Select Committee on Foreign Affairs Minutes of Evidence

ANNEX A

Information paper for the Bills Committee Legislative Provisions (Suspension of Operation) Bill 1997

INTRODUCTION

  This paper sets out the reasons for the Administration's proposal to suspend the five labour-related ordinances under the Legislative Provisions (Suspension of Operation) Bill 1997 which was introduced into the Provisional Legislative Council (PLC) on 9 July 1997. These five labour-related ordinances are:

—  Employment (Amendment) (No. 4) Ordinance 1997.

—  Occupational Deafness (Compensation) (Amendment) Ordinance 1997.

—  Employment (Amendment) (No. 5) Ordinance 1997.

—  Employee's Rights to Representation, Consultation and Collective Bargaining Ordinance 1997.

—  Trade Unions (Amendment) (No. 2) Ordinance 1997.

BACKGROUND AND ARGUMENT

  2. We propose to suspend the operation of these labour-related ordinances so that the Government, in consultation with the Labour Advisory Board (LAB), can review each piece of legislation carefully to assess the social, economic and political implications, mainly for the following reasons:

(a)  These ordinances, passed by the previous Legislative Council in the form of Members' Bills, were not based on any consensus reached by the LAB. Their hasty passage has undermined the well-established role of the LAB as a tripartite consultative forum comprising employers, employees and Government. This is not conducive to the harmonious labour relations which Hong Kong currently enjoys. The LAB considered the legislation in their draft form at a special meeting in May 1997, but could not support any of them. In some cases, the LAB had asked for more time to study the provisions carefully, given their far-reaching implications.

(b)  The implications of these ordinances have not been thoroughly assessed, especially those which would have far-reaching implications for the community as a whole. The Employee's Rights to Representation, Consultation and Collective Bargaining Ordinance 1997 is a clear example. It affects around 18,000 establishments with over 20 staff in Hong Kong, and about 1.33 million employees. This Ordinance will have immediate and far-reaching impact on Hong Kong's labour relations system. For example, the Ordinance requires employers to consult employees through their representative trade unions on sensitive commercial decisions such as changes of ownership and restructuring. It will adversely affect Hong Kong's economic competitiveness and attractiveness to overseas investments to the detriment of the employment opportunities of the entire workforce.

(c)  Some of these ordinances could not be properly enforced, and would only bring about unnecessary confusion to the concerned parties.

  For instance, the Employmentt (Amendment) (No. 4) Ordinance on anti-union discrimination contains substantially similar provisions as the Employment (Amendment) (No. 3) Ordinance 1997, which was introduced by the Government and passed by the previous Legislative Council on 17 June 1997. The latter aims primarily at strengthening protection of employees against unreasonable dismissals, which includes dismissals on the ground of anti-union discrimination. The only difference is that the Employment (Amendment) (No. 4) Ordinance 1997 contains more lenient provisions on remedies for dismissals on similar grounds. This will cause unnecessary confusion to employers, employees and the court in case of dispute.

  Besides, the Employment (Amendment) (No. 5) Ordinance 1997 which seeks to add 1 May as a statutory holiday will cause unnecessary confusion to the public. This is mainly because the list of general holidays for 1998, which has been decided and published, does not include 1 May. As institutions like banks and stock exchanges have their operational schedules tied to the list of general holidays and some may have already made arrangements accordingly, the implementation of this Ordinance will render these institutions unable to carry out their normal operations on 1 May 1998 when all employees are to be on holiday. This will have adverse consequences to the economy of Hong Kong as a whole.

(d)  Some of these ordinances have already had an immediate impact. For example, the Occupational Deafness (Compensation) (Amendment) Ordinance 1997 relaxes the eligibility requirements for compensation and increases the scale of compensation payment for eligible claimants without any appropriate arrangements to cope with the financial implications. If the Ordinance is allowed to remain in force for long, the eligible claims will cause the Occupational Deafness Compensation Board to suffer from an annual deficit and will exhaust its fund in three years. This will ultimately inhibit the Board from making compensation payments to eligible claimants when they are due.

  The major proposals of each of these Ordinances and the reasons why their operation should be suspended as soon as possible are at appended.

CONCLUSION AND PROPOSAL

  3. For the above reasons, the operation of these five Ordinances should be suspended as early as possible in order to minimise and contain the changes effected by the Ordinances. This will enable the Government, in consultation with the Labour Advisory Board, to properly scrutinise each piece of legislation individually and thoroughly assess its effects on employers, employees and the community as a whole before deciding on the way ahead. We will complete this review at the latest by September 1997. We will consult the PLC on the outcome of the review. We appeal to Members of the PLC to support the resumption of the Second Reading debate on this Bill at the next sitting on 16 July 1997 and to pass the Bill. In short, the Bill represents a pragmatic approach which allows for a proper scrutiny of the various legislative changes to determine whether the provisions are truly in the public interest.

