Money Matter

Deduction from wages

Article exclusively contributed by Allen & Overy

Under Hong Kong law, employers are not allowed to make arbitrary deductions from wages unless the deductions are permitted by the Employment Ordinance (EO).

In some industries, companies have the practice of hiring fixed-term employees that they then dispatch to work for clients on an assignment basis. In such cases, the employment contracts often contain provisions allowing the companies to withhold the employees' last salary payments, should they terminate their employment early. The justification for this is that the employees' early departure would cause them loss and damage.

The court looked at the issue of deduction from wages in the case of Lam Yau Kuen v Easy (Hang Fung) Transportation Co Ltd (2006).

The plaintiff was a truck driver transporting goods between Hong Kong and mainland China. He had been working for the defendant, who had required him to register a business name before employing him, presumably under the misapprehension that this would make him ineligible for protection under the EO.

The defendant had registered the plaintiff's business on his behalf. The plaintiff's employment contract stated that if he terminated the contract, he would be responsible for any expenses related to traffic accidents and for the registration costs of the business.

After the plantiff's employment with the defendants ceased, the defendant failed to substantiate its claim for expenses related to traffic accidents. Instead, the company simply proceeded to withhold his wages, contending that he was liable for expenses related to traffic accidents and the expenses associated with registering his business.

The plaintiff took issue with this and took the matter to court. In considering whether the defendant was entitled to withhold payment of the plaintiff's wages, the court referred to sections 32 and 63D of the EO, which restrict the right of employers to deduct wages from their employees, except under specified circumstances. The EO also imposes criminal sanctions on employers infringing the ordinance.

In summary, the court condemned the defendant's act, stating there was no legal justification to withhold payment of the plaintiff's wages. The court ruled that the plaintiff should be allowed to recoup all expenses that had been wrongfully deducted from his wages.

Training daze

In another Hong Kong case, an employer and an employee entered into an employment contract that required the employee to reimburse the employer for the cost of in-house training provided during his employment. On termination of employment, the training costs amounted to a sum equivalent to the last six months of the employee's earnings.

Considering the case, the court ruled that the employee had been treated unfairly, since the employment contract had the effect of deterring him from seeking alternative employment. The provision was held to be a restraint of trade and was not enforced by the court. It is, however, important to note that each situation should be assessed on a case-by-case basis and judged on its own merits.

Q & A on deductions from wages and reimbursement of expenses
Q1 If an employer provided an employee with a BlackBerry for business use and the employee lost it during a business trip, can the employer deduct the cost of the BlackBerry from the employee's wages?
A1 The Employment Ordinance imposes restrictions on employers regarding withholding wages from employees. In the case of the loss of (or damage to) equipment or property entrusted to an employee, where the loss or damage can be directly attributed to the employee's neglect or default, the total amount recoverable by deduction may not exceed the equivalent in value of the damage or loss suffered by the employer or HK$300, whichever is the less. The total amount of deduction in a wage period is capped at one quarter of the wages payable to the employee.

Q2 What is the maximum penalty that can be imposed on a company found guilty of unlawfully deducting from an employee's wages?
A2 Unless the deduction from wages has been authorised by the Employment Ordinance, an employer who unlawfully deducts from an employee's wages is guilty of an offence.The maximum penalty is a fine of HK$100,000 and one year's imprisonment.

Taken from Career Times 28 November 2008, p. B5

(Last review date: 23 August 2013)

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Disclaimer: The opinions expressed in this article are those of the contributor

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