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Following is a question by Hon Kwok Wai-keung and a reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (January 20):
Question:
At present, when a winding-up or bankruptcy petition has been filed with the Court against an employer, the employee(s) concerned may apply for ex-gratia payments from the Protection of Wages on Insolvency Fund (PWIF) to cover the outstanding wages, the pay for untaken annual leave, the pay for untaken statutory holidays, wages in lieu of notice, severance payments, etc. PWIF is administered by the Protection of Wages on Insolvency Fund Board (the Board) and the Labour Department is responsible for handling and vetting the relevant applications. In August last year, a furniture and electrical appliance chain store suddenly closed down, rendering around 400 employees being owed wages, wages in lieu of notice and severance payments. Although such employees were granted ex-gratia payments by PWIF in the end, some of them have pointed out that they have encountered numerous obstacles in applying for ex-gratia payments, there are problems about the application procedures and calculation methods of ex-gratia payments, and the coverage of PWIF is inadequate. These problems have undermined the level of protection available to employees under PWIF. In this connection, will the Government inform this Council:
(1) given that when there are disputes between the employees and the companies in liquidation over the amounts owed to the employees, the amounts have to be determined by the Labour Tribunal (LT), but PWIF does not always calculate the amounts of ex-gratia payments payable to the employees concerned according to LT's determination, whether the authorities will review if the procedure requiring LT to determine the amounts owed to employees is necessary;
(2) given that the payment ceilings of a number of ex-gratia payment items under PWIF have not been adjusted for years (for example, it has been over 20 years since the ceiling of wages in lieu of notice was increased to $22,500 in 1995 but no further adjustment has been made), whether it knows why the Board has not reviewed the levels of the payment ceilings for years, and whether the Board will conduct a review and put forward relevant adjustment proposals expeditiously; if the Board will not, of the reasons for that; and
(3) given that when this Council scrutinised the Protection of Wages on Insolvency (Amendment) Bill 2011, the authorities indicated that the Board had undertaken to review the coverage of PWIF, of the details and progress of the review, and when the authorities will submit the relevant review report to the Labour Advisory Board and the Panel on Manpower of this Council?
Reply:
President,
The Protection of Wages on Insolvency Fund (Fund) was set up to provide timely relief in the form of ex-gratia payment to employees in the event of the closure of business of their insolvent employers. The ex-gratia payment covered by the Fund includes wages, wages in lieu of notice, severance payment, pay for untaken annual leave and pay for untaken statutory holidays.
My reply to the question raised by Hon Kwok Wai-keung is as follows:
(1) Under the Protection of Wages on Insolvency Ordinance (PWIO) (Cap. 380), the filing of a bankruptcy or a winding-up petition against an employer is a pre-condition for the grant of ex-gratia payment from the Fund. If the amount owed to the employee is undisputed between the employer and the employee, and the employer has confirmed his inability to pay the said amount, the Labour Department (LD) can process the employee's application for payment from the Fund after having received all the relevant information so long as a bankruptcy or a winding-up petition has been presented to the court against the employer, irrespective of whether the petition is filed by the employee or other creditors of his/their own accord. In such circumstances, there is no need for the employee to seek the Labour Tribunal (LT)'s determination of his claim(s).
If the employee has to apply for legal aid for filing a bankruptcy or a winding-up petition to the court against the employer, LD will refer the employee to the Legal Aid Department (LAD). If, however, the employee fails to establish the amount of debts owed as claimed before the court in its hearing of the said petition, the process of his claim for recovering the outstanding payments may be delayed and the cost incurred by the relevant parties on filing the petition may be wasted. Therefore, according to LAD, generally speaking, unless the amount owed by the employer is undisputed between the employer and the employee, and the employer has admitted his inability to pay the debts, the employee is required to confirm his employment relationship with the employer, the payment item(s) and amount owed by the employer to him and the inability of the employer to pay the amount. For this reason, LD will be required to refer the employee's case to LT for determination so as to ascertain the claim item(s) and amount due to the employee before LAD can process the employee's application for legal aid. If the employer fails to pay the said amount in accordance with the award made by LT, the employee may then file a bankruptcy or a winding-up petition to the court against the employer on the basis of the said award and concurrently apply for ex-gratia payment from the Fund.
In processing applications for ex-gratia payment from the Fund, LD carefully verifies the information and documents provided by the applicant or other relevant parties in respect of each application. If the employee has obtained an award made by LT in respect of his claim(s), LD will make reference to the award in the course of verifying his application for ex-gratia payment. As verification of applications is conducted on the basis of all the available information, and there is a statutory ceiling on every item of ex-gratia payment under the PWIO, the amount of ex-gratia payment approved by LD may be less than that awarded by LT.
(2) The Protection of Wages on Insolvency Fund Board (Board) reviews from time to time the scope of protection of the Fund having regard to the changes in the socio-economic circumstances and needs as well as the financial position of the Fund in order to progressively improve the protection accorded to employees. With the improvements made over the years, the majority of applicants for the Fund can now receive all or a large part of the amount that they applied for. Notwithstanding, the Board will take into account the item on wages in lieu of notice in the review that it is currently conducting.
(3) The Protection of Wages on Insolvency (Amendment) Ordinance 2012 (Amendment Ordinance) was passed by the Legislative Council (LegCo) in April 2012 to expand the scope of the Fund to cover pay for untaken annual leave and pay for untaken statutory holidays so as to improve the protection of employees who are affected by their insolvent employers. The relevant amendments have taken effect in June 2012. In endorsing the amendment proposals, the Board agreed to review the scope of protection of the pay for untaken annual leave and pay for untaken statutory holidays, including the payment ceiling of $10,500, one year after implementation of the Amendment Ordinance based on actual operational experience and the relevant data.
The Board kick-started a review in this regard in the second half of 2013 and, having regard to the views of the Panel on Manpower of LegCo, has undertaken to cover all the payment items under the Fund in its review. In the process, the Board has to examine with prudence all the relevant information, including the forthcoming ruling of the Court of Final Appeal in April this year on a judicial review case concerning the calculation of ex-gratia payment on severance payment, and the effect that the said ruling may have on the financial position of the Fund for the purpose of thoroughly considering the matter. When the result of the review is known, the Government will consult the Labour Advisory Board and the Panel on Manpower of LegCo as soon as possible.
Ends/Wednesday, January 20, 2016
Issued at HKT 13:05
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