Summary dismissal for alleged dishonesty

By Bucky Chan, Partner, Litigation Department, Woo Kwan Lee & Lo

Article exclusively contributed by Woo Kwan Lee & Lo

Mr T had been employed as an auditor since August 1995 by Q Company, the Appellant in this case. He was assigned to conduct a certification audit of the client H Company on 24 April 2002 and attended their office as scheduled. After arriving, he found that Mr Y, the person in charge, would be out most of the day and unable to take part in the audit which, therefore, could not proceed as planned.

The certification audit consisted of two parts: examination of documents and an interview. So that he could keep his other commitments, Mr T accepted Mr Y's suggestion of taking the file of relevant documents and completing that part of the audit first. They agreed to meet again on 27 April and duly completed the audit interview within half a day.

To save having to explain all these details to his employer, Mr T reported that the certification audit had been completed on 24 April and the Appellant issued an invoice charging H Company for one full day's work. Mr Y, however, complained about being overcharged. He said the audit had taken only half a day on 27 April, not taking account of the fact that Mr T had done the documentation audit at home.

When questioned, Mr T clearly explained everything to the Appellant. Nevertheless, his explanation was rejected and he was summarily dismissed under section 9 of the Employment Ordinance on the grounds of "dishonesty". He took his case to the Labour Tribunal where the Presiding Officer held that Mr T had committed a serious fault by concealing how the audit was conducted and misstating the date. It was emphasised that a high standard of good faith was expected of anyone employed by the Appellant, a quality assurance authority.

However, the Presiding Officer found in favour of Mr T and held that section 9 dismissal was not justified. In his ruling, he sought to balance the impact on Mr T of the summary dismissal with the effect of his "dishonesty" on the Appellant and noted:
(a) Mr T's employment record during the previous six years
(b) The only error in handling the audit was the misstatement of the date
(c) Mr T did not benefit in any way
(d) Mr T would lose over HK$200,000 including wages in lieu of notice, and long service payment if summarily dismissed; and
(e) The Appellant had no consistent criteria for summary dismissal.

Later, the Appellant decided to appeal to the High Court contending that Mr T's actions did not meet the high ethical standards expected of someone in his position.

Hearing the appeal, Deputy High Court Judge To agreed that the court should look beyond the label of "dishonesty" as justification for summary dismissal. The seriousness of the employee's alleged dishonest conduct should be considered and each case assessed on its merits. Summary dismissal was not justified in all cases and the test was whether the employee had been in breach of an employment agreement. Only where there had been a breach of one or more specific duties, and such a breach constituted a repudiation of the contract of employment, would summary dismissal be justifiable.

Q&A on summary dismissal
Q1 Based on this judgment, what should an employer do when considering whether to dismiss an employee summarily for alleged dishonesty?
A1 Firstly, the employer must consider the actual fault committed. If not serious, the employer cannot dismiss the employee summarily but may consider other penalties. If it is something like theft of the employer's property, which is serious and amounts to a breach of the employment agreement, the employee can be summarily dismissed. However, if there are mitigating circumstances, the employer must consider the impact of summary dismissal on the employee and the real effect of the original action on the employer. If the former outweighs the latter, the employer should not consider summary dismissal.

Q2 In a hypothetical case, Mr F had worked for G Company for 10 years and had performed well. He was given a two-day assignment overseas and told he could claim reimbursement of all expenses upon his return. As he was not confident of finishing the work within the time allowed, he applied for a day's leave and stayed overseas for a third day to complete the job, without telling his employer. After the trip, he applied for reimbursement of expenses for the full three days, but stated they were incurred only over the two days of his official trip. Could G Company dismiss Mr F summarily under section 9 of the Employment Ordinance on the grounds of providing false information in his expenses claim?
A2 No, G Company cannot justify summary dismissal. Mr F's conduct could be seen as "dishonesty" of a serious nature because the system of reimbursement relies on the employee's good faith and there has been a breach of trust. However, in mitigation, the incorrectly claimed expenses were incurred while working for the employer. Therefore, G Company should consider Mr F's good record, his intention of completing the job, and potential losses he might suffer. These factors would make summary dismissal unjustifiable.

Taken from Career Times 12 November 2004

(Last review date: 23 August 2013)

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