Introduction

Under the Employment Ordinance (Cap. 57) (“EO”), an employee is entitled to statutory holidays. An employee having been employed under a continuous contract for not less than 3 months immediately preceding a statutory holiday is entitled to holiday pay.

An employee is also entitled to annual leave with pay after having been employed under a continuous contract for every 12 months. An employee’s entitlement to paid annual leave increases progressively from 7 days to a maximum of 14 days according to his length of service.

Generally speaking, the daily rate of statutory holiday pay and annual leave pay is a sum equivalent to the daily average wage (“DAW”) earned by the employee in the preceding 12 months immediately before the statutory holiday and annual leave (as the case may be). In the recent case of Mackinlay Andrew Antony v Hong Kong Dragon Airlines Limited [2020] HKDC 64, DCCJ 2228/2016, the District Court gave an insight on how these statutory holiday pay and annual leave pay are to be calculated where the employee concerned works on a roster.

Background

The plaintiff employee (“Employee”) was a commercial airline pilot of his former employer defendant (“Employer”). He worked under a monthly roster system that was structured and largely pre-determined by the Employer. Under the system, there were on-duty days, off-duty days and leave days. The Employee earned a monthly fixed wage and received variable payments depending on his flight hours.

After the Employee retired, he brought a claim against the Employer for underpayment of, among other things, (1) statutory holiday pay; and (2) statutory annual leave pay.

Statutory holiday pay and annual leave pay

Calculation – daily average wage

In calculating the DAW earned by the employee during the 12 months, the EO provides the following periods and wages are to be disregarded:

1.        Disregarded Period: any period for which the employee was not paid his wages or full wages by the reason of:

a.        a day of maternity leave, a day of paternity 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; or

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); and

2.        Disregarded Wages: any wages paid to the employee for the Disregarded Period.

In other words, DAW is calculated as follows:

DAW = (W – DW) / (365 – DP)

where:

 “W” is the total wages earned by an employee in the preceding 12 months immediately before (or, if appropriate, the first day of) the statutory holiday/annual leave;

“DW” is the wages (if any) paid to the employee for the Disregarded Period;

“DP” is the number of days in the Disregarded Period.

The dispute

The Employee argued that as a commercial airline pilot, the following days should be disregarded for the purpose of calculating his DAW:

1.        his off-duty days, including days on which he was free of duty and he rested overseas in between flights; and

2.        the days on which he was on suspension under an investigation.

If the Employee was correct, the amount of DAW he earned would increase, as the denominator (i.e. (365 – DP)) would decrease.

Should off-duty days be disregarded?

The Employee argued that he was not provided with any variable payments (that would be payable to him if he was flying) when he was off-duty. The Court disagreed and held that to disregard his off-duty days in calculating the DAW would go against the legislative intention of providing a fair average of the employee’s earnings when calculating his statutory holiday pay and annual leave pay. The Court ruled that since the monthly roster was largely pre-determined by the Employer, the Employer may randomly designate a more “concentrated” on-duty hours for one employee resulting in that employee having more off-duty days per month, and less “concentrated” on-duty hours for another employee resulting in the other employee having less off-duty days per month.

The effect of the Employee’s argument would be that two employees working exactly the same number of on-duty hours and having earned exactly the same wages in the whole previous 12 months would have different DAW, resulting in different statutory holiday pay and annual leave pay only because of their difference in “concentration” of on-duty hours within their respective rosters. This result would clearly be unfair and go against common sense, thus could not have been the intention of the legislation. Therefore, the Court held that employees working in a roster should generally be deemed to be paid his “wages or full wages” on both his on-duty and off-duty periods, meaning that off-duty periods should not be disregarded in the calculation of DAW for statutory holiday pay and annual leave pay.

Suspension days

The Employee also claimed that the days when he was suspended from work as he was under to an investigation should be disregarded in the calculation of DAW. The Court ruled in favour of the Employee on this point as he was prevented from working on a normal working day when he was on suspension, therefore falling within one of the reasons stipulated in the EO and should be disregarded in the DAW calculation.

Takeaways

In Mackinlay Andrew Antony v Hong Kong Dragon Airlines Limited, the District Court ruled that employees working under a roster should generally be deemed to be paid his “wages or full wages” on both his on-duty and off-duty periods. In other words, off-duty periods should not be disregarded in the calculation of DAW for statutory holiday pay and annual leave pay under the EO.

The judgment has an impact not only on aircraft pilots working on a roster, but also on all other lines of work under a roster system (for example, Accident and Emergency doctors) and on general shift workers as the same line of reasoning in relation to the unfairness of disregarding off-duty periods in the calculation of DAW under the EO equally applies. Employers putting their employees under a roster system should bear this case in mind in calculating their employees’ statutory holiday pay and annual leave pay.