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Case update (3): Discrimination – Beware False Reasons for Dismissal 

Summary:  If an employer lies (albeit in good faith) about the reason for dismissal, is that enough to shift the burden of proof in a discrimination case?

Yes, says the Court of Appeal in Base Childrenswear Ltd v Otshudi available here.

Facts:  The employee, Ms Otshudi, worked at Base Childrenswear Ltd, the employer. The employee had only three months’ service when the employer called her into a meeting and dismissed her without notice. The reason given was redundancy but the employee believed it was because of her race (she is of black African ethnicity). She raised a grievance and an appeal against her dismissal but the employer did not respond to either.

The employee brought a Tribunal claim of racial harassment. At the Tribunal, the employer initially argued that the reason for dismissal was redundancy. However, when the employer could produce no documents supporting the redundancy claim, it said the real reason was suspected theft.  This was because designer clothes had been found concealed in the area in which the employee worked. The employer said that redundancy had been given as the reason to avoid confrontation.

The employee brought a Tribunal claim for race discrimination.  The Tribunal upheld the employee’s claim and held that the dismissal constituted racial harassment. The Tribunal awarded nearly £30,000 compensation plus interest and a 25% uplift for the employer’s disregard of the ACAS Code.  The Tribunal also showed its disapproval of the misrepresentation of the grounds for dismissal by an order for the employee’s costs in dealing with the redundancy argument.

The most important aspect of the Tribunal’s decision was that it found the employer’s inconsistent and unconvincing defence and its lying to the employee, was enough to shift the burden of proof from the employee to the employer.   The employer then failed to show that the employee’s race had no bearing on the decision to dismiss, particularly when it had not investigated the circumstances of the suspected theft.

The employer appealed to the EAT, which dismissed the appeal. The employer appealed to the Court of Appeal, arguing that the burden of proof should not have shifted from the employer to the employee.

The Court of Appeal dismissed the appeal and found that it was right for the burden of proof to shift.  This was because, in particular, the employer had lied about the reason for the dismissal and had persisted in the lie. The reason for the lie – that it wished to avoid conflict – was no longer valid once Tribunal proceedings had been brought, as it was clear that conflict had not been avoided.

Once the burden of proof had shifted, it was up to the employer to show that the reason for its treatment of the employee was not her race. The Court of Appeal held that, although the employer’s belief in the employee’s theft was genuine, the fact that it had formed its belief that she had stolen clothes so readily, and on so little evidence, showed that it was likely to have been tainted by a stereotypical assumption based on her race.

Implications: The case highlights the dangers of giving a false reason for dismissal, even if the reason is given in good faith. Employers should be clear and honest about the reasons from the outset. It can be tempting to use redundancy as a reason for dismissal because it is a “no fault” dismissal and may be less likely to trigger bad feeling or even a claim. It may also be a quicker and simpler route than, in particular, performance management. However, if redundancy is not the genuine reason for the dismissal, mislabelling it as such can be dangerous, particularly where, as in this case, no redundancy process is followed.

This case also serves as a reminder that employers should consider following their disciplinary and grievance procedures to some extent, even where the employee does not have the required two years’ length of service to bring an unfair dismissal claim.  This is because employees do not need any service for discrimination or whistleblowing claims. If, as in this case, there are sufficient facts from which the Tribunal could decide that the employer has committed an act of discrimination, then the burden of proof will shift to the employer to prove it had a non-discriminatory reason for the dismissal.  Therefore, where there is a risk of discrimination or whistleblowing being raised, following a process will help the employer establish the real reason for the dismissal.

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