Honesty is the best policy – lies and inferences in discrimination claims

The recent Court of Appeal decision in Base Childrenswear v Otshudi is a useful reminder of how the burden of proof provisions work in the Equality Act 2010 and the dangers for employers of dishonesty in dealing with employees and tribunal claims. Charles Wynn-Evans examines the case.

Ms Otshudi was made redundant from her position as a photographer with immediate effect by the employer’s managing director. Otshudi challenged this decision as she considered that her dismissal was due to her race. The MD dared her to repeat that allegation in front of her line manager – which she did – and the MD ensured that the written grievance which she subsequently lodged was not addressed.

When Otshudi subsequently brought an employment tribunal claim for race discrimination, the employer’s defence initially was that the reason for its decision to dismiss Otshudi was purely financial.

However, the employer subsequently amended its defence to include a new reason for dismissal which it had previously not raised or relied upon. It suspected the employee of stealing stock as a result of finding some concealed items and the MD who informed Otshudi of her dismissal had lied about the true reason for her dismissal to minimise potential confrontation and “soften the blow”.

The employment tribunal decided that race was a factor in the employee’s dismissal. In so doing it applied the two-stage burden of proof provisions of section 136 of the Equality Act 2010. This provides that, if at the first stage the employee demonstrates a prima facie case of discrimination, the burden of proof then shifts to the employer to prove that it has not committed an act of unlawful discrimination.

In this case, at the first stage, the employment tribunal accepted that the burden of proof shifted to the employer – to explain its conduct and that its actions were in no way because of the employee’s race – because Otshudi had shown that there were facts from which the tribunal could conclude, absent any other explanation, that her dismissal was because of her race.

The employment tribunal accepted that this prima facie case was established on the basis of the MD’s “strong and intimidatory” response to being challenged about the true reason for the claimant’s dismissal when he knew he had given a false reason, his refusal to address the employee’s grievance and his persisting in maintaining that redundancy was the reason for dismissal long after relying on that explanation had failed to avoid the confrontation it was designed to.

At the second stage the employment tribunal did not accept the employer’s argument that the employee’s dismissal had nothing to do with her race. The employment tribunal rejected the employer’s argument that Otshudi’s dismissal was actually because of the suspected theft. The basis for this conclusion was the weakness of the employer’s evidence in support of that allegation, the fact that it had “rushed to judgment” and its considerable delay before changing its defence.

The Employment Appeal Tribunal rejected an appeal, taking the view that the employer’s false explanation of redundancy was capable of shifting the burden of proof and that the employment tribunal was entitled to find that the employer’s explanation of suspected theft was either fabricated and/or racially tinged.

In rejecting a further appeal, the Court of Appeal made clear that employment tribunals should not draw inferences of potential discrimination too readily just from the fact that an employer has lied. In this case, however, the employer had persisted with its lie long after it was clear that it had failed to soften the blow.

The employment tribunal was entitled to infer that the MD had been covering up a dismissal related to the employee’s race and that there was a racial element which contributed to or caused the dismissal, even though it did not explicitly find, as the Court of Appeal thought was implicit in its judgment, that the MD had made stereotypical assumptions (consciously or subconsciously) about the honesty of the claimant because of her race.

It is hardly a surprise that lying to an employee about the reason for his or her dismissal will not exactly endear the employer to the employee or the employment tribunal if the true position becomes clear.

The Otshudi decision does make clear that dishonesty about the reason for its actions will not, in the context of a discrimination claim, automatically shift the burden of proof to the employer and that the context needs close examination. However, it does emphasise the need for employers to be able to substantiate the non-discriminatory basis for their decisions with cogent and contemporaneous evidence and highlights the damage which can be done to an employer’s defence of a discrimination claim by being found to have adopted a misleading or dishonest position.