Campbell Richard Blakeney – Williams & Others v Cathay Pacific Airways Ltd & Others

This is a Court of Final Appeal Case determining on the meaning of “trade union activities” under section 21B of the Employment Ordinance (“EO“) and whether an employer has the right to by-pass the contractual disciplinary procedures and terminate the employment of an employee relying simply on the termination provisions.

In mid 1999, a dispute developed between Cathay’s management and Hong Kong Aircrew Officers Association (the “Union“) with respect to Cathay’s pilots’ rostering practices and contract entitlement.

In July 2000, the members of the Union voted by a very substantial majority to start a “contract compliance” regime involving a “rigid adherence” to the strict terms of the pilots’ employment contracts, and “Maximum Safety Strategy” action (“MSS“) involving reversing the established practice of expediting safety operations as laid down in Cathay’s operational manuals leading to flights delay of 15 to 60 minutes or more. These had a seriously disruptive effect on Cathay’s business.

In view of the Union’s actions, one of Cathay’s reactions was to set up an internal review team to identify those pilots who “had an attendance problem”, “had a warning letter on file in connection with a disciplinary matter” or “were considered to be unhelpful and uncooperative”. Cathay identified 49 pilots for dismissal.

On 9 July 2001, Cathay issued letters terminating the employment of the said pilots terminating their employment by way of 3 months’ payment in lieu of notice, and no reason for the dismissal was identified in the letter. On the same date, Cathay issued a press statement criticizing the Union and issued a standard form letter to all members of Cathay’s flight crew saying that the industrial action would “drain Cathay’s resources” and “damage the reputation of the company worldwide”.

In 2006, the majority of the relevant pilots began proceedings against Cathay at the Court of First Instance. The trial judge decided, inter alia, that:-

On appeal by Cathay, the Court of Appeal inter alia:-

• upheld the trial judge’s decision that Cathay was liable for damages under the EO claim, on the ground of the plaintiffs’ participation in Union activities, but not their Union membership, and declined to interfere with the award of HK$150,000, the maximum permitted under the EO; and

• reserved the trial judge’s decision that the plaintiffs had established the wrongful termination claim, and therefore set aside the award of one month’s salary.

The pilots appealed to the Court of Final Appeal against the decisions of the Court of Appeal set out in (b) above, and Cathay cross- appealed against the decision of the Court of Appeal set out in (a) above.

Section 21B of the EO

The issue was whether Cathay terminated the contract of employment of each of the plaintiffs by reason of his exercising “the right, at any appropriate time, to take part in the activities of the Union”.

The determination of this issue turned on (i) Cathay’s reasons for dismissing the pilots, and (ii) the meaning and effect of section 21B.

For Cathay’s reasons for dismissing the plaintiffs, all the pilots and Cathay accepted that it was the trial judge’s conclusion that the key reason for dismissal was Cathay’s perception that the pilots were themselves the most active participants in the limited industrial action and the most likely adherents to the MSS action.

Section 21B provides that :-
“(1) Every employee shall as between himself and his employer have the following rights-
…
(d) the right to be or to become a member or an officer of a registered trade union…;
(e) whether he is a member or an officer of any such trade union, the right, at any appropriate time, to take part in the activities of the trade union;

(2) Any employer…who-
(a)prevents or deters, or does any act calculated to prevent or deter, an employee from exercising any of the rights conferred on him by subsection (1); or
(b) terminates the contract of employment of … an employee by reason of his exercising any such right,
shall be guilty of an offence….”

The question of principle to which this case gave rise was the breadth of the expression “activities of the trade union”, and in particular, whether it extended to taking part in contract compliance, or possibly, proposing to take part in MSS action.

The Counsel for Cathay contended that industrial action, whether working to rule (which would include contract compliance and MSS) or striking, was not within the expression “activities of the trade union”. He claimed that that expression was apt only to cover actions which were performed by an employee for or on behalf of a union, as opposed to actions performed by an employee in his capacity of an employee, even where it was with the support of, or at the behest of, the employee’s union. In other words, the expression applied to acts such as attending meetings of, or on behalf of, the union, deciding on union policy, and implementing, organising or enforcing actions consequential on decisions of officials or members of the union, all of which were properly described as union activities.

