Seventh Circuit Goes It Alone – Upholds NLRB Decision Holding That Class and Collective Action Waivers in Arbitration Agreements Are Unlawful and Unenforceable

The court is the first federal appellate court to accept the NLRB’s position on the issue

The long-running teeter-totter battle between National Labor Relations Board (NLRB or Board) and employers regarding the lawfulness of class and collective action waivers in employment arbitration agreements continues.  Joining the fray this week is the U.S. Court of Appeals for the Seventh Circuit, which on May 26 issued the first federal appellate court decision to agree with the NLRB’s position that mandatory employment arbitration agreements that require employees to waive the right to engage in class or collective actions in court violate the National Labor Relations Act (NLRA).

At issue in Jacob Lewis v. Epic Systems Corporation was a provision in an arbitration agreement the Madison, Wisconsin-based software company distributed to its employees via e-mail in 2014.  The provision at issue in the agreement, entitled “Waiver of Class and Collective Claims,” provided that employees waived “the right to participate in or receive money or any other relief from any class, collective, or representative proceeding.”  The agreement did not require employees to sign the agreement; employees were “deemed to have accepted the [a]agreement” if they “continue[d] to work at Epic.” Undeterred by this waiver, Jacob Lewis, a former Epic Systems technical writer, and other technical writers, brought a collective action lawsuit alleging that Epic Systems violated the Fair Labor Standards Act (FALSA) by misclassifying them as exempt employees.  The company sought to dismiss on the grounds that Lewis’ collective action was precluded by his (and the other employees’) arbitration agreement.  Mr. Lewis and his co-workers’ defiance of the agreement was rewarded when the District Court refused to enforce the waiver.  Epic Systems appealed, and in an opinion that diverged from prior decisions out of the Fifth, Eighth, and Ninth Circuits, the Seventh Circuit affirmed.

The significance of the decision is that the Seventh Circuit is the first federal appellate court to approve of the NLRB’s much-maligned (and heretofore uniformly rejected) position on this issue.  The Seventh Circuit’s opinion rejected the well-documented  position taken for several years by the Fifth Circuit, which has been, at least until now, the primary battleground for the back-and-forth between the NLRB and employers on this issue.

In 2012, the Board issued its D.R. Horton, Inc. decision, explaining that “from its earliest days,” the Board has held that “employer-imposed, individual agreements that purport to restrict Section 7 rights” violate the NLRA.  The company appealed the NLRB’s decision to the Fifth Circuit, which in 2013 which overturned the NLRB.  Rather than seek U.S. Supreme Court review, the NLRB instead decided to double down on its position, issuing its decision in Murphy Oil USA, Inc., once again determining that class and collective action waivers violate the NLRA.

Under the NLRA’s broad venue provisions, employers have the option to appeal an adverse NLRB decision to the D.C. Circuit, or to any circuit in which it has sufficient business options.  As a result, Murphy Oil appealed the NLRB’s decision to – you guessed it – the Fifth Circuit, which again overturned the NLRB, explaining to the Board, that it had “been here, done that.”

Now here is where it gets interesting (as if it isn’t interesting enough for you already).  Rather than risk an appeal to the U.S. Supreme Court and receiving a split 4-4 affirmance of the Murphy Oil decision (following Justice Scalia’s passing), the NLRB asked for a rehearing from the Fifth Circuit en banc (that is, a rehearing before all of the judges in the circuit). The Fifth Circuit recently denied this request (on May 12).  It therefore appeared that the NLRB was once again on the horns of a dilemma:  appeal the Fifth Circuit’s decision in Murphy Oil (and implicitly D.R. Horton) to the Supreme Court, or continue its cat-and-mouse game with employers with sufficient contacts in Fifth Circuit states (Louisiana, Texas, and Mississippi).

Until now.

The Seventh Circuit’s decision in Epic Systems now opens the door for the NLRB to potentially sit back and allow Epic Systems to be the party to seek Supreme Court review.  The significance of this is that while politicians continue to politick and the nation continues to have a Supreme Court operating at less than full complement, split 4-4 decisions have the same weight as an affirmance.[1]  As a result, although the impact of the Seventh Circuit’s decision may be felt by Epic Systems today, in the bigger picture, the greater resulting impact of the decision may soon be felt by all, as the decision may have moved the NLRB and employers one step closer toward an – pardon the pun – “epic” showdown before the U.S. Supreme Court on the issue of class and collective action waivers in arbitration agreements.

