AustLII Home | Databases | WorldLII | Search | Feedback

Precedent (Australian Lawyers Alliance)

You are here:  AustLII >> Databases >> Precedent (Australian Lawyers Alliance) >> 2021 >> [2021] PrecedentAULA 28

Database Search | Name Search | Recent Articles | Noteup | LawCite | Author Info | Download | Help

Riggs, Naomi --- "Serious misconduct by an employee" [2021] PrecedentAULA 28; (2021) 164 Precedent 16


SERIOUS MISCONDUCT BY AN EMPLOYEE

By Naomi Riggs

In order to terminate an employee, there must be a valid reason – one that is ‘sound, defensible or well founded’ and not ‘capricious, fanciful, spiteful or prejudiced’.[1]

If ‘serious misconduct’ can be established, it is prima facie a valid reason and termination can occur summarily without the requirement to provide notice:

‘The right of an employer to summarily dismiss an employee without notice is qualified by the employee inter alia having committed an act of misconduct; thus, to be able to rely upon the right, and to pay the employee up to the time of dismissal only rather than terminate by notice or payment in lieu of notice, the employer must not only allege misconduct but must also prove it.’[2]

A finding of serious misconduct is not static. Events discovered after a termination for serious misconduct may subsequently form part of the initial decision to terminate for serious misconduct.[3]

WHAT IS SERIOUS MISCONDUCT?

‘Serious misconduct’ is defined in the Fair Work Regulations (the Regulations) as having ‘its ordinary meaning’[4] and is conduct that includes both:

(a) wilful or deliberate behaviour by an employee that is inconsistent with the continuation of the contract of employment;

(b) conduct that causes serious and imminent risk to:

i. the health or safety of a person; or

ii. the reputation, viability or profitability of the employer's business.’[5]

The conduct includes each of the following:

(a) the employee, in the course of the employee's employment, engaging in:

i. theft; or

ii. fraud; or

iii. assault;

(b) the employee being intoxicated at work;

(c) the employee refusing to carry out a lawful and reasonable instruction that is consistent with the employee's contract of employment.’[6]

The above will not constitute serious misconduct if the employee can show that ‘in the circumstances, the conduct engaged in by the employee was not conduct that made employment in the period of notice unreasonable’.[7]

The word ‘serious’ means that something more than mere misconduct is required. Serious misconduct is generally defined as a ‘disregard of the essential conditions of a contract of service, and a single act can justify a dismissal, especially where it is destructive of the relationship between employer and employee’.[8]

In Mourilyan v James Hardie, Commissioner Asbury made the following observation, which is often referred to as an apt definition of serious misconduct:

‘Misconduct is wrongful conduct. To be properly described as “serious”, misconduct must be: significantly worse than negligence and serious in its culpable quality as misconduct, as distinct from the results. Serious misconduct is judged on an objective basis, and it is therefore not necessary that the employee should intend to do wrong. If the employee knows of a specific relevant risk there may be misconduct depending on its seriousness. If the employee does not know of a specific relevant risk, then the negative element of misconduct requires a disregard or recklessness of possible risk. Wilful misconduct carries the additional connotation of intention, or a deliberately reckless course of misconduct, with knowledge that it is wrong.’[9]

Serious misconduct is always to be informed by the circumstances in which the conduct occurred and a contextual analysis of the conduct is paramount.

Inappropriate language in the workplace

Objectionable language in the workplace will ordinarily not be serious misconduct unless it is repeated and/or is part of some other objectionable conduct.

Drury v BHP Refractories

In Drury v BHP Refractories,[10] during a dispute regarding leave, an employee called his supervisor ‘fucking pig-headed’. He then told his supervisor to ‘go and get fucked’ and ‘no wonder your fucking wife left you’. It was determined that such language, as it was confined to one event, warranted a warning and was not serious misconduct. However, if the conduct had continued after the warning was given, then it would have been serious misconduct.[11]

Ratnayake v Greenwood Manor

In Ratnayake v Greenwood Manor,[12] during a meeting, an employee was told by his employer that his hours were being reduced from 40 to 25 hours per week. The employee called the employer a racist and a liar. It was held that the use of such language, on a single occasion, did not amount to serious misconduct.[13] This was despite the employee not subsequently apologising for the name calling and maintaining, even at the hearing for unfair dismissal, the truthfulness of his offending language.

Fraud

An employer must establish that fraudulent conduct has occurred for it to constitute serious misconduct. Fraud is given its ordinary meaning, and the reference to it in the Regulations does not necessitate a criminal test nor a requirement to prove the fraud beyond reasonable doubt.[14] The Briginshaw test[15] applies and the fraud must be proven on the balance of probabilities; the more serious the offence, the more persuasive the evidence must be in order to satisfy the test.

Carter v Qantas Airways

In Carter v Qantas Airways,[16] the applicant was a Qantas employee who had made a large number of booking changes that were in breach of the fare rules. The respondent terminated the applicant’s employment on the basis of serious misconduct, alleging that the booking changes were against company policy and had resulted in a loss of revenue, and therefore amounted to serious misconduct. While the applicant admitted to making the booking changes, he claimed that it was common practice and that he was unaware of the written policy. Commissioner Spencer, in determining that the applicant’s conduct was not serious misconduct, held that there was a culture and practice not to seek authorisation for booking changes despite company policy to the contrary. He stated further:

‘There was no evidence that the applicant acted to gain any personal or pecuniary or other advantage or acted directly to deprive the respondent of an interest. There was no evidence to sustain a breach in terms of Regulation 1.07 such as theft, fraud, or direct evidence of refusal to carry out a lawful or reasonable instruction.’[17]

Mourilyan v James Hardie

In Mourilyan v James Hardie,[18] the applicant Mr Mourilyan took sick leave and his wife phoned the respondent employer to inform them that he would not be coming into work. The respondent had a copy of the applicant’s roster which showed that the applicant had recorded ‘sick leave’ in advance of the day that his wife called in sick on his behalf. The applicant claimed that he had intended to apply for the leave in advance as carer’s leave, explaining the recorded ‘sick leave’ on his roster, however he forgot to apply and coincidentally turned out to be sick on the day. This was not accepted by the respondent who alleged that the applicant’s explanation was fraudulent and amounted to serious misconduct. Commissioner Asbury observed that:

‘I accept that there is a degree of coincidence involved in the scenario put forward by Mr Mourilyan ... to explain his absence from work. However, that explanation was not so improbable that it could reasonably have been concluded that Mr Mourilyan had engaged in fraud.’[19]

It was held that the applicant’s conduct did not amount to serious misconduct, with Commissioner Asbury noting that ‘an allegation of fraud should not be lightly levelled and conduct of an employee should not be labelled as fraud without clear and cogent proof’.[20]

Intoxication

Under the Regulations, an employee is considered to be intoxicated ‘if the employee's faculties are, by reason of the employee being under the influence of intoxicating liquor or a drug ... so impaired that the employee is unfit to be entrusted with the employee's duties or with any duty that the employee may be called upon to perform’.[21]

Trudi Puszka v Ryan Wilks

Intoxication itself is not serious misconduct, as demonstrated in Trudi Puszka v Ryan Wilks T/A Ryan Wilks Proprietary Limited.[22] The applicant was intoxicated at a function held outside of work hours, which was being hosted for a colleague who was leaving and was connected to the applicant’s employment. On the night, the applicant passed out on a chair and vomited on the floor of the bar before she was assisted home by friends. She was subsequently terminated for misconduct arising from her intoxication at the function. In finding that the act of drunkenness was not serious misconduct, Commissioner Cambridge stated:

‘a single act of drunkenness at an after work function which did not involve any abusive or aggressive behaviour, and for which no serious risk to the reputation or viability of the employer’s business could be established, would not represent misconduct that provided a sound, defensible and well-founded reason for dismissal. Frankly, if one act of inoffensive drunkenness at an after work function provided valid reason for dismissal, I suspect that the majority of Australian workers may have potentially lost their jobs.’[23]

COMMON LAW RIGHT TO TERMINATE AND THE DUTY OF FIDELITY

There now seems to be settled law that a duty of good faith or duty of fidelity from the employee to the employer (but not vice versa) is implied in all employment relationships.[24] Relevantly, this means that there is an implied duty upon employees not to act in a manner that is adverse to the interests of their employer. This was not unsettled by the High Court judgment in Barker.[25] The duty of good faith or duty of fidelity applies to the terms of the contract and the employment relationship, and gives rise to the common law right to terminate for serious misconduct.

Avenia v Railway & Transport Health Fund Ltd

The statutory framework around serious misconduct is mirrored in the common law right to terminate for serious misconduct, as was discussed in Avenia v Railway & Transport Health Fund Ltd.[26] The applicant, Dr Avenia, had entered into a contract to transfer his sole dental practice to the respondent’s business and then commence work at the respondent’s dental practice as an employee in the position of principal dentist. Upon commencement of his employment in late 2016, Dr Avenia engaged in email communications with other staff members which were often rude and aggressive.[27] There was also an immediate drop in revenue at the dental practice. Dr Avenia was suspended with pay and the respondent requested that he attend a meeting so that the informal complaints from staff could be discussed. The suspension letter sent by the respondent suggested incorrectly that a formal investigation was being undertaken. As a result of this letter, Dr Avenia considered the respondent to be in breach of the employment contract and considered himself not personally bound by the terms of the contract. Dr Avenia then refused three further requests to attend a meeting with the respondent. Dr Avenia also sought, through Australia Post, to redirect the respondent’s mail to himself.

Various letters were exchanged and on 21 February 2017, the respondent informed the applicant that no formal investigation was being undertaken and pressed for a meeting to discuss the informal complaints. Two days later, the respondent sent a further email requesting that the applicant cease redirecting the respondent’s mail; noting that the emails to Dr Avenia’s prior sole practice were no longer being redirected to the respondent; and reminding Dr Avenia of his contractual employment conditions.

On 7 March, the respondent sent a show cause notice to the applicant in respect of his refusal to attend meetings on 3 February, 17 February and 2 March. The respondent also alleged that the redirection of the respondent’s mail and emails constituted serious misconduct, and that it was considering terminating Dr Avenia’s employment. The respondent stated that he was to show cause as to why he should not be terminated by 10 March. In response, the applicant sent a letter stating that the show cause letter was an adverse action and then filed proceedings.

Relevant to the issue of serious misconduct, the Court held that the respondent had the contractual power to issue the directions to attend the meeting and also to ultimately terminate the applicant’s employment. The Court held that it must then determine whether the exercise of these contractual powers was reasonable and therforefore lawful.[28]

It was held that it was unreasonable for Dr Avenia to be directed to attend a meeting without the assurance of the proper true intentions of the respondent and his refusal to attend was not in breach of the contract.[29] However from 21 February, when the respondent did identify the true intentions of the meeting, the directions to attend the meeting and then to terminate when the applicant failed to do so were reasonable. A determination of what is reasonable, like any procedural fairness obligation, is to be informed by the context in which it arises.[30] It was then considered whether it was lawful to terminate Dr Avenia’s employment. Ultimately, the Court determined that as it was a contractual requirement to comply with lawful directions and the failure to comply with lawful directions gave rise to the right to summarily terminate Dr Avenia.[31]

Justice Lee went on to consider other bases on which the termination could be maintained, relevantly termination at common law due to serious misconduct. The test to determine serious misconduct, in reference to a breach of contract, is firstly to determine the breach and then to consider the seriousness of the breach.[32] In order to constitute serious misconduct, ‘the conduct must be either: (a) of a character to demonstrate repudiation; and/or (b) repugnant to the employment relationship’.[33] This is to be determined objectively.

SERIOUS MISCONDUCT AND SMALL BUSINESSES

A small business is characterised as a business with less than 15 employees.[34] Small businesses are subject to the Small Business Fair Dismissal Code (the Code). If a dismissal is consistent with the Code, it is not an unfair dismissal. Part 1 of the Code states that ‘it is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal’ [emphasis added].[35] It seems clear that the Code dispenses with the need to establish serious misconduct as defined in Regulation 1.07.[36] In order to establish serious misconduct under the Code, all that must be shown is that when the impugned conduct occurred, the conduct was serious misconduct in the employer’s mind and the employer had reasonable grounds to hold that view. Further, ‘it is not necessary for the purposes of the first limb of the Code that all of the company’s grounds for believing immediate dismissal is warranted or reasonable. So long as there are reasonable grounds for the belief, the employer complies with the first limb of the Code, even if there are other reasons that are not reasonable.’[37]

This is a seismic shift in the evidentiary burden which is otherwise placed on employers in establishing serious misconduct. It turns an objective test into a primarily subjective test, with no requirement to prove that the impugned conduct did in fact occur or was in fact serious misconduct. All that must be shown, determined objectively, is that there were reasonable grounds for the employer to think that the conduct occurred and that it was serious misconduct.

In Jannine Russell v Natasha Bakerzis,[38] the applicant, who performed in-home care services, was summarily dismissed on the basis of serious misconduct. The respondent alleged that the applicant had made an external complaint about the tasks she was being asked to do and when asked if she had made the complaints, she lied and said that she had not. In upholding the characterisation of the conduct as serious misconduct, Commissioner McKinnon stated that the ‘question is whether, at the time of dismissal, Ms Quinlan believed on reasonable grounds that Ms Russell’s conduct ... was sufficiently serious to justify immediate dismissal’.[39]

CONTINUING TO WORK AFTER AN ALLEGATION

It is important to be aware that if serious misconduct is not acted upon at the time that it is discovered, and the employee is permitted to continue working in their ordinary capacity, procedurally it may result in an inference that the conduct has been condoned or is not truly of such a nature as to warrant instant dismissal. Ultimately, whether the delay itself is enough to change the characterisation of the conduct will depend on all of the circumstances.[40]

UNFAIR DISMISSAL

Section 385 of the Fair Work Act 2009 (Cth) states that a person will have been unfairly dismissed if:

(a) the person has been dismissed; and

(b) the dismissal was harsh, unjust or unreasonable; and

(c) the dismissal was not consistent with the Small Business Fair Dismissal Code; and

(d) the dismissal was not a case of genuine redundancy.’

In most circumstances, especially where there has been fraud, a finding of serious misconduct will extinguish any prospects of being successful in a claim for relief from unfair dismissal. This is because the conduct itself will prevent the termination from being harsh, unjust or unreasonable.

This, however, is not always the case. In a recent decision of the Fair Work Commission,[41] it was held that an employee, who was a chef, had threatened to stab a colleague; attempted to delete the employer’s Facebook page; and refused to provide a free kids’ meal when reasonably required to do so. The incidents, both separately and in combination, were held to be instances of serious misconduct.[42]

However, it was held that the serious misconduct did not outweigh the significant procedural errors in the way in which the termination was managed.[43] As a result, the applicant was successful in her claim for relief from unfair dismissal despite a finding of serious misconduct.

CONCLUSION

Serious misconduct will always be characterised by the circumstances in which it occurred. Serious misconduct is conduct which renders the continuation of the employment relationship untenable. It is conduct that cannot be addressed through the issuing of a warning or a performance improvement plan. Unless you are a small business, there are few instances in which poor conduct will equate to serious misconduct enabling summary dismissal.

Naomi Riggs is a principal solicitor at Rubicon Compensation Lawyers and an accredited specialist in personal injury law. Rubicon Compensation Lawyers practises in all areas of personal injury law and employment law, and specialises in the intersection between the two areas. It has offices in Victoria and Tasmania. PHONE (03) 9081 3830 EMAIL naomi@rubiconlegal.com.au.


[1] Selvachandran v Peteron Plastics Pty Ltd [1995] IRCA 333; (1995) 62 IR 371, 373.

[2] Pastrycooks Employees, Biscuit Makers Employees & Flour and Sugar Goods Workers Union (NSW) v Gartrell White (No. 3) (1990) 35 IR 70, 84.

[3] Samantha Rombola v Rail Commissioner [2017] FWC 194 (Rombola), [129].

[4] Fair Work Regulations 2009 (Cth) (the Regulations), reg 1.07(1).

[5] Ibid, reg 1.07(2).

[6] Ibid, reg 1.07(3).

[7] Ibid, reg 1.07(4).

[8] Gardlenius v RF Martin Pty Ltd trading as Advantage Panel and Paint [2019] FCCA 2351, [76].

[9] Mourilyan v James Hardie Australia Pty Ltd [2010] FWA 9672 (Mourilyan), [90].

[10] Drury v BHP Refractories Pty Ltd (1995) 62 IR 467.

[11] Ibid, 473.

[12] Ratnayake v Greenwood Manor Pty Ltd [2012] FMCA 350.

[13] Ibid, [102]–[103].

[14] Mourilyan, above note 9, [86].

[15] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336.

[16] Carter v Qantas Airways Limited [2011] FWA 8025.

[17] Ibid, [105].

[18] Mourilyan, above note 9.

[19] Ibid, [104].

[20] Ibid, [88].

[21] The Regulations, above note 4, reg 1.07(5).

[22] [2019] FWC 1132.

[23] Ibid, [62].

[24] Lidia Lucisano v Fictