The importance of proof of genuine reasons for dismissal in defending discrimination claims

The Hong Kong District Court has recently handed down a judgment against a logistics company (Respondent) for refusing to pay a former pregnant employee (Claimant) her year-end bonus and for not renewing her employment contract after she had informed the Respondent about her pregnancy. 

The Claimant in the case of 周露娜 v 中旅貨運物流中心有限公司 [2023] HKCU 3488, was former responsible personnel of the Respondent’s Logistics Business Unit and Sales and Marketing Unit. After informing the Respondent of her pregnancy, the Claimant received a “Notification of Non-Renewal” from the Respondent that her employment with the Respondent would not be renewed due to restructuring and downsizing of the Respondent’s business. The Respondent also did not pay the Claimant her year-end bonus.

The Claimant made a complaint to the Equal Opportunities Commission (EOC) alleging that the Respondent had discriminated against her on the ground of her pregnancy. After failing to resolve the complaint at the EOC, the Claimant commenced legal proceedings against the Respondent at the District Court.   

The Claimant sought, among other things, compensation for injury to feelings, loss of future income, loss of bonus, a letter of apology and a reference letter from the Respondent.

The court’s analysis

The court noted that the burden is on the claimant to prove discrimination on the balance of probabilities.

At the same time, the court also referred to a number of past local cases (such as Haden v. Leighton Contractors (Asia) Ltd and Tan, Shaun Zhi Ming v. Euromoney Institutional Investor (Jersey) Ltd, and Yeung Chung Wai v. St Paul’s Hospital) that a claimant may rely upon inferences based on the primary facts as there is seldom direct evidence on discrimination, which is usually not overt. 

Inference may be rebutted if the court accepts a respondent’s reasons as genuine even if they may be unjustified (relying on Kamlesh Bahl v. The Law Society, Robert Sayer, Jane Betts). 

The court reached the following conclusions by applying the above principle and taking into account all relevant evidence.

Non-renewal of employment

The court considered that the Respondent’s reasons for not renewing the Claimant’s employment - “business restructuring” and “business downsizing” - was unsubstantiated mainly due to the fact that:

• The Respondent has not produced any document whether by way of internal discussion, plan, analysis, report or email and such concerning its “business restructuring,” rather it was only through the “Notification of Non-Renewal” that the Claimant had heard about the “business restructuring” from the Respondent for the first time.
   
• The Respondent had only presented broad and general figures on its revenue and profitability to support its case but did not divulge other known facts other than the simplistic picture portrayed by the Respondent.  

The court also considered that the various accusations regarding the Claimant’s work performance were baseless and unfair as the Respondent had never issued to the Claimant any written warning or complaint against or concerning any of the allegations of unsatisfactory performance made against her in the proceedings.

The court further took into account the proximity of time between the Claimant informing the Respondent of her pregnancy and the Respondent hiring other staff to take up the Claimant’s role, which was another strong indication that the non-renewal of the Claimant’s employment was partly, if not wholly, due to her pregnancy. 

Based on the above facts, the court inferred that the Claimant’s pregnancy was one, if not the substantial, reason for not renewing her employment with the Respondent (regardless of whether there might be other reasons). As such, the court concluded that the Respondent was liable for discrimination against the Claimant by not renewing her employment due to her pregnancy.

Refusal to pay claimant year-end bonus

The court noted that it was the Respondent’s usual practice and treatment for not paying an employee a discretionary bonus if during that year the employee either left the Respondent’s employment, was dismissed, or the employee retired. Such policy applied to staff of the same or similar grade as the Claimant.

The court, however, considered that the Respondent’s claim of its refusal to pay the Claimant her year-end bonus due to her lack of legal entitlement under the above policy to be an after-thought.

The court considered that the refusal to pay the Claimant her year-end bonus was consequential upon the non-renewal of her employment, and therefore the refusal was also discriminatory, as the non-renewal was.

All the unsatisfactory performance reasons put forth by the Respondent for the refusal to pay the year-end bonus were not properly substantiated. 

In the circumstances, the court inferred that the refusal to pay the Claimant her 2017 year-end bonus was based on her pregnancy (or at least one of the reasons) and held that the failure to pay the Claimant her year-end bonus was a less-favourable treatment on such discriminatory ground.

Damages for injury to feeling apology, reference letter and other relief

Judgment was entered against the Respondent to pay the Claimant the following:

• Loss of income of HK$306,680 and interest thereof at half judgment rate from 28 February 2018 (the date the Claimant would have received the first monthly salary) to the date of the judgment.
• Year-end bonus in the sum of HK$498,500 and interest thereof from 1 April 2018 (the date the Claimant would have received the bonus) to the date of the judgment at prime lending rate.
• Interest on both sums thereafter at judgment rate until full payment.

In addition to the above compensation, the court also awarded compensation for injury to feelings in the sum of HK$130,000 which was assessed provisionally on the basis that the Respondent will issue to the Claimant an apology and a reference letter in appropriate form and terms. Subject to the Respondent’s willingness to issue an apology and reference letter to the Claimant, the court may likely vary this compensation figure and/or possibly award further exemplary damages to the Claimant based on the guidelines given by the CFA in the case of Ma Bik Yung v. Ko Chuen.

In our view, the provisional amount assessed is on the lower end given the factual circumstances and the nature of the discriminatory conduct.    

What does the outcome of the judgment mean for employers?

The judgment sends a strong reminder to all employers that pregnancy discrimination in the workplace will not be tolerated. An employer should have appropriate anti-discrimination policy in place to prevent such conduct.

When dealing with an employee with protected characteristics, especially in cases of termination, employers should ensure that its decision to terminate such employee does not involve consideration of any of the employee’s protected characteristics.  It is critical for employers to be able to demonstrate the genuine reason(s) for termination (or other “less favourable treatment”) and that the reason(s) are not in any way unrelated to any protected characteristics.  Failure to do so may lead to the court drawing an adverse inference of unlawful discrimination against the employer.

Accordingly, employers should clearly document in its contemporaneous internal records of its decisions to dismiss employees with detailed true and legitimate reason(s) for its decision.  Having in place such records may help defend against discrimination claim by former employees and minimise the risk of any allegation that a protected characteristic is one of the employer’s dismissal decisions.

Employers should consider seeking legal advice before making the relevant decisions if they consider that there may be a risk of discrimination allegation by the employees.

Russell Bennett is head of the Employment Practice at Tanner Dewitt in Hong Kong.