the EAO.

Cathay Pacific contends that by virtue of the provisions of s.40, to the extent that the Claimants worked on a statutory holiday, the wages paid to them in respect of that statutory holiday (which she worked) constitute their full entitlement under the EO in respect of that statutory holiday.  In these circumstances, the Claimants will have received the amount they "would have earned" on the statutory holiday.

In effect, Cathay Pacific rigidly construes "that holiday" referred to in s.40 as the statutory holiday.  In my view, "that holiday" plainly means the holiday actually taken by the employee, whether the employee takes a holiday on the statutory holiday or on an alternative or substituted holiday or a holiday under s.39(4). Were Cathay Pacific's construction acceptable, an employer would have no obligation under the EO to pay SHP in respect of an alternative or substituted holiday.  That must be wrong.

Contractual Annual Leave Pay
Clause 16(A) of the COS 1986 provides :-
"Annual Leave – Cabin crew will be granted three weeks’ paid leave per year.  In the first year cabin crew do not qualify for annual leave until they have completed nine months’ service. After completing five years of service, cabin crew will be granted four weeks’ paid leave per year.  After completing ten years of service, cabin crew will be 
granted five weeks’ paid leave per year."

Clause 12(A) of the COS 1993 provides :-
"Annual Leave – Cabin Attendants will be granted three weeks’ paid leave per year.  In the first year Cabin Attendants do not qualify for annual leave until they have completed probation. After completing five years of service, Cabin Attendants will be granted four weeks’ paid leave per year.  After completing ten years of service, Cabin Attendants will be granted five weeks’ paid leave per year. 
Leave shall be taken in accordance with the leave roster system established by the Company.  The taking of leave will be subject to the exigencies of service as determined by the Company. "

Clause 5.1 of the COS 2003 provides :-
	"Annual Leave
The Company operates a common leave year from 1 January to 31 December.  Cabin Attendants are eligible to apply for and take annual leave in accordance with Company Policies.
Annual leave will be granted subject to the needs of the Company, determined in its discretion from time to time.
A Cabin Attendant is expected to take all annual leave within the current leave.  Annual leave cannot be carried forward without prior written approval of the Company.
Advance annual leave may be granted at the Company’s sole discretion.  If granted, the Cabin Attendant’s annual leave entitlement for the ensuing period will be adjusted accordingly.
If, upon leaving the employment of the Company, a Cabin Attendant has taken annual leave in excess of the Cabin Attendant’s pro-rata annual leave entitlement, calculated 
to cessation of employment, the final payment made to the Cabin Attendant will be adjusted accordingly."

The Company Policy provides Jenny’s AL entitlement as follows :-
"Cabin crew who join on or after 01 September 1996:
Flight Attendant or Flight Purser with less than 5 years of service as cabin crew, 21 days of leave entitlement
Flight Attendant or Flight Purser with more than 5 years of service as cabin crew, 24 days of leave entitlement
Senior Purser or Inflight Service Manager, 28 days of leave entitlement"

Section 2 of the EO provides that "annual leave" means the annual leave provided for in Part VIIIA and "annual leave pay" means the annual leave pay required by the EO to be paid in respect of a period of annual leave provided for in Part VIIIA in respect of a period of annual leave required to be paid under section 41D.

Therefore, Cathay Pacific contends that the provisions in the EO relation to annual leave and annual leave pay are applicable only to statutory annual leave (a maximum of 14 days); that the statutory provisions do not apply to leave granted by an employer in excess of the statutory annual leave and that leave granted in excess of the statutory requirement.  In other words, contractual annual leave, including the taking and the payment of such leave, is therefore governed solely by the terms of the relevant employment contract, which fall to be interpreted and construed in accordance with general contractual principles.

Cathay Pacific contends that on the basis of general 
contractual principles of construction and on the basis of plain common sense, the expression "paid leave" means leave of absence from work with the payment of basic salary and those allowances to which a cabin attendant is entitled by virtue of his or her position i.e. title and appointment allowances, but excluding allowances which arise by virtue of the actual performance of in flight or other specific duties, such as OA, LDA and GDA and which plainly do not arise at all during periods of leave.

I accept that the Claimants' contractual AL is governed by the terms of the employment contract.  The COS are drafted in details.  Upon reading the relevant provisions of the COS, I observe that they do not make any distinction between a cabin crew's statutory and contractual annual leave payment.  In practice, there is no way to tell when the Claimants take AL, whether they are on the statutory or contractual AL.  As a matter of construction of the employment contract, I take the starting point that the calculation of the ALP regarding all AL provided by the employment contract is equal.  

In Wong Yin Fong & others v. ISS Hong Kong Services Ltd, J Lam J held that "Given its paternalistic nature, the statutory scheme strives to achieve through s.41C that an employee will not suffer any accompanying economic loss for not working during the leave period".  In the present case, Cathay Pacific takes into account of the numbers of days of AL taken by Becky and Vera to calculate their Excess Flying Pay ("EFP") (See Clause 6 of COS 1986 and Clause 5 of COS 1993 for EFP’s meaning).  Jenny's situation is similar.  Cathay Pacific takes into account the number of hours flown as well as credits earned by reasons of leave (including AL) to calculate MGFP and Jenny's wages.  Jenny earns 
3.25 leave credits per day of AL.  Such arrangements suggest that the parties are also prepared to make provision for making up a cabin crew’s accompanying economic loss for not working during the leave period.  Conversely, Cathay Pacific contends that on the basis of plain common sense, allowances that arise by virtue of the actual performance of duties such as LDA and GDA should be excluded in calculating ALP and SHP.  Courts will imply terms into individual contracts on the ground of business efficacy but it is nothing to do with making things reasonable or fair.  All in all, I am not persuaded by Cathay Pacific's common sense approach.  After having carefully considered all evidence, I take the view that there is no contractual basis to calculate the ALP attributable to the statutory and contractual AL differently.  

Conclusion
I hold that Jenny is hourly paid.  Therefore, she is employed on daily wages that vary from day to day.  In accordance with the old s.41(2) of EO, her holiday pay shall be a sum equivalent to the average of the daily wages earned by her on each day on which she 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 holiday.  In my view, she does not receive any SHP.  In accordance with the old s.41C(2) of EO, her annual leave pay shall be calculated by reference to the average of the daily wages earned by her on each day on which she 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.  Account will be taken into ALP that were already paid by Cathay Pacific.  


In conclusion, I hold that Cathay Pacific should calculate and pay Becky and Vera shortfalls in the amounts of ALP and SHP in the manners as set out in the above paragraph 102 and should calculate and pay Jenny shortfalls in the amounts of ALP and SHP in the manners as set out in the above paragraphs 102, 108 and 140, but it is not required to include OA in the calculation of ALP and SHP.

The parties shall make arrangements with the case Tribunal Officer for the purpose of fixing a mutually convenient date for a mention hearing on the question of quantum.

Costs reserved.


	(K.K. PANG)
	Deputy Presiding Officer





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