July 1997

Employment (Amendment) (No. 4) Ordinance 1997 (Commencement Date: 30 June)

MAJOR PROVISIONS

  The amendment Ordinance seeks to strengthen the protection of employees against anti-union discrimination and its major provisions are:

(a)  to create a new right for employees to make civil claims against acts of anti-union discrimination and to place on the employer an evidential burden to adduce evidence to show that the employee did not suffer any detriment on account of his union membership;

(b)  to confer upon the Labour Tribunal jurisdiction to hear and determine civil claims relating to anti-union discrimination under the Ordinance with wide powers to grant remedies, including compensation and punitive/exemplary damages;

(c)  to provide that the Labour Tribunal shall not be bound by the rules of evidence in civil proceedings arising from the Ordinance; and

(d)  to limit the Labour Tribunal's discretion over award of costs in civil proceedings arising from the Ordinance.

WHY THE ADMINISTRATION OPPOSES THE ORDINANCE

—  The then Legislative Council has passed Employment (Amendment) (No. 3) Ordinance 1997 on 17 June 1997. This Ordinance seeks to strengthen protection of employees against unreasonable termination of employment, and variation of contract, as well as unlawful dismissals. Protection of employees against dismissals on the ground of anti-union discrimination has already been included in the scope of protective provisions relating to the category of "unlawful dismissals" under this bill. Remedies to any valid claim of dismissal relating to anti-union discrimination include reinstatement or award of terminal payment and/or an award of compensation for damage up to a maximum of $150,000. These protective provisions which were endorsed by the Labour Advisory Board (LAB) represent a more prudent and balanced package than those under the amendment Ordinance.

—  Owing to the similarities between the provisions of this Ordinance and those contained in the Employment (Amendment) (No. 3) Ordinance 1997, relating to anti-union discrimination, this Ordinance will create unnecessary confusion amongst employers, employees and the Labour Tribunal.

—  The Ordinance was considered by the LAB at its meeting on 28 May 1997. Members did not support the Ordinance, as the improvement to employees' protection against anti-union discrimination would have been covered by the legislative package including the Employment (Amendment) (No. 3) Ordinance 1997, the Labour Relations (Amendment) Ordinance 1997 and the Trade Unions (Amendment) Ordinance 1997 which had also been introduced into the previous LegCo then and that this legislative package was based on the consensus reached at LAB. The three Ordinances were subsequently passed on 17 June 1997. LAB also agreed that the issue of the right of reinstatement had to be further examined by the LAB Committee on Labour Relations at a later stage. The passage of this Ordinance therefore represents a unilateral attempt to amend labour legislation in a way which goes against the consensus of LAB. This is definitely not conducive to the maintenance of harmonious labour relations in Hong Kong.

—  The Ordinance provides for remedies which may include, among other things, employment, re-employment, and even promotion of the affected employee without the employer's agreement. We consider it inappropriate for the Labour Tribunal to interfere with the decisions on staffing matters taken by private companies. We also consider that an order for re-employment will only work if it is agreed by both parties because once an employment relationship has turned sour, it would be difficult for an employee to continue working under the same employer.

—  The Ordinance provides that each party to the civil proceedings taken out under it (i.e., the employer and the employee) shall pay for his own costs of the proceedings. This will induce an employee to make trivial claims or claims without valid grounds against the employer, and will hence lead to a deterioration in the employer-employee relationship.

WHY THE OPERATION OF THIS ORDINANCE SHOULD BE SUSPENDED AS SOON AS POSSIBLE

—  In order to minimise the impact of the above-mentioned confusion and undesirable consequences the operation of this Ordinance should be suspended as soon as possible, pending a full review of its implications.

Occupational Deafness (Compensation) (Amendment) Ordinance 1997 (Commencement Date: 30 June)

MAJOR PROVISIONS

  The Ordinance revises the compensation provisions under the Occupational Deafness Compensation Scheme (the Scheme) by:

(a)  relaxing the disability requirement for compensation by lowering the minimum level of hearing loss (deafness threshold) from 50dB to 40dB; and

(b)  revising upwards the scale of degree of permanent incapacity by reference to noise-induced hearing loss.

WHY THE ADMINISTRATION OPPOSES THE ORDINANCE

—  The changes to the Scheme under the Ordinance will cause the Occupational Deafness Compensation Board to suffer from an annual deficit and will exhaust its fund in three years.

—  Without adequate financial resources, the Board will not be able to discharge its statutory duty to pay compensation to eligible claimants as payments become due. Ironically, the Ordinance will cause hardship in the end to the claimants.

—  The Amendment Ordinance has not been examined by a Bills Committee before its enactment and its impact has yet to be assessed. For instance, it contains no clear provisions as to how compensation claims which were made before the commencement of this Ordinance and are still under processing by the Board should be handled. This causes unnecessary confusion to both the Board and the claimants.

