LCQ19:Tackling false self-employment

     Following is a question by the Hon Wong Sing-chi and a written reply by the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung, in the Legislative Council today (June 15):


     With the commencement of the Minimum Wage Ordinance (Cap. 608) on May 1 this year, the working class worry that employers may attempt to evade their obligation to pay the minimum wage by means of "false self-employment", which turns employees into false self-employed persons. In this connection, will the Government inform this Council:

(a) of the total number of complaints about "false self-employment" received by the Government since May 1 this year and among such cases, of the number of cases in respect of which prosecutions were instituted;

(b) whether it will assess the relationship between the establishment of the statutory minimum wage and the problem of "false self-employment"; if it will, how it will carry out the assessment, and of the amount of resources to be injected; and

(c) in the long run, whether it will consider studying the feasibility of introducing legislation correspondingly to regulate "false self-employment", consulting the public and community groups on the related details, and publicising the phase-in outcome of the study; if it will, of the details; if not, the reasons for that?


(a) The Labour Department (LD) has all along been attaching great importance to protecting employees' rights and benefits. In combating false self-employment, LD has adopted a three-pronged approach aimed at deterring the malpractices of evading liabilities by purposely and falsely labelling an employee as a self-employed person, and enhancing the knowledge of employers and employees on different contract types to facilitate their making the right decisions. Our measures include stepping up promotional and publicity efforts, provision of consultation and conciliation service to those involved in false self-employment disputes, and taking rigorous enforcement actions to combat illegal practices. In May 2011, LD received 18 complaint and claim cases involving false self-employment disputes, which accounted for one percent of the total number of complaint and claim cases of the month. The figure is similar to that recorded before the commencement of the Minimum Wage Ordinance. At the moment, there is no information showing that the concerned cases arise from the commencement of the Minimum Wage Ordinance. As we are still following up the cases, no prosecution statistics are available at this stage.

(b) LD has been collecting statistics on cases and complaints involving false self-employment disputes since late 2009. We will continue to closely monitor cases involving false self-employment disputes, including the situation of these cases after the implementation of the Minimum Wage Ordinance on May 1, 2011. As the responsible officers are also tasked with carrying out other duties, there is no separate breakdown on the resources involved in monitoring the situation of false self-employment.

(c) At present, employers who purposely make use of false self-employment contracts to evade paying employment benefits to their employees already have to bear the consequences of failing to fulfil their legal liabilities under the relevant legislation. A person or company found to be an employer by a court not only has to pay back the statutory rights and benefits retroactively to a worker who is falsely labelled as a self-employed person, he may also be liable to prosecution for failing to comply with the Employment Ordinance or the Employees' Compensation Ordinance as an employer.
     To define self-employment by legislation is neither easy nor practical. Having regard to past court cases involving self-employment disputes, there is no single conclusive test to distinguish whether a person is an employee or a self-employed person. All the relevant factors of the case must be taken into account and there is no hard and fast rule as to how important a particular factor should be. Hence, it is difficult to list out all the possible scenarios clearly through legislative provisions. On the other hand, attempts to set out categorically in the law what constitutes self-employment may be counterproductive, as those who intend to exploit their employees can take this as providing guidance for evading the law.

     We consider that the more effective ways to tackle the problem are through educating people and employers on the differences, pros/cons and the legal rights and obligations of the two contractual relationships of employment and self-employment, and reminding them to clarify the relevant modes of co-operation before entering into contracts. If people suspect that their own statutory rights and benefits as employees are exploited under the guise of false self-employment, they should report to LD as soon as possible. We will conduct investigation at once and institute prosecution against the offending employers whenever there is sufficient evidence. We believe that the adoption of the three-pronged approach, i.e. enhanced publicity, consultation service and enforcement action, is indeed the key to tackling the issue of false self-employment.

Ends/Wednesday, June 15, 2011
Issued at HKT 11:55