Call for Proper Protection of Injured Employees

In his judgment in Kong Hoi Lam v Cheung Yuk Kwan [2015] HKEC 2563, Judge Bharwaney made a “plea to the Secretary for Welfare and Labour and to the Commissioner of Labour, and to all those charged with safeguarding the interests of our labour force to please quickly take a close look at ECAO [Employees’ Compensation Assistance Ordinance, Cap. 365] and do something about it. We cannot claim to have a first class legal system when our laws contain the sort of provisions we find in our ECAO.”

The Law Society echoes the concerns about the ECAO provisions that govern the method for calculating relief payment. We call for an urgent review of the ECAO and the operation of the Employees’ Compensation Assistance Fund (“Fund”) under the ECAO. We strongly advocate that legislative amendments be introduced as soon as possible to ensure that severely injured employees are properly compensated.

The purpose of the ECAO, as initially drafted in 1991, was to allow injured employees to obtain payments under a statutory scheme when they could not recover employees’ compensation or common law damages from their employers or insurers.

The Fund unfortunately suffered from certain financial difficulties. This led to various amendments to the Ordinance in 2002. As a result of these amendments, the injured employee who cannot recover common law damages from their employers can only apply for a relief payment from the Fund, which excludes legal costs and interest. Such an unfavourable payment mechanism effectively penalises the injured employees. As the relief payment excludes legal costs, the actual amount that the injured employees are paid will be substantially reduced after netting off those costs. In the case of Kwan Kam Pui v Fung Man & Ors [2014] 6 HKC 361, although the injured employee was awarded damages of HK$800,000, he ended up receiving a net payment of only HK$300,000 after deducting legal costs in the sum of HK$500,000.

Another problem lies with those cases involving severely injured employees. Where the damages exceed HK$1.5 million, the relief payment will only pay out an initial lump sum amount capped at HK$1.5 million with the remaining balance paid out by a monthly sum capped at HK$10,000 or the pre-accident salary, whichever is higher. These limits on lump sum payment and monthly payment are so low that they effectively deprive the employees of the relief payment they are entitled to. With such a low monthly payment coupled with the injured employees’ reduced life expectancy because of the injuries, they may likely die before they can exhaust the full relief payment.

Further, taking the figures in one case as an example, the damages awarded amounted to HK$15.4 million; adopting the payment mechanism in the ECAO, the injured employee was paid the maximum limit of the initial lump sum fee of HK$1.5 million with the balance of HK$13.9 million to be paid by a monthly sum calculated to be around HK$28,000 (since the employee was severely injured and hence entitled to an additional sum on top of the maximum limit of HK$10,000 or pre accident salary per month, whichever is higher). A quick calculation shows that it will take 40 odd years for the monthly payments to add up to HK$13.9 million. The relief payment excludes interest. Such a lengthy payout period raises the concern about the extent of the inflationary impact on the actual amount of damages so many years into the future.

The Government has been asked to consider a reform of the ECAO back in 2013, but the response given was that the financial situation of the Fund at the time was such that it was inappropriate to initiate amendments to the Ordinance.

The Fund’s current financial position has clearly improved significantly. As of 31 March 2017, the Fund carried a net surplus of HK$837,981,067. The financial years of 2016 and 2017 each accumulated a surplus of HK$92,182,632 and HK$124,311,640 respectively. It is reasonable to assume a surplus of around HK$100,000,000 for each of 2018 and 2019. If so, the Fund will now stand at around more than HK$1,000,000,000. The present limits of HK$10,000 a month and HK$1.5 million for the initial lump sum payment were fixed 17 years ago and are grossly inadequate to fulfil the needs of seriously injured victims.

The Law Society has called for an immediate upward revision of the relief payment limits to a monthly figure of HK$85,000 and a lump sum figure of HK$8 million. With the substantial regular surplus to the Fund every year, the proposed adjustments to the payment limits should not bear any adverse impact on the viability and sustainability of the Fund.

The glaring injustice caused by the existing form of relief payment must be corrected as soon as possible to ensure that the ECAO properly protects the interests of those it was initially promulgated to protect, namely the injured employees. The Law Society will continue its advocacy work to push for an urgent improvement of the compensation mechanism for the protection of injured workers.

Jurisdictions: 

President

The Law Society of Hong Kong