There were a number of decisions of the United Kingdom Employment Appeal Tribunal which provided some guidance. However, those English cases were not entirely mutually consistent and one potentially relevant decision was cogently criticised in one of the leading English employment law books. In addition, the UK Act contained provisions which had no equivalent in the EO, and those other provisions inevitably influenced the interpretation of the relevant provision of the UK Act.

The Court of Final Appeal considered that as a matter of ordinary language, there was an obviously powerful case for saying that industrial action, such as working to rule or striking, was not one of the “activities of the trade union”. Even where the union initiated, organised and enforced, a work to rule or a strike, ran the argument, it was not the union which worked to rule or struck: it was the employees who did so. On such basis, therefore, the organising and enforcing of the strike or work to rule might be union activities, but the strike or work to rule themselves were not.

However, the Court of Final Appeal considered that once one took into account common sense and practicality, there was an even stronger argument for saying that industrial action was within the expression “activities of the trade union”. If a trade union had proposed, organised and proceeded to enforce industrial action, it seemed that any employee participating in the action would think of himself as taking part in an “activity of the trade union”. Further it would seem surprising if an employee who lobbied for, organised or policed such industrial action could rely on the protection affected by the EO, whereas an employee who merely took part in such action could not.

The Court of Final Appeal therefore upheld the Court of Appeal’s finding.

Wrongful termination of the plaintiffs’ employment contracts?

Clause 33 of the employment conditions provides that “DGP will apply to all Officers”. Clause 35.3 stated that “an Officer’s employment may be terminated after the probationary period by either party, giving to the other party not less than 3 months’ written notice or payment in lieu thereof”.

Paragraph 8.1 of the DGP explained that there were five disciplinary actions, which were, admonishment, warning, reprimand, dismissal, and summary dismissal. Paragraph 8.5(a) stated that “dismissal is normally reserved for more serious offences or for the repetition of less serious offences”. Paragraph 8.5(b) provided that “dismissal will take place after the appropriate notice has been given or payment in lieu of notice”.

The Court of Final Appeal considered that DGP was part of the employment conditions and accordingly clause 35.3 could not be construed in isolation, and had to be read together with the DGP. This approach, which was simply to try to give effect, as far as was possible, to all provisions in a contract, even where they appeared at first blush to be contradictory or mutually inconsistent, was applied in the Court of Final Appeal in the case Ko Hon Yue v Chiu Pik Yuk and others.

The Court of Final Appeal was of the view that if it was open to Cathay to terminate an employee’s contract for disciplinary reasons simply by invoking clause 35.3, it would mean that the procedures laid down in the DGP in a case where an employee was being dismissed for “gross misconduct” within the meaning of paragraph 8.5 of the DGP, could be circumvented by Cathay. It appeared that unless the wording of the employment conditions ineluctably point to such a conclusion, it should be rejected.

Accordingly, the Court of Final Appeal concluded that dismissal for a disciplinary reason in accordance with clause 35.3 could only take place after the procedures laid down in DGP had been gone through.

Counsel for Cathay claimed that in this case the dismissal letter sent to each pilot was not expressed to be for disciplinary reasons, let alone for gross misconduct, and therefore, he claimed that the DGP had no relevance. The Court of Final Appeal on the facts of this case, rejected that submission. It was true that Cathay in the dismissal letter did not invoke or refer to any aspect of the employee’s conduct. However, simply to focus on the dismissal letters, and to ignore what was being said by Cathay at around the same time, appeared to be quite unrealistic. It was unrealistic to say that the pilots were dismissed by Cathay for no reason.

Counsel for Cathay further raised that it would be peculiar if the effect of reading clause 35.3 and the DGP together meant that an employee was better off if Cathay was intending to dismiss him for disciplinary reasons than if it was intending to dismiss him for reasons which involved no wrong-doing on his part. The Court of Final Appeal considered that based on the above analysis, there was no capriciousness in the dismissal procedures. If the dismissal was not based on any wrong-doing by the employee, he was merely entitled to three months’ notice, or payment in lieu. However, if the employee was to have the “stigma” of a disciplinary reason for his dismissal, then, as a matter of elementary justice, he was entitled to have the protection of the DGP procedure first, and the fact that this might give him a few weeks in his job, as against someone who was dismissed for reasons involving no wrong-doing on this part, was merely the consequence of that entitlement.

The Court of Final Appeal therefore allowed the pilots’ appeal and restored the award of one month’s pay made by the trial judge to each plaintiff.

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Cynthia Chung

Partner | Corporate Commercial | Employment and Pensions

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