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Following is a question on disputes involving non-payment of wages by contractors or sub-contractors of the construction industry by the Hon Chan Kwok-keung and a reply by the Secretary for Works, Mr Lee Shing-see, in the Legislative Council meeting today (Wednesday) :

Question :

Will the Government inform this Council

(a) of the number of known cases since January last year in which contractors or sub-contractors of public works projects defaulted on the payment of wages to construction workers; among them, the number of cases mediated by the Labour Department, and the results of the mediation; and

(b) whether it has adopted measures to prevent contractors or sub-contractors from defaulting on the payment of wages to workers when it awards construction projects; if it has, of the details; if not, the reasons for that, and if it will consider formulating measures to prevent such situation occurring?

Reply:

Madam President,

(a) The Labour Department has not categorized the statistical data of labour disputes into public works project and non-public works project. In 1999, the Labour Department handled a total of 1,219 disputes involving non-payment of wages by contractors or sub-contractors of the construction industry. Among them, 105 cases involve more than 20 employees. The remaining 1,114 cases involve claims by less than 20 employees.

Of the 1,219 cases, 655 have been resolved through mediation by the Labour Department. The remaining cases concern disputes in the amount of defaulted payment, or the identity as to whether the claimant worker is an employee or a subcontractor, or the inability of the employer to pay the money. Accordingly, these cases have been referred to the Minor Employment Claims Adjudication Board, the Labour Tribunal or the Legal Aid Department.

Since January last year, the works departments under the Works Bureau have received a total of 4 cases whereby the contractor or sub-contractor under the public works projects is alleged to have defaulted on payment of wages to his workers. The cases are all related to non-payment of wages by the sub-contractors. In two of these cases, the sub-contractors subsequently paid to the workers the overdue payment after the disputes were resolved through mediation by the Labour Department and the main contractors. As regards the remaining two cases, one is being investigated and the other one was referred to the Labour Tribunal. The investigation process of the Labour Tribunal is still under way and the next hearing is scheduled in February 2000.

(b) Under the General Conditions of Contract for public works projects, there is a provision whereby Government may exercise his discretionary power to make direct payment to the contractor's workers in the event of default being made in the payment of any money in respect of wages of any person employed by the Contractor. To succeed a claim for outstanding wages, the aggrieved worker must file a claim in the office of the Labour Department and furnish proof to the satisfaction of the Commissioner for Labour.

The proof should include, where the claim is disputed by the Contractor or it is found necessary by the Commissioner for Labour, proof of final determination of the claim by an award or order of the Labour Tribunal or as the case may be the Minor Employment Claims Adjudication Board or a judgement of the District Court or, where the matter is subsequently further disputed by way of appeal, by a judgement of the Court of First Instance or the Court of Appeal.

The prerequisites for invoking this provision when the claim is disputed by the Contractor are a decision of the court and that there is sufficient money recoverable by Government from the Contractor under the contract. For the sub-contractor's workers, there is no similar contractual provision as Government has no contractual relationship with the sub-contractor and hence is not in possession of any money due to the sub-contractor. Government is therefore not entitled to make any offset for direct payment to the sub-contractor's workers.

The sub-contractor's workers may however rely on the protection offered by law, which under the provision of the public works contracts must be complied with and cannot be evaded. Under the Employment Ordinance (Cap. 57), the principal contractors, superior sub-contractors and superior nominated sub-contractors (if any) engaged in building and construction works are liable for the first two month's unpaid wages of an employee who is employed by the subordinate sub-contractor.

If an employee employed by a sub-contractor is owed wages, he must serve a written notice to the principal contractor within 60 days after the wages become due. The written notice should comply with certain formalities required under the ordinance. The principal contractor, the superior sub-contractor and the superior nominated sub-contractor should pay wages to the employee within 30 days after receiving the notice. They may also request every superior sub-contractor to the employee's employer to share out the liability.

The wages paid by the principal contractor, the superior subcontractor and the superior nominated sub-contractor shall be a debt by the employer of the employee to them. The debt may be recovered through civil claims proceedings.

The statutory provisions under Employment Ordinance have struck a balance between the workers and the principal contractors. It offers extra protection to the construction worker by way of a claim to the principal contractor who is not his employer. Together with the contractual provision under the public works contract, the statutory protection would facilitate the payment of outstanding wages to the building and construction workers.

End/Wednesday, January 5, 2000

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