Learning from the recent Cathay Pacific lawsuit: despite the definition of wages provided by the Employment Ordinance, identifying whether particular types of payments constitute wages is still far from straightforward, as shown by the latest Cathay Pacific case. Minter Ellison discusses the lessons learned.(Hong Kong Employment Watch)

Q: We have recently read in the news about the Labour Tribunal decision which involved claims made by Cathay Pacific flight attendants. Can you tell us more about the decision, particularly the implications of the decision in relation to our calculation of payments for our employees?

A: The recent Labour Tribunal decision involving claims made by three Cathay Pacific flight attendants illustrates the application of the Employment (Amendment) Ordinance 2007 ("Amendment Ordinance"), which came into force on July 13 2007. Part of the legislation's aim is to ensure that businesses are better equipped to determine which payments to employees should and should not be included in the calculation of "wages" when determining the pay for certain statutory entitlements.

The Labour Tribunal's decision

In this latest case, three Cathay Pacific flight attendants claimed against the airline over their holiday pay entitlements from 2002 to 2008. They achieved a partial victory in the Labour Tribunal, which ruled that line-duty and ground duty allowances, and commission earned from selling duty-free goods, where applicable, should be included in the calculation of holiday pay.

However, the Tribunal also ruled in the airline's favour by deciding that it does not need to include the overnight or out-port allowances, which were paid to flight attendants to cover expenses incurred while they stayed overseas between flights). The Tribunal's reasoning was that such allowances were sums "payable to the employee to defray special expenses incurred by him by the nature of his employment", and therefore were not "wages" for the purpose of calculating holiday pay.

The Amendment Ordinance

Although certain aspects of the Amendment Ordinance's application are not strictly certain at the moment, it is essential that employers do their best to grapple with the law and comply where possible.