The Hong Kong Court of First Instance has confirmed in Caidao Capital Ltd v Harmen Christiaan Overdijk & Ors [2026] HKCFI 1326 that the definition of “wages” under the Employment Ordinance is broad enough to cover commission-only payments under a profit share remuneration structure and that withholding those payments can amount to constructive dismissal.
Employers who impose new conditions on commission payments, suspend them unilaterally or rely on ambiguous audit clauses to withhold remuneration face significant legal exposure.
Facts
In September 2014, the 1st and 2nd defendants (collectively, the “defendants”) joined the plaintiff company (the “Company”) as investment managers to set up and run a new wealth management team (the “WM Team”).
Their remuneration was “solely commission based and not fixed”. Revenue generated from clients they introduced was split “90/10” between the WM Team and the Company, with each Defendant receiving an equal share (known as the Transaction and Fee Revenue Share) of the WM Team’s net income on a quarterly basis (the “Commission”).
The Company never made those quarterly payments. Instead, in April 2015 the parties agreed that the Company would pay each defendant HK$100,000 per month (the “Monthly Payment”), to be set off against the Commission. At least 20 Monthly Payments were made from April 2015.
During an SFC audit of the Company, the Company’s CEO became dissatisfied with the compliance aspects of the defendants’ work and proposed to adjust the original “90/10” revenue split to “80/20”. In April 2016 the parties agreed to the proposed arrangement.
In early September 2016, the 1st defendant (“D1”) emailed the CEO asserting that the defendants had not been paid Commission in accordance with their employment agreements and that the parties should part ways. Shortly after, the defendants resigned by giving six months’ notice, but left their employment before the expiry of their notice period on 20 March 2017.
The following events occurred during the notice period:
- On 28 November 2016, the CEO emailed the 2nd defendant (“D2”) stating that the defendants’ final Commission payments “[would] only be made upon satisfactory completion of independent audits” by a consultant engaged by the Company. D2 replied that this was “clear and agreed” (the “Nov 28 Emails”).
- The Company then stopped the Monthly Payment to D2 in December 2016 and D1 in January 2017.
- D1 claimed constructive dismissal on the basis that the Company had failed to pay his salary and unilaterally suspended the Monthly Payments.
- D2 sought to buy out his remaining notice period and set off the amount of payment in lieu of notice against the Commission the Company owed him.
The Company sued for wrongful termination and claimed wages in lieu of notice. The Defendants denied the claims and counterclaimed for the outstanding Commission payments.
The decision
The court made three key findings:
1. Was Commission conditional on passing the audit? No.
The Company relied on the Nov 28 Emails to argue that Commission was conditional on passing an independent audit and that the defendants were not entitled to any Commission because the audit identified compliance deficiencies.
The court rejected this as “opportunistic” and held that it was unclear what “satisfactory completion of independent audits” means. In particular, the court noted that completing an audit and passing an audit are not the same thing. In any event, the defendants had never made clear that they were ready to risk losing all their Commission if the results of the audit were unsatisfactory. Indeed, the Judge found that it would be contrary to commercial common sense for the defendants to have agreed to receive nothing at all for work done for over two years.
The Nov 28 Emails were interpreted as addressing only the timing of the final commission payments, namely, payable after the audit’s completion and not conditional on its outcome.
2. Did the defendants earn “wages”? Yes.
The Company contended that because the defendants had no fixed salary and their remuneration was solely commission-based, they did not earn “wages”. It further argued that the Monthly Payments were only advances and not “wages”.
The court rejected this. The statutory definition of “wages” is broad and expressly includes commission. The focus is on the substance of what is being earned by the employee in respect of work done by him/her, and not how it is designated or calculated.
The Company’s argument also contradicted its own claim for wages in lieu of notice. The court held that both the Commission and Monthly Payments constituted wages, the latter being advances being paid in respect of ongoing work performed under the employment agreements.
3. Was D1 constructively dismissed? Yes.
Under section 10A of the Employment Ordinance, an employee may treat themselves as constructively dismissed where wages remain outstanding for one month or more from the date they fell due. This is in addition to any common law right to claim constructive dismissal for non-payment of wages.
Because the Company failed to pay D1’s January 2017 Monthly Payment (and his Commission after set-off), the court upheld D1’s constructive dismissal claim.
The Company’s claims were dismissed in their entirety. Both defendants were found to be entitled to their outstanding Commission.
Key takeaways for employers
Imposing new conditions on contractual payments (including commission) generally amounts to a variation of the contract of employment. Without an express unilateral variation clause, any proposed variation must satisfy the usual requirements of contract formation, namely, offer and acceptance (which may be inferred from conduct), intention to be legally bound and consideration.
Unilaterally imposing a change may result in underpayment or non-payment of contractual remuneration, which may give rise to both civil and criminal liabilities. In addition, this may constitute a repudiatory breach, entitling the employee to claim constructive dismissal.
To minimise the risk of disputes, any variation to the contract of employment (particularly in relation to remuneration arrangements) should be clearly documented in writing.
The judgment is available here.
