Taking disciplinary action

by Susana Ng, senior associate, Allen & Overy

Article contributed by Allen & Overy

A disciplinary process can be lengthy and in some cases the time needed to complete the procedure can exceed the notice period.

To avoid the risk of litigation, some employers choose to bypass prescribed disciplinary procedures by making payments in lieu of notice when an employee is let go because of misconduct. In such cases, employees are deprived of the opportunity to contest unjustified allegations of wrongdoing.

The legality of such action was scrutinised in the case of John Simpson Warham v Cathay Pacific Airways Ltd (2009).

In this case, Cathay Pacific terminated the employment of nine aircrew officers by paying them wages in lieu of notice without providing any reasons for termination. The officers' employment contracts all contained provisions setting out the procedures to be followed in case of misconduct. They contended that Cathay Pacific ceased their employment because of their involvement in a trade union and their instigation of industrial action.

After terminating the aircrew's employment, Cathay Pacific's management made public statements accusing them of an unhelpful attitude at work, which allegedly resulted in disruptions to the airline's operations, affecting its employees, customers and the reputation of Hong Kong.

The aircrew officers sued Cathay Pacific for wrongful termination of their employment, claiming that the airline failed to follow the disciplinary procedures set out in their employment contracts, and seeking damages. Cathay Pacific argued that it had an unfettered right to choose whether to invoke disciplinary procedures or to make payments in lieu of notice.

Procedural requirements

Under the Employment Ordinance, an employer may, without notice or payment in lieu, suspend any employee under certain circumstances. Generally, suspension in this manner may not exceed 14 days.

An employer may suspend the service of a member of its staff as a disciplinary measure for similar reasons that it may terminate his employment contract summarily, pending a decision as to whether or not it will exercise its right to terminate the contract summarily, or pending the outcome of any criminal proceedings against the employee arising out of, or connected with, his employment.

If criminal proceedings are not concluded within 14 days, the suspension may be extended until the process is completed.

The Court of First Instance firstly had to decide whether to support Cathay Pacific's contention. It was held that the procedural requirement, as set out in the disciplinary procedure provision in the officers' employment contracts, was not a free-standing option for Cathay Pacific to choose.

The judge referred to a number of British cases, stressing that a person's employment has come to be regarded as an important aspect of identity, self-esteem and well-being. If the parties therefore agreed on specific provisions that give the employee certain rights before an employer may dismiss him, the court must be careful in construing the employment contract so as to not inadvertently undermine or negate such provisions.

The rationale is that an employee entering into an employment contract would not have intended provisions protecting the security of his livelihood to be readily bypassed.

Consequently, the court held that Cathay Pacific had not been entitled to bypass its disciplinary procedures before terminating the aircrew officers' employments for alleged misconduct.

Q & A on disciplinary action and termination of employment
Q1 Is an employer required to give reasons for termination?
A1 It is generally possible for an employer to terminate an employee without giving any reasons, either by giving notice or by making a payment in lieu of notice. However, employees who have been employed under a continuous contract for 24 months or more are protected from unreasonable dismissal, unless the reason for their termination falls within the recognised grounds for dismissal.

Q2 If an employer has a disciplinary procedure in place, does this mean it has to apply the procedure in every situation involving termination?
A2 It depends on whether the procedure is of a contractual nature. Generally, if an employment contract expressly states that the procedure must be applied in every situation involving termination (including termination by giving notice) then the employer must adhere to it before confirming any termination. However, if a disciplinary procedure is non-contractual, the employer does not have to comply with it.

Taken from Career Times 11 September 2009, p. A11

(Last review date: 23 August 2013)

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Disclaimer: The opinions expressed in this article are those of the contributor

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