—  The provisions under the Amendment Ordinance were not drawn up on the basis of any consensus between employers and employees, since they had not been considered by the Labour Advisory Board (LAB) before they were passed by the previous LegCo, although the LAB had considered and advised against the passage of the Amendment Ordinance in its original form.

—  A Government Working Group (WG) comprising employers, employees, medical professionals and audiologists has just completed a comprehensive and in-depth review of the Scheme. The proposed improvements cover a wider range of issues than those under the Amendment Ordinance. They will be considered by the Labour Advisory Board later in July. However, as a result of the likely financial problem caused to the Occupational Deafness Compensation Board arising from this Amendment Ordinance, the Board will practically be precluded from implementing any improvements arising from this review.

WHY THE OPERATION OF THIS ORDINANCE SHOULD BE SUSPENDED AS SOON AS POSSIBLE

—  To minimise the adverse financial impact on the Occupational Deafness Compensation Board and the above-mentioned confusion caused to both claimants and the Board, the operation of the Ordinance should not be allowed to continue, pending a full review of its implications.

Employment (Amendment) (No. 5) Ordinance 1997 (Commencement Date: 30 June)

MAJOR PROVISIONS

  The amendment Ordinance seeks to amend the Employment Ordinance by adding 1 May as a statutory holiday.

WHY THE ADMINISTRATION OPPOSES THE ORDINANCE

—  To add one statutory holiday on a permanent basis applies to all employees in the private sector and would therefore affect the production and work schedules of business establishments in all economic sectors. As such, this will add to the cost of doing business.

—  Employers may make 1 May one of the two floating statutory holidays.

—  The Labour Advisory Board (LAB) was consulted on 28 May 1997. The Board did not support the Ordinance because the list of general holidays for 1998 had been decided and published. It was also agreed that the discussion on this subject should be postponed until 1998 and any decision made should be implemented in 1999.

—  The Ordinance has not been scrutinised by a Bills Committee and its implication has not been assessed.

WHY THE OPERATION OF THIS ORDINANCE SHOULD BE SUSPENDED AS SOON AS POSSIBLE

—  The list of general holidays for 1998 has been decided and published. 1 May is not included in it. The addition of 1 May as a statutory holiday will lead to the following situations—

(i)  Banks, schools and government offices will have to operate as usual.

(ii)  Non-governmental organizations will have to grant a holiday for their staff.

(iii)  Although employers can assign an alternative holiday to their employees, they will encounter great difficulties in staff deployment.

(iv)  Staff in Government schools have to work while their counterparts in other schools will be granted a holiday.

—  Overseas or international companies which have planned their activities such as business meetings and promotional activities in Hong Kong, may already have taken into account whether a particular day or period of time fall into the published list of general/statutory holidays. This Ordinance may cause disruption to their plans.

Employees' Rights to Representation, Consultation and Collective Bargaining Ordinance (Commencement Date: 30 June)

MAJOR PROVISIONS

  The purposes of the Ordinance are:

(a)  To give certain new rights to individual employees who are members of registered trade unions, i.e.:

(i)  right to be represented by a trade union on employment matters;

(ii)  right to be consulted by their employer through a representative trade union on matters affecting their interests provided that the employer has employed 20 or more employees and more than 15 per cent of those employees are members of that union; and

(iii)  right to be covered by a collective agreement negotiated by a representative trade union with their employer provided that the employer has employed 50 or more employees, that more than 15 per cent of those employees are members of that union and that the union represents more than 50 per cent of those employees.

(b)  To create a new obligation on the employer to recognise a trade union which meets the specified membership criteria for the purpose of employee consultation and collective bargaining. The employer also has a duty to consult and bargain with the union in good faith.

(c)  To create a new civil liability on the employer to pay compensation without maximum limit to an employee in the event of the employer's failure to comply with the requirements of the Ordinance.

(d)  To provide for the appointment of an independent scrutineer by a trade union or group of unions to determine whether a trade union or group of unions is representative for consultation or collective bargaining. A person is a qualified independent person if he is a legal practitioner or belongs to a category specified by the Secretary for Education and Manpower by notice in the Gazette.

WHY THE ADMINISTRATION OPPOSES THE ORDINANCE

—  There is no need for Hong Kong to introduce compulsory employee representation, consultation and collective bargaining legislation. The existing practice of voluntary and direct negotiation between employer and employee(s) at enterprise level, underpinned by the conciliation service rendered by the Labour Department, has been working well. Under the current system of dispute resolution, the average number of working days lost through labour disputes in the past three years is 0.5 day per 1,000 wage earners and salaried employees. We do not see any need to change this system.

—  The Ordinance is not conducive to industrial harmony—

(i)  it may induce rivalry amongst unions arising from the competition for more members in order to meet the criteria for union recognition;

(ii)  collective bargaining undertaken by a trade union may affect the interests of non-unionised employees and lead to disputes amongst employees; and

(iii)  the detailed procedures for determining union representation for the purpose of collective bargaining would impede the operation of the current mechanism for prompt dispute resolution through direct and voluntary negotiation between the employer and employees.

—  The Labour Advisory Board (LAB) was consulted on 28 May 1997. Most members did not support the Ordinance because it would have far-reaching implications on the interests of employers and employees, overall development of trade union movement and the employment relationship. They asked for more time to examine the Ordinance. It was agreed that the proposals should first be examined by the LAB Committee on Labour Relations before further deliberations at the LAB.

—  The Ordinance has not been scrutinised by a Bills Committee and its implication has not been assessed.

  WHY THE OPERATION OF THIS ORDINANCE SHOULD BE SUSPENDED AS SOON AS POSSIBLE

—  As the Ordinance has commenced operation, employees working in organisations with less than 20 employees will now have the right to be consulted by their employers through a representative trade union on matters affecting their interests. For organisations with 50 employees or more, the employers have to accede to a request for collective bargaining from a recognised trade union. The detrimental effects of this Ordinance on employer and employee relationship; and inter-union relationship rivalries will begin to emerge. If the operation of this Ordinance is allowed to continue for long, more collective bargaining procedures will be activated. Any undesirable impact of this Ordinance will become more difficult to contain.

Trade Unions (Amendment) (No. 2) Ordinance 1997 (Commencement Date: 30 June)

MAJOR PROVISIONS

  The amendment Ordinance seeks to relax the existing restrictions on trade unions under the Trade Unions Ordinance (Cap. 332) in certain contentious areas. The major provisions of the Ordinance are:

(a)  to relax the restriction of becoming officers of a trade union;

(b)  to amend the procedure for changing the name of a trade union from secret ballot to voting in general meetings among members of the trade union;

(c)  to repeal the requirement of Chief Executive's approval of a trade union to contribute or donate funds, other than the welfare and political funds, to any other trade unions or similar organisations established outside Hong Kong;

(d)  to replace the right of registered trade unions to establish "electoral fund" by allowing trade unions funds to be used for any purpose by a secret ballot by members of a trade union;

(e)  to remove the requirement of the Chief Executive's approval for a trade union to be a member of any kind of trade union or other organisation established outside Hong Kong; and

(f)  to remove the prohibition of the formation of a trade union with members coming from different trade, industry or occupation.

WHY THE ADMINISTRATION OPPOSES THE ORDINANCE

—  The Ordinance is not conducive to the healthy development of trade union development in Hong Kong. The legislation enables the funds of a trade union to be used for political purpose and to be expended for any purposes are contrary to the objective of a trade union.

—  The requirement to obtain the Chief Executive's consent for affiliation with overseas unions or organisations is a necessary safeguard to prevent local trade unions from being unduly influenced or controlled by overseas political bodies. The Administration has been flexible and has never refused any past application from local trade unions for affiliation with overseas unions.

—  The present legislative requirement governing the formation of trade union federations is intended to discourage the setting up of federations with widely diversified interests and trades, bonded together only for political purposes.

—  The Labour Advisory Board (LAB) was consulted on 28 May 1997. Employer members did not support the Bill and some employee members had reservations on certain provisions of the Bill. They all asked for more time to study the Bill.

WHY THE OPERATION OF THIS ORDINANCE SHOULD BE SUSPENDED AS SOON AS POSSIBLE

—  The amendment Ordinance enables trade union funds to be used for any purposes, including political purposes, and allows trade union funds to be used for any purpose by a secret ballot by members of a trade union. This in effect allows trade union funds to be used for purposes unrelated to the members' benefits and contrary to the objective of a trade union. Moreover, since the use of trade union funds for any purpose is to be determined by a secret ballot of a majority of members' representatives present at a general meeting; while the quorum required for a general meeting has not been specified, a small number of members would in certain circumstances be able to control the use of such funds. For example, where a trade union has 100 voting members, and its rules stipulate that one-fifth of the voting members could form a quorum (i.e., 20 members), a simple majority will require only the approval from 11 members. According to the amendment Ordinance, these 11 members could determine the use of funds belonging to the entire trade union. This is clearly against the interest of a majority of the members.

—  Prior to the passage of this amendment Ordinance, a trade union needs to seek approval from the Administration before becoming a member of any kind of trade union or other organisation established outside Hong Kong. Since this requirement has been removed, the Government will not be able to obtain any information on whether a local trade union has affiliated with any overseas organisations. In addition, the legislation does not require the trade union to consult or seek approval from its members before affiliating with any overseas organisations. Hence, this amendment Ordinance has rendered trade union members' rights in this respect no longer protected.

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Prepared 7 August 1998