Employees' rights on winding-up or bankruptcy of employer

An inter-departmental task force comprising the Labour Department, the Official Receiver's Office, the Commercial Crime Bureau of the Police Force and the Legal Aid Department has been set up to further prevent possible abuse of the Protection of Wages on Insolvency Fund (PWIF).

This was disclosed by the Permanent Secretary for Economic Development and Labour (Labour), Mr Matthew Cheung Kin-chung, at a seminar on "Protection of Employee's Rights on Winding-up or Bankruptcy of Employer" organised by the Labour Department and the Protection of Wages on Insolvency Fund Board for more than 200 trade union representatives today (December 12).

Mr Cheung said that the PWIF Board and the Government would work closely to guard against employers dishonestly shifting their responsibilities for payment of wages, wages in lieu of notice and severance payment owed to employees to the PWIF.

"The seminar seeks to enhance employees' understanding of their rights in order to help combat these abuses," he said.

The Chairman of the PWIF Board, Mr Ho Sai-chu, said at the Seminar that as employers had the responsibility to pay wages in full, employees should not tolerate underpayment of wages by employers.

Mr Ho added that if the directors or management of a company committed acts such as fraud or illegal transfer of assets or capital from the insolvent company to another company, this would have adverse impact on the subrogation income of the PWIF, as only a small proportion of the payment advanced to the employees could be recovered from the remaining assets of the employer. He appealed to employees to report these illegal acts to the authorities concerned.

Representatives of the Official Receiver's Office, Legal Aid Department, the Police Force and a private liquidator today spoke on the following subjects:

- proceedings of bankruptcy and winding-up cases;
- provisions governing the distribution of remaining assets of employers and preferential payment on employment claims in winding-up/bankruptcy cases;
- rights of creditors including employees who are owed wages;
- provisions governing voidable/illegal transfer of assets and related penalties;
- provisions governing fraudulent trading and improper conduct in bankruptcy or winding-up cases ;
- provisions to disqualify any person as company director for misconduct; and
- channels to report illegal transfer of assets, theft or fraudulent acts.

Meanwhile, the Commissioner for Labour, Mrs Pamela Tan Kam Mi-wah, has earlier sent letters to unions to appeal for their support in encouraging employees to take prompt action to pursue wages claims and report fraudulent acts of insolvent companies such as the illegal transfer of assets or transactions.

The department will encourage employees to act as prosecution witnesses in order to step up prosecution against employers for non-payment of wages with a view to reducing such cases.

Under the Employment Ordinance, an employer should pay wages to an employee as soon as practicable but in any case not later than seven days after the end of the wage period or termination of employment. Late payment is an offence. Employers are liable to prosecution. The maximum penalty is a fine of $200,000 and imprisonment for one year.

The Labour Department will continue to vet PWIF applications stringently. Under the Protection of Wages on Insolvency PWIF Ordinance, applicants and their employers must provide truthful information. Offenders are liable to a fine of $50,000 and three months imprisonment.