[1] For you baseball fans, this is the equivalent of the “tie-goes-to-the-runner” with the NLRB being the runner; for you soccer fans, this would mean the NLRB would have the equivalent advantage of an away-goal; and for basketball and football fans, this is the equivalent of winning the head-to-head regular season matchup for determining home court advantage for the playoffs.  And for the blackjack aficionados, it is the equivalent of a push.

Webinar: Employment Law Worldview Webinar Series – Belgium

Squire Patton Boggs presents a series of webinars focusing on the key labour and employment issues in countries throughout Europe, the Middle East, Asia Pacific and the United States.

Given in English by our local labour and employment law experts, each 60-minute webinar comprises a 50-minute presentation covering key “hot topics” in the featured jurisdiction, followed by a 10-minute online question and answer session.

Intended to help you manage labour and employment law risk across your international operations, the webinars will be of interest to both HR professionals and in-house counsel.

On 22 June 2016 at 3.00 pm GMT (4.00 pm BST, 5.00 pm CEST, 11.00 am EDT, 8.00 am PDT), the featured country is Belgium. Nathalie Lucas from our Brussels office will provide updates on:

  • Key legislative developments and trends:
    • Modernisation of the Belgian employment market
    • Business tax incentives to promote job creation and increase spending powers
    • Retirement and early retirement
  • Hot topics:
    • Personal privacy in the workplace
    • Practical steps for employers when dealing with strikes
    • Terminations including statutory severance and collective redundancies


For God’s sake – the “particular disadvantage” of religious belief

Some cases just make you uneasy. This is one of them.  It revolves around a Mrs Pendleton who was faced for reasons which are not strictly relevant with the requirement by her employer that she either divorce her husband or lose her job.

OK then, not strictly relevant but sufficiently unusual to warrant a little background. Mrs Pendleton was a teacher at Glebe Junior School in Derbyshire, married to another teacher at a neighbouring school.  Completely out of the blue for her, it was found, the husband was arrested on some pretty grim child sex charges, admitted them and was jailed for 10 months.

Mrs Pendleton found her marriage vows obviously severely tested but chose to stand by her husband (as in, not divorce him, rather than deny or condone in any way what he had done). No suggestion arose at any stage of any personal knowledge or involvement on her part in the offences.

Because she chose not to divorce her husband Mrs Pendleton was summarily dismissed by the School. Her wrongful and unfair dismissal claims succeeded easily, as they were pretty much bound to do.  However, she also chose to claim indirect religious discrimination.  This required her to show that though the School would have dismissed anyone who refused its instruction to divorce her husband in the same circumstances, that instruction caused her “particular disadvantage” because of her faith.

Mrs Pendleton was a staunch Anglican Christian and as such, she said, saw her marriage vows as sacrosanct. The instruction to breach them, even where it would have been instantly understandable within her faith had she done so, therefore placed her under a disadvantage additional to that of a non-religious person in an otherwise identically loving relationship, whether formally married or not.  It is more difficult for me to divorce because of the commitment I made to my God than it is for another who made that commitment only to him/herself, in other words.  Therefore the “particular disadvantage” requirement within the indirect discrimination rules is satisfied, she said.

Mrs Pendleton’s claim was upheld largely on that basis. Though rejected at the Employment Tribunal stage, she succeeded on appeal: “Comparing two groups, both comprising individuals in long-term, loving and committed relationships ….and given the choice between remaining with their husband/partner or their career, but with one group also holding a religious belief in the sanctity of their marriage vows, I conclude the ET was bound to hold that the latter had an additional burden; a particular disadvantage”.  And then this also from the EAT – “In saying that, I do not suggest that any less respect should be given for those who are in a loving and committed relationship… but who do not share the same view as [Mrs P] as to the sanctity of marriage vows; I am simply recognising that …those who share [that] belief would suffer a particular disadvantage given the crisis of confidence they would face”.

