It may be obvious, but employers should neither issue nor rely upon a written warning made in bad faith. It is equally plain that any written warning issued in bad faith should not be used to dismiss an employee. Otherwise, this would taint the Company's termination decision.

What if the decision-maker genuinely but mistakenly believes there is no issue of bad faith and relies on a written warning to dismiss an employee? According to a recent Court of Appeal decision in the UK (which is likely to be followed in Hong Kong), such a termination decision would still be tainted if the warning was indeed issued in bad faith. This may be a new avenue for claimants to pursue in dismissal cases in Hong Kong.

The Facts

Mr. Way was a recruitment manager. He was given a final written warning by his employer in 2010 for assisting an acquaintance to obtain employment in breach of the Company's fair recruitment procedure. At the time that he was given the final written warning, Mr. Way did not object to it.

When that final warning was still ‘live’ on his personnel file, Mr. Way committed further misconduct that would, in and of itself, normally have attracted a final written warning. However, taken with the earlier final warning, Mr. Way was dismissed by the Company for misconduct.

After being dismissed, Mr. Way argued with the Company's senior management that the original final written warning was issued in bad faith because the manager in charge had sanctioned the recruitment.

The CEO of the Company then investigated the points made by Mr. Way but rejected them. The CEO found no issue of bad faith in the original written warning.

Dissatisfied with the dismissal decision, Mr. Way took the Company to Court, and the case went to the Court of Appeal in the UK.

The Judgment

The UK Court of Appeal decided as follows:

  1. If a written warning was issued in bad faith, the Company would not be acting reasonably in taking such written warning into account when deciding whether to dismiss the employee.
  2. The fact that the Company's senior management erroneously thought there was no bad faith in issuing the warning would not assist the Company. It would still be unreasonable for the Company to rely on the bad faith warning in making any decision to dismiss the employee.

In the circumstances, the Court of Appeal remitted the claim back to the lower court to consider whether or not the warning was indeed issued in bad faith.

Tips for Hong Kong employers

Taking a view on whether a written warning was issued in bad faith is not easy. However, it is not difficult for an employee to start a claim to challenge the bona fides of a written warning following his dismissal, which the employer will then have to justify. A dismissal decision made in good faith but in reliance of a final written warning issued in bad faith could then be challenged in court.

  1. Do's: 
    • If an employee complains that an earlier warning was issued in bad faith, check carefully whether there is any merit or substance to the complaint.
    • Give the employee a fair opportunity to explain his points. 
    • If the decision is to go ahead with the dismissal, record the rationale of the termination decision carefully.
  2. Don'ts: 
    • If in doubt, do not rely on the warning as the basis of any termination decision but instead create a fresh process for the disciplinary sanction or dismissal, which is more robust and not tainted.
    • Do not allow a manager to issue written warnings if the manager has a personal interest (or a conflict of interest) in the outcome of the process.
  3. Health warning: 
    • Termination decision tainted by a final warning issued in bad faith could backfire on the Company if it affects the employee's eligibility to discretionary benefits contingent on continued employment with the Company.