In June 2017, the Court of First Instance (“CFI”) ruled on the unlawful deduction of wages by an employer in the case of Voahanginiaina Aimee Chantal v Leung Man Kai [2017] HKEC 1287. The CFI held that regardless of whether an employee has given his consent or not, an employer could not deduct wages of the employee to pay-off employee’s loan if such deduction is not authorised under section 32 of the Employment Ordinance (“EO”).

Facts

The claimant employee (“Claimant”) in the present case is a Madagascar national who applied to work as a domestic worker in Hong Kong through an employment agency in Madagascar called East Asia Agency (“East Asia”). East Asia and the defendant employer (“Defendant”) asked the Claimant to sign a number of documents in different languages which the Claimant could not understand. In particular, an authorisation was signed by the Claimant and bore her thumbprint. The authorisation permits the Defendant to repay her loan on her behalf to a finance company, Toyo Finance and Credit Limited (“Toyo Finance”). The loan was stated on various documentations to be incurred by the Claimant in Madagascar for the Claimant’s “personal requirements” and “placement, training and processing to Hong Kong”. A total amount of HK$24,640 was paid to Toyo Finance by the Defendant through deducting the Claimant’s salary.

The Claimant claimed she signed the documents because she was ordered to and she had never knowingly entered into any loan agreement or signed any debt statement. The Claimant lodged a claim with the Labour Tribunal against the Defendant for, among others, the underpayment of wages of HK$24,640.

What constitutes an unlawful deduction?

The CFI dealt with two main issues — (1) whether the payment to Toyo Finance to discharge the loan amounted to an unlawful deduction of wages (“First Issue”); and (2) the legal significance of the contractual documents relating to the loan (“Second Issue”).

The general position under section 32 of the EO is that “no deductions shall be made by an employer from the wages of his employee…”. However, there are certain exceptions; some of them include deduction in respect of meals supplied by employer at the request of the employee and deductions for damage to or loss of goods, etc. These exceptions are restrictive, which means that any deduction which does not fall within the statutory exception   is deemed to be unlawful. In cases where employer is requested by the employee in writing to make other deductions that are not explicitly authorised under section 32, the employer should seek the approval of the Commissioner for Labour (“Commissioner”) under section 32(2)(i) of the EO, which is a catch all provision.

With regard to the First Issue, the Defendant’s deduction of salary did not fall under any of the exceptions. As such, other than a written request from the Claimant, which is required, the Defendant should also have sought the approval of the Commissioner. The intent of the provision was to provide for consensual deductions to be further approved by the Commissioner.

In dealing with the Second Issue, the CFI accepted the Claimant’s evidence and version that she did not request the Defendant to issue cheques on her behalf to East Asia, or to Toyo Finance, as the Claimant had only signed the receipts on the instructions of her employer. However, the CFI emphasized that whether the contractual documents were genuine or not was immaterial, since the deduction of the Claimant’s salary by the Defendant was not supported by reasonable grounds as set out above.

Conclusion

As the case suggests, even if the loan did exist, or if an employee did consent to a deduction of wages by the employer, written approval from the Commissioner should be obtained.  All employers should consider section 32 of the EO before making any deductions of the employee’s salaries to ensure that such deductions are lawful. The case does not intend to prohibit employers from payment of employees’ wages to a third party in discharge of the employee’s obligations to that third party. However, the message is clear that the employee’s written consent alone is insufficient and the employer must also obtain the Commissioner’s approval.