The High Court of Hong Kong has awarded some HK$61 million in damages and compensation to 18 pilots formerly employed by Cathay Pacific whose employment was terminated in 2001 during a bitter industrial dispute.

Background

In 2001, Cathay Pacific and the union representing its pilots were locked in a long running dispute over rostering practices and pilots’ entitlements. The union had advocated what was described as a ‘contract compliance’ or ‘WOE’ (withdrawal of enthusiasm) campaign by its pilots. This involved pilots sticking to the letter of their employment contracts, for example being completely uncontactable on their days off, being extremely cautious about fitness to fly on reserve duty days, taking the full 45 minutes preparation time before leaving home if called to duty, and arriving at the airport no earlier than the designated minimum of 80 minutes prior to departure time.

In mid 2001, Cathay Pacific management conducted an internal review of every pilot, identifying those who had attendance problems, disciplinary warnings, were considered to be unhelpful and uncooperative in the performance of their duties or to be difficult to deal with from a management perspective or in terms of relations with other staff. This review resulted in the pilots being ranked, and ultimately 49 were selected for termination of employment. In all cases, termination was with payment of three months’ salary in lieu of notice. No cause for dismissal was stated in any termination letter.

Court’s findings

The claimants (18 of the 49, the others having settled with Cathay Pacific for undisclosed sums) pursued claims for:

  • statutory compensation under the HK Employment Ordinance for termination without a valid reason  
  • damages for breach of contract in that Cathay Pacific failed to comply with applicable contractual disciplinary procedures in relation to misconduct, and  
  • damages for defamation in relation to public comments made by Cathay Pacific representatives accusing the pilots of being unprofessional, of being bad employees, and of not caring for Cathay’s best interests or those of Hong Kong.

The claimants were successful on all three counts.

In relation to the unfair dismissal claim, Cathay Pacific argued that the pilots had been dismissed due to their conduct, being unusually high rates of calling in sick on duty or reserve days, their failure to discuss with management the reasons as to why such was happening, and their perceived negative attitude towards Cathay and fellow employees. The court rejected this argument and held that the predominant reason for the terminations by Cathay was the perceived participation by the pilots in union activities. The court awarded the maximum compensation under the Employment Ordinance (HK$150,000) to each plaintiff for the unfair dismissal.

In relation to the breach of contract claim, the court held that Cathay could not have it both ways—on the one hand to say it was a ‘no cause’ termination on notice, and on the other to make serious allegations of professional failings on the part of the pilots. The court found that since allegations of misconduct formed part of the motivation for the dismissals, the relevant contractual disciplinary procedure in relation to misconduct should have been followed. The court awarded each plaintiff one month’s pay as damages for the wages they would have received during the period that it estimated it would have taken for the disciplinary process to be followed.

In relation to the defamation claim, the court found that the statements made by Cathay Pacific were defamatory and that it had no defence of justification or qualified privilege. General damages of HK$3 million and aggravated damages of HK$300,000 were awarded to each Plaintiff in relation to the defamation.

Cathay Pacific have lodged an appeal against the decision.

Implications for employers

This case serves to remind employers of the importance of treading carefully in a dismissal scenario, particularly where unions and industrial disputes are involved. It illustrates that in Hong Kong:

  • A court will look at all of the facts and circumstances to ascertain what is the ‘true’ reason for dismissal, and determine whether or not that reason is a valid reason under the Employment Ordinance.  
  • It is important for an employer to apply relevant contractual terms, in particular any disciplinary policy that may apply, as a pre-requisite to proceeding to termination. A court will not accept an employer ‘dressing up’ a termination as a not for cause termination on notice, when in truth the employer’s reason related to the conduct of the employees.  
  • Employers should be very careful about statements made to third parties regarding employees or former employees, as damages for defamation can be significant.