[Archive] Assisting employees to recover unpaid wages

Asked by : Hon Albert HO

Replied by : SEM

Question :

Regarding the assistance provided by the Protection of Wages on Insolvency Fund ("the Fund") to employees whose wages, wages in lieu of notice and severance payment ("the wages") are due and unpaid, will the Government inform this Council:Regarding the assistance provided by the Protection of Wages on Insolvency Fund ("the Fund") to employees whose wages, wages in lieu of notice and severance payment ("the wages") are due and unpaid, will the Government inform this Council:

1. whether the Commissioner for Labour ("the Commissioner") had exercised his discretion in the past year to make ex gratia payment from the Fund to employees whose wages were due and unpaid in respect of cases in which no bankruptcy or winding-up petitions had been presented against the employers; if he had, of the number of such cases;
   
   
2. of the number of applications for legal aid received in the past three years by the Legal Aid Department regarding employees whose wages were due and unpaid, for presenting winding-up petitions against their employers to facilitate the exercise of power by the Commissioner to grant them ex gratia payment from the Fund; and, among these cases, the number of applications rejected on grounds of the applicants' failure to pass the means tests; and
   
   
3. whether it will consider extending the scope of the Fund in order to assist employees whose wages are due and unpaid in presenting winding-up petitions against their employers?
   
   

Reply:

Madam President,

1. Under section 16 of the Protection of Wages on Insolvency Ordinance (the Ordinance), the presentation of a bankruptcy or winding-up petition against the employer is a pre-condition for an employee whose wages are due and unpaid to receive ex gratia payment from the Protection of Wages on Insolvency Fund (the Fund) by the Commissioner for Labour. The Fund is mainly financed by a levy on each Business Registration Certificate. To avoid abuses, bankruptcy or winding-up proceedings must be instituted before payment from the Fund could be made to employees so as to ensure that the employer is genuinely insolvent. By the institution of the bankruptcy or winding-up proceedings, the Fund may recover the ex gratia payment made, from the remaining assets of the insolvent employer through subrogation.
   
   If, for any insolvent employer employing less than 20 employees, sufficient evidence exists to support the presentation of a petition and it is unreasonable or uneconomic to present a petition (e.g. the assets of the employer is less than the legal costs required for the presentation of the petition), the Commissioner for Labour may make ex gratia payment, by discretion under section 18 of the Ordinance, to an employee whose wages are due and unpaid, despite that a bankruptcy or winding-up petition against the employer has not been presented.
   
   In 2000, the Commissioner for Labour exercised the discretion in 804 claims, i.e. 32% of a total of 2550 claims processed by the Labour Department in the year
   
   
2. Since 1998, the number of applications received by the Legal Aid Department from employees whose wages are due and unpaid for legal aid for the presentation of bankruptcy or winding-up petition against their employer and the number of applications rejected due to the applicant's failure to pass the means test are as follows -
   
   

   	1998	1999	2000	2001 (up to 31 March)
   Number of applications	940	1244	1179	271
   Number of applications rejected due to the applicant's failure to pass the means test	111 (12%)	148 (12%)	130 (11%)	24 (9%)

   
   
   
3. The Protection of Wages on Insolvency Fund has been set up to provide prompt relief to employees in the form of ex gratia payment in respect of arrears of wages, wages in lieu of notice and severance payment. According to the existing legislation, we cannot make use of the Fund to assist employees whose wages are due and unpaid in presenting bankruptcy or winding-up petitions against their employers. We do not think that it is necessary neither because -
   
   
   1. The Commissioner for Labour may exercise discretion under section 18 of the Ordinance to handle eligible cases in a flexible manner. As more than 90% of the establishments in Hong Kong employ less than 20 employees, the discretionary power of the Commissioner should be sufficient to cover the great majority of establishments.
      
      
   2. As for the cases where section 18 is not applicable, if any other creditor has presented a bankruptcy or winding-up petition, then all the employees concerned would not need to present petition again.
      
      
   3. If employees whose wages are due and unpaid present a bankruptcy or winding-up petition, they should pay the costs for the presentation first. They may however be accorded priority in claiming the legal costs for the presentation from the assets of their employer, after the completion of the bankruptcy or winding-up proceedings. Employees who cannot afford the costs may seek legal aid from the Legal Aid Department. Although individual employees may not be able to pass the means test and are therefore not entitled to legal aid, those eligible employees may act as an representative to present the bankruptcy or winding-up petition, which would enable all employees whose wages are due and unpaid to receive ex gratia payment from the Fund.