The Court of Appeal has held that if a manager lies in good faith about the reason for dismissal, this is enough to shift the burden of proof from employee to employer in discrimination cases.

The facts of this case concerned Ms Otshudi, a photographer employed by Base Childrenswear, who is of black ethnicity. Ms Otshudi was made redundant on 19 May 2016 and challenged the decision on the grounds of racial discrimination.

Base Childrenswear initially stated in their ET3 that Ms Otshudi’s redundancy was for “purely financial/economic reasons”. However, three weeks before the substantive hearing, the ET3 was amended to include an additional reason for her dismissal. This was due to finding items of clothing that were “concealed” in the photography room that only Ms Otshudi had regular access to, implying Ms Otshudi was intending to steal them. Subsequently the manager admitted lying about the real reason for redundancy in order to “minimise potential confrontation”.

The Court of Appeal assessed whether there had been an error of law in a finding of racial discrimination, and in doing so, applied the burden of proof test from the Equality Act 2010.

In applying the burden of proof test from the Equality Act, the Claimant must first prove a prima facie case whereby a tribunal must decide that, in the absence of any other explanation, the respondent(s) had contravened a provision of the 2010 Act. If a prima facie case is adequately established, the burden of proof then shifts to the respondent(s) to prove that they have not committed an act of unlawful discrimination. In this instance, the Court of Appeal held that the manager’s persistence in lying about the reason for redundancy was sufficient to form a prima facie case for race discrimination, and thus shifted the burden of proof to Base Childrenswear.

They were unable to show that race played no part in Ms Otshudi’s dismissal. Pivotally the Court of Appeal held that even if the manager had a genuine belief that a potential theft could occur and had lied about the reason for dismissal in good faith, his belief was influenced by a racial prejudice and not by adequate investigation. The employer’s appeal was dismissed.

This case highlights that employers must ensure they adequately investigate any form of concerns they have over the conduct of an employee and must also ensure they can demonstrate a reasonable investigation took place.  This also highlights masking the real reason for dismissal should be avoided, even if it is to avoid a confrontational conversation surrounding an individual’s exit.

We are able to advise on the procedure of internal investigations, so please do get in touch to discuss further.