George Seah SCJ:

The factual background, so far as directly material to this appeal, may be briefly stated.

On 16 January 1980 the Holiday Inn Kuala Lumpur (hereinafter referred to as the Hotel) and the National Union of Hotel, Bar & Restaurant Workers (hereinafter referred to as the Union) on behalf of the employees of the Hotel who are members of the Union entered into a

Collective Agreement in respect of the period from 1 November 1978 to 31 October 1981. On 23 April 1980 the Industrial Court gave cognizance to the Collective Agreement pursuant to s. 16 of the Industrial Relations Act 1967 (hereinafter referred to as the Act). The Collective Agreement inter alia, provides for the collection of a 10% service charge on bills and receipts specified in the Service Tax Act 1975. The Hotel retains 12% and the remaining 88% of the gross amount collected is distributed to employees of the Hotel in accordance with a scheme of distribution set out in the Collective Agreement.

On 10 January 1981 the Union lodged a complaint under s. 56(1) of the Act to the Registrar of Industrial Court alleging that the Hotel has neglected to comply with the Collective Agreement taken cognizance of by the Industrial Court on 23 April 1980 (Cognizance No. 73/80)" in that the Hotel "has not computed service charge of Article 26 for the ordinary and hourly rate of pay for Article 7 - Weekly Rest Day, Article 11 -Public Holiday and Article 8-Overtime.

The Hotel denied the allegations of the Union contained in the Complaint and averred that it was not under contractual obligation to pay service charge pursuant to the Collective Agreement. It further stated that the Collective Agreement did not include service charge for computing the ordinary rate of pay. Alternatively, the Hotel argued that the service charge is a variable allowance and as such denied the Union's claim of contractual right thereof as wages.

The Industrial Court allowed the claim of the Union on 18 February 1981 and said:

In interpreting a Collective Agreement which has been taken cognizance of by the Court under the provisions of the Act (as is the case with the agreement here) regard must be had to the provisions of the Employment Ordinance 1955 (the Ordinance); see Industrial Court Awards Nos. 157 and 158 of 1980. In both Awards, we discussed in detail the effect of s. 601(1) of the Ordinance (as amended on 1 October 1980) vis-a-vis collective agreement on overtime and other rates of pay. We do not propose to repeat ourselves here. All we need say is that the formula for the calculation of ordinary rate of pay under the agreement is inferior to that laid down by law. The law must, therefore, prevail: s. 7 of the Ordinance. In any event, Article 3 of the agreement reads:

(a) In the event that any legislation is introduced which is less favourable than those in the Agreement, then the benefits in the Agreement shall continue to remain in force.

(b) If the benefits in the legislation are more favourable than those in the Agreement, then the provisions of the legislation shall supersede the benefits in the Agreement.

We hold that a share of the service charge is part of remuneration of the Hotel employee as defined in wages in s. 2 of the Ordinance and as that section does not specifically exclude service charge it is wages within the meaning of ordinary rate of pay under s. 60I(1) of the Ordinance. We accordingly hold that for the purpose of calculating Rest Day pay, Public Holiday pay and Overtime, ordinary rate of pay includes the share of the service charge payable to the employees of the Company.

In the event, we Order the Company to pay arrears of-

(i) Rest Day pay,

(ii) Public Holiday pay, and

(iii) Overtime pay

being the difference already paid and the amounts payable by virtue of this Award to all employees entitled thereto with effect from 1 October 1980 on or before 31 March 1981.

The Hotel was dissatisfied with this Order and obtained leave from a Judge to apply for an