The decision offers important guidance on how commission and profit-share arrangements are treated under Hong Kong employment law, and the limits of using compliance concerns to withhold pay.
CCL hired the two managers to build a wealth management division. Rather than fixed salaries, they were remunerated through a Transaction and Fee Revenue Share (“TFRS”) linked to revenue from clients they introduced, with 90% of revenue allocated to the new unit and net profits split equally between them. From April 2015, each manager also received HK$100,000 per month as an advance against future TFRS.
When the SFC commenced an audit of CCL in September 2015, relations became strained. CCL proposed reducing the revenue split to 80/20, which the Court found was validly agreed at a management meeting in April 2016, effective retrospectively from 1 January 2016. Both managers resigned in September 2016 on six months’ notice. In November 2016, CCL proposed that final TFRS payments would only be released upon “satisfactory completion of independent audits.” CCL then stopped making monthly payments. Mr Overdijk claimed constructive dismissal in February 2017. CCL sued both managers for repayment of sums paid, wages in lieu of notice, and other damages. The matter was transferred from the Labour Tribunal to the High Court.
Key findings
Does commission-based profit share constitute “wages”?
The Employment Ordinance (“EO”) defines wages broadly to include all remuneration, earnings, and commission, however calculated, payable in respect of work done. The Court found the TFRS fell squarely within this definition. The managers worked in return for their agreed profit share, the calculation method was contractually fixed, and MPF contributions had been made on the monthly payments. CCL’s own claim for wages in lieu of notice against the managers further undermined its argument that no wages were owed. This finding had significant consequences for both the constructive dismissal and termination claims.
Could entitlement to profit share be made conditional on an audit?
CCL argued that the managers had agreed to forfeit all accrued TFRS if an independent audit produced adverse findings. The Court rejected this. Reading the November 2016 email exchange objectively, the parties had only agreed to defer the timing of final payments until after an audit — not to surrender all accrued profit share if findings were unfavourable. The Court found it extraordinary to suggest that managers who had worked for over two years and generated significant revenue would agree to receive nothing, and concluded that CCL’s CEO was acting opportunistically to avoid payment.
Was the audit genuinely independent?
Even if payment had been conditional on an independent audit, the Court found the audit CCL relied upon did not qualify. CCL had actively shaped the scope and content of the report, provided feedback on drafts before finalisation, and the conclusions focused exclusively on deficiencies identified by CCL’s own CEO. The audit was neither impartial nor independent, and CCL could not rely on it to deny the managers their TFRS.
Constructive dismissal and termination
Because TFRS constituted wages, CCL’s failure to make monthly payments triggered statutory consequences. Under section 10A of the EO, an employee may treat themselves as constructively dismissed where wages remain outstanding for one month or more from the due date. CCL’s failure to pay Mr Overdijk’s January 2017 payment, together with outstanding TFRS, entitled him to claim constructive dismissal. Mr Lamaison was entitled to terminate by making payment in lieu of notice, set off against outstanding profit share. All of CCL’s claims — for repayment of commission, wages in lieu of notice, loss of revenue, and audit costs — were dismissed.
Outcome on quantum
Although the managers succeeded on liability and were in principle entitled to unpaid TFRS on the revised 80/20 basis, their quantum case was found to be unclear and unintelligible. New spreadsheets they sought to introduce had not been pleaded or properly evidenced, and the Court refused to entertain them. Rather than awarding nominal damages, the Court reluctantly ordered a further hearing on quantum, confined strictly to existing pleadings with no new evidence permitted.
Key takeaways
The decision carries three clear lessons for both employers and employees, particularly in the financial services sector.
First, courts look at substance over form. Employers cannot avoid wage obligations by labelling remuneration as “commission” rather than salary. If pay is earned in respect of work done and is capable of being expressed in money, it is likely to constitute wages under the EO, with all the protections that follow.
Second, compliance concerns do not justify withholding earned pay. Regulated employers may have legitimate grounds to renegotiate incentive arrangements going forward, but they cannot unilaterally suspend or claw back remuneration already accrued without clear and unequivocal contractual agreement. Attempting to do so risks both civil liability and criminal exposure under the EO.
Third, winning on liability is not enough. Even where a court finds in a party’s favour, a failure to properly calculate and evidence the quantum of a claim from the outset creates a real risk of receiving only nominal damages. Litigants (employers or employees) must ensure their claims are clearly pleaded and fully substantiated before proceedings begin.