With respect, this takes the Employment Appeal Tribunal into some very difficult waters, since it is in effect saying that a person of Mrs Pendleton’s faith is (or rather, feels) more bound by his/her wedding vows than someone else. Where is the evidence for that?   There was nothing put before the Employment Tribunal to show that religious people find it harder to break promises or commitments than those bound “only” by love or contract or honour or duty or self-esteem.  There was nothing to show that non-Anglican Christians would be any less tortured (or have any lesser “crisis of confidence”) about the ultimatum presented by the School in this case.   Not all Anglican Christians would have stood by their spouse in those circumstances.  Equally, maybe some non-religious wives would have filed papers on finding the dreadful truth about hubby’s leisure activities, but others would not.   Who says that they would not regard themselves as equally bound by a commitment made in honour to themselves, their partner and all their witnesses on the day?   The Tribunal had no evidence on this, nor could there ever be such evidence without detailed investigation into exactly why some people break some promises and others do not. What says that a religious belief is additional to one’s “normal” views, rather than part of them?

At its most basic, this case endows a promise made on oath with a weight above that of a promise to do exactly the same thing made by, say, ordinary contract or public affirmation, however untrue the oath and however honourable and straight that affirmation. It says that promises made before one’s God are automatically harder to break than those made to yourself or others, even in circumstances (as here) where there could have been no possible criticism of Mrs Pendleton had she taken that course.  Taken to its end, this decision suggests that in an otherwise perfectly balanced question of fact, a witness swearing on a religious text should for that reason alone be believed over someone who does not.  That would be an extraordinary conclusion.

Even if not taken to its logical end, the outcome here is that because of her faith, Mrs Pendleton had and won a claim which a non-religious person treated identically and suffering identically from it would not have. That just does not sound right to me.

Information and consultation in insolvencies – who wins, really?

The Employment Tribunal ruled last month that the former employees of Sahaviriya Steel Industries UK Limited (in liquidation) are entitled to the maximum protective award for a complete failure by SSI to inform and consult them about their redundancies (90 days’ pay for each of the 1100 employees affected).

Because of the insolvency of SSI, the employees will need to look to the Secretary of State’s National Insurance Fund for payment of the award. However due to the cap on payments out of the Fund (being a maximum of just £479 per week for 8 weeks) they will not recover anything like the full amount from it. The balance of their claims will be unsecured against SSI but given the levels of debt compared to the value of the assets in that business, they should sadly not expect to recover much – if any – of the extra.

Consultation and insolvency 

The SSI case is another example of the stark reality that distressed businesses face when contemplating collective (20+) redundancies.

In many cases, there will simply be insufficient time or resource to comply with these obligations before making redundancies – doing so may put the business in an even more precarious position that could ultimately result in more people losing their jobs or in its going under altogether. Against that, however, a failure to inform and consult where required to do so will expose the business to potentially significant financial penalties.  Of even more concern to directors will be the possibility of criminal charges brought by the Insolvency Service (see our blog here about the City Link redundancies last year). The case law makes it clear that the “special circumstances” defence to not consulting does not include the employer being on the brink of insolvency or its already having entered formal insolvency proceedings.

There are similar provisions for informing and consulting under TUPE, with similar sanctions for getting it wrong. Often the same (or more) urgency applies where a sale is being sought which seeks to preserve the value of the insolvent business and the jobs of the workforce. Any delay whilst carrying out an information and consultation process might jeopardise the value of the business or even risk the sale completely, leaving employees without the prospect of any job at all. On the other hand, if no proper information and consultation process is carried out, the resultant liabilities could transfer to the purchaser under TUPE. That could also jeopardise the sale (affecting employees) or have a significant impact on the purchase price (affecting creditors).  We must remember in all of this that the fact or size of any protective award made will not usually be affected by whether the employees suffer any loss or whether that process would have made any difference to the end result.  At that level, the information and consultation rules could be said to be a triumph of form over substance.

Much will depend upon the particular circumstances but certainly anything the distressed business or insolvency practitioner can do to mitigate the risk of protective award claims should be carefully considered. To the extent that some form of information and consultation can be carried out – even if this clearly falls short of the strict statutory obligations – then this should be done so.  Pretty much anything is better than nothing.  At least it may give the business a little moral high-ground, some notion of a defence and/or a reduction in the size of any potential awards. That may involve just a few days’ information and consultation or at least some written communications to the workforce.  These would set out so far as possible the information which a full process would require to be given to the employee representatives (or to the affected staff direct if there is no time to elect them) and invite comments or queries by return.  Such an attempt to do the right thing in difficult circumstances may also help mitigate the risk of criminal charges against directors.

Ultimately, the SSI decision is a victory for employees as it reinforces the message that insolvency or difficult trading circumstances will not absolve employers of their statutory obligations. The SSI staff will receive at least a small proportion of their claims as a result. The decision is unlikely to make businesses or insolvency practitioners change materially how they deal with insolvency situations but will probably make it more difficult to promote a rescue culture.  That may mean that other businesses which (unlike SSI) could have been saved will now not be, with hundreds or thousands of jobs lost as a result.  No real winners there.

In March 2015, the Government launched a Call for Evidence on collective consultation for employers facing insolvency. The Call closed in June 2015 and the Government issued its response in November 2015. It confirmed that it would be “analysing the feedback received” and considering the best way to clarify the requirements on employers in such circumstances. The fact we have not yet received anything perhaps reflects the challenges that the tensions between employment and insolvency law create. Interestingly, in its response the Government suggested it did not feel there was any such conflict whilst at the same time acknowledging that the majority of respondents thought otherwise!

It’s Overtime Time! The Final Rule is Here – Are You Ready?

The wait is over.  The US Department of Labor has released the long-awaited Final Rule modernizing the Fair Labor Standard Act’s (FLSA) white-collar exemptions. The good news, for those who have been following the development of the Final Rule, is that there are no big surprises.

What are the changes?  

Expected to require employers to pay overtime to roughly 4.2 million additional US workers, the regulation changes include:

  • Increasing the current minimum salary requirement for the executive, administrative, professional and computer employee exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year), with automatic increases every 3 years to the threshold wage level based on the 40th percentile of weekly earnings for full-time salaried workers in the lowest-wage Census region (currently the South);
  • Increasing the threshold for exemption as a “highly compensated employee” from $100,000 to $134,004, with automatic increases every 3 years to the threshold wage level based on the 90th percentile of weekly earnings for full-time salaried workers; and
  • Permitting up to 10% of the standard salary level to come from non-discretionary bonuses, incentive payments, and commissions paid at least quarterly.

The DOL decided not to make any changes to the duties test at this time. Employer groups strongly lobbied the DOL to not make changes to the various duties tests as any changes would have increased compliance costs.

How much time do I have?

The Final Rule goes into effect December 1, 2016, giving employers more than six months to prepare for the changes.  However, there is no time for procrastination!  The dramatic increase in the salary threshold will require most employers to make some significant changes to ensure their organization is compliant.

What should I do next?

Register for our first webinar addressing the Final Rule, on Monday, May 23, 2016 at 12:30 PM EST.  The webinar, put on by the experienced duo, Jill Kirila and Meghan Hill, will educate you on the nuances of the Final Rule and provide you with information on ways that you can minimize the impact on your organization (and it’s bottom line).

Does abolishing appraisal ratings help employee performance management?

You may recall from a year or so ago a flurry of publicity within the HR world for a number of major companies which had abandoned formal performance ratings (not, as widely misreported, appraisals) in favour of better informal performance management conversations.  Pioneers included Accenture, Netflix and Microsoft.  The thinking was that a formal rating had traditionally led to the focus being on that number or letter and not on the employee’s future development.  More useful performance discussions could perhaps be had if the thrust of the process were on the future, not the past.  As a result, it was thought, employees would become more engaged, managers could spend more time on informal performance guidance, the quality of performance conversations would improve and it would become easier to differentiate pay decisions, good news all round.

A recent study by international HR solution providers, CEB Corporate Leadership Council, has taken a look at doing without ratings, based on a survey of nearly 10,000 employees in 18 countries in a wide array of industry sectors. It indicates a tendency to positive feedback from staff immediately after the removal of ratings, but that the initial reaction then fades and that the key performance outcomes that organisations expected to improve actually worsened: “Our performance and pay systems began to look like a black box. Without the visible symbol of a rating, employees didn’t understand the processes or philosophies behind them“, said one HR VP.

There was a 6% drop in employee engagement, no doubt fuelled in part by the discovery that without the impetus and context of the formal rating process as a topic for discussion, management time on informal performance conversations actually fell too (perhaps confirming that managers are no keener on the performance aspects of their role than the employees being managed). Not only that, but the perceived quality of such performance conversations as did take place dropped also by nearly 15%.

Without the need to defend a rating, managers tended to put less time into collating the necessary concrete examples, leaving employees feeling unclear as to how they were doing. That in turn led to a weakening in employees’ minds of the link between performance and pay, since managers struggled without examples to explain how pay decisions were linked to individual contributions.  That was particularly the case for the high performers who often viewed the rating as a form of recognition and differentiation from the herd.  They saw its removal as a sign that they were no longer being rewarded appropriately relative to their peers, an active disengagement factor.

The CEB survey indicates that where doing without ratings works, it is due to the very high quality of line management in that organisation. Absent that, average corporate performance among survey respondents dropped by around 10%.  Making performance management work without ratings will therefore need a very substantial investment in manager training.  Even then, says the study, “most organisations will struggle to reach the level of manager effectiveness required as currently only the top 5% of managers are able to manage talent effectively without ratings“.

Nowhere in the CEB report is there any reference to the need for ratings to justify management decisions as between employees in the Employment Tribunal. However, that is not a factor to be overlooked.  If, as a result of dropping formal ratings your company loses the closest it has to an objective performance assessment and your managers no longer feel the same need to the generate comments or collect the examples necessary to defend such decisions, it will be far less easy for an employer to discharge the burden of showing them not to be discriminatory.  A drift towards informal conversations, unless your managers are really top-notch, is likely to be a drift away from the creation and maintenance of proper written records of what you think of your staff and why, and it is those which will be the mainstay of the employer’s justification in many cases.

Unless you are sure that your line management is in that top 5%, the safe money would therefore seem to be on retaining a formal rating structure. Neither managers nor employees may enjoy the process, but the fairly consistent view, even before you get to the employment lawyers’ need for evidence, is that doing without is worse.

No Harm No Foul: US Supreme Court Rules Plaintiffs Must Show Actual Harm

Although not an employment case, the Supreme Court’s May 16 decision in Spokeo, Inc. v. Robins carries substantial employment law implications, particularly for employers who conduct background checks on employees that implicate the Fair Credit Reporting Act (FCRA).  Click here for a Squire Patton Boggs Alert discussing the Court’s decision and its potential impact, including how it may narrow the field of plaintiffs able to sue under laws that provide for statutory damages with no requirement of actual injury, including the FCRA.


No going back – rejection of promotion offer not a failure to mitigate

Gibbs -v- Leeds United Football Club concerned the former Assistant Manager of the Club who took his £330,000 constructive dismissal claim to the High Court so as to sidestep the compensation ceiling in the Employment Tribunal.

Having fairly easily established the fundamental breach of contract necessary to win his claim against Leeds, Mr Gibbs then faced two more difficult questions about his compensation. First, how do you provide for mitigation where you know the dismissed employee is going to get a bonus from his new employer, and when, but don’t know how much it will be?  Second, is it a failure to mitigate that the employee declines to accept an offer of improved employment terms from the old employer?

On the first point, the Judge reviewed the options of (i) estimating the bonus figure (but thereby certainly being wrong in one party’s favour of the other) or (ii) delaying the compensation award until the bonus amount were known, but thereby racking up interest charges for Leeds and denying Mr Gibbs receipt of his money. Note that part of the relevant bonus was due to be paid by Mr Gibbs’ new employer, Tottenham Hotspur FC, little more than four months after the High Court’s decision, at a time of low prevailing interest rates and when Mr Gibbs was safely in receipt of a salary from Spurs and so had no immediate need for the money.   Nonetheless, this was still felt to be hardship enough all round to leave that option on the bench.

The Judge chose instead to order that:

  • the full amount of the £330,000 award should be paid to Mr Gibbs’ solicitors to be held in an interest-bearing account;
  • the parties should then agree how much of that could be released to Mr Gibbs (i.e. leaving at least enough in the account to cover any likely bonus award from Spurs); and
  • the rest would be offset against that bonus, with the bonus amount going back to Leeds and the balance to Mr Gibbs, plus interest in each case.

All very sensible and the fact that this was a High Court case in no way prevents a similar Order (or agreement between the parties) being made by the Employment Tribunal where there is a need to reflect an uncertain future receipt in the amount of a settlement or compensation award.

On the second point, was it a failure by Mr Gibbs to take reasonable steps to mitigate his losses when he rejected Leeds’ post-resignation offer to stay at Elland Road as Head Coach/Manager? The Judge gave this allegation a fairly short shrift – having found the Club guilty of a repudiatory breach of Mr Gibbs’ contract, it could not fix things so easily.  Though the new role would have been more senior and presumably better paid, the damage caused to Mr Gibbs’ credibility among players and staff by the Club’s earlier treatment of him made it reasonable for him to refuse.  He could have taken the chance that Leeds would change its behaviour towards him, but he was not obliged to do so.  Bear in mind also the recent Employment Appeal Tribunal decision in Cooper Contracting -v- Lindsey which stressed just how high is the hurdle of showing a failure to mitigate, and also Buckland –v- Bournemouth University in 2010. There the Court of Appeal decided much against its own better judgment that once the employer was guilty of a repudiatory breach of contract, it could not “mend” that breach by profuse apologies and other appropriate steps afterwards, even if those measures would have undone all or most of the harm caused in the first place.

Threshold for a protected belief under the Equality Act reaches a new low

Does really just anything count as a philosophical belief these days?  An impression you could reasonably take away from the headlines in the Employment Appeal Tribunal’s decision in Harron –v- Chief Constable of Dorset Police last week but happily not one completely borne out by closer reading.

Mr Harron considered himself to have been discriminated against on grounds of disability and philosophical belief. The Employment Tribunal rejected both allegations and Mr Harron took them off to the EAT on the grounds that its decision was insufficiently clear to allow him to understand why he had lost.

The EAT began by making some not even remotely condescending remarks about Employment Tribunal judgements generally – “it is well recognised that Tribunal judgements cannot be expected to be the finest pieces of legal draftsmanship. Infelicities and awkwardness of expression must be excused” (not sure how I would feel about that if I were an Employment Judge of impeccable legal career and many years’ standing!) – but then moved on to the merits of the two appeals.

On the discrimination side, part of Mr Harron’s case was that Dorset Police should not have assumed from his silence on the point that he was not disabled. He argued that people who suffer from mental disabilities are frequently reluctant to the point of silence to say anything to their employers about it, and that an absence of complaint should not therefore be held against them.  Accepting this as true in part, the EAT nonetheless rejected the disability appeal.  “The absence of evidence, though it might be explained”, it said, “cannot amount to a presence of evidence, and the Tribunal has ultimately to reach its conclusion on the evidence before it”.

The philosophical belief which Mr Harron contended for was “a belief in the proper and efficient use of public money in the public sector”.  At the Tribunal the Employment Judge had measured that credo against the five established criteria for a protectable belief set out in Grainger –v- Nicholson in 2009, and had found it wanting.  It was accepted that Mr Harron’s belief was genuine and that it was worthy of respect in a democratic society.  However, the Employment Judge was not convinced that it was a belief as opposed to just an opinion, that it related to “a weighty and substantial aspect of human life and behaviour”, or that it had attained the necessary degree of cogency, cohesion and importance.

But the Employment Judge, though fully entitled to reach those views, did not explain fully how he had reached them. In particular, he had not obviously considered where the boundaries were around “weighty and substantial” and he had paid no overt heed to the guidance of the House of Lords (now Supreme Court).  Their Lordships had said in a case back in 2005 that a belief which was “more than merely trivial” was potentially substantial enough, and that in both that respect and in relation to cogency, “not too much should be demanded [of a claimant] in this regard”.  Overall, said the EAT judge slightly tortuously, the Employment Tribunal had not “said sufficient to persuade me that an error of law may not have been committed”.  The case was therefore sent back to the same Employment Tribunal for it to apply the right tests and have another go.

Lessons for Employers:

This case does not say that a belief in the evils of the wasting of public money by public services is a belief protectable under the Equality Act.

It does not say that Dorset Police were not ultimately entitled to react badly to Mr Harron’s frequent internal complaints to that effect.

It does not say either that a belief is protectable even if it is just about what others would regard as common sense – too obvious to go to the lengths of consciously advancing it as such in circumstances where you would also think a whistleblowing argument might have been a better bet.

What it does say, however, is that as employer you need to very careful before dismissing such concerns as somehow self-interested, wilful meddling or the product of some one-issue campaigner without enough to do. While it is likely that the reconvened Employment Tribunal will still dismiss Mr Harron’s claim, that is not guaranteed.  And even if it does so on this occasion, we are left with the clear steer from the Tribunal system that the threshold of a protectable belief is low and getting lower.

“Ladies’ Night” promotions in Hong Kong – good business or unlawful discrimination?

The hospitality industry is no stranger to the rules prohibiting discrimination in accommodations. The average restaurant or hotel operator is fully aware that he cannot deny goods, facilities or services to a customer on the basis of gender. What appears to be less well known is that, at least in Hong Kong, the same business establishments cannot discriminate by providing extra service to a protected status either. This fact is apparent by the continuing trend to hold “Ladies’ Night” events, or special discounts available only to women, for restaurant, bar and club businesses. These bonuses for female customers may be useful in boosting business, but if those businesses refuse service or the same discounts to a male customer, they may be in for a rude awakening when they receive a complaint for violation of the Sex Discrimination Ordinance (Chapter 480 of the Laws of Hong Kong) (the “SDO”).

The SDO is an anti-discrimination law passed in 1995. Discrimination on the basis of sex, marital status and pregnancy, and sexual harassment are made unlawful under this law. The law is intended to protect both males and females from arbitrary discrimination in the areas (among others) of employment and provision of goods, facilities or services.

With respect to the lawfulness of a “Ladies’ Night” offer made only to women, the answer remains unclear in Hong Kong despite a recent legal case. In April the Equal Opportunities Commission secured a provisional judgment against the Club Legend, a karaoke and disco venue in Mong Kok, over gender-based discounts offered at its “Ladies’ Night” events. The Club charged men a flat HK$300 for entry while women were charged just HK$120 between 9.30pm and 4.30am from Sunday to Friday. The Commission argued that such a sex-based pricing policy was unlawful under the SDO and the Court agreed.

That said, this ruling still has question marks over its real significance. Despite the binding effect of the decision on the Club concerned, the precedent value of the case may be limited as the ruling was reached without the Club contesting it, apparently on the basis that it would be cheaper to lose and pay damages than to pay lawyers to defend it and probably lose anyway. The complainant was looking for injury-to-feelings compensation only, and that will inevitably be fairly marginal for the sake of a price gap of just £16, US$23 or €20.

Local public opinion has been sharply divided – at one level it is clear unequal treatment on gender grounds but on another, it is very common and long-established practice for sound commercial (rather than gender) reasons. About 10% of Hong Kong’s clubs and restaurants do something similar. The HK Bar and Club Association intends to pool funds to allow it to fight the point on principle when it next arises.

Can the “Ladies’ Night” be justified on those commercial grounds? That we reduce the rate to bring in women because that in turn brings in men and it is they who spend the money we need to stay in business? The Bar and Club Association has said that abolishing such events could reduce takings by up to 50% – this seems very high, but even if it were true, the high cost of not discriminating seems unlikely to justify doing so. As a minimum the business would have to show that it had tried non-discriminatory approaches, for example reducing prices for men on quiet nights and/or holding “Gentlemen’s Nights” (though that has its own risk in terms of male-oriented entertainment, of course, and is unlikely to attract paying women in the same way as the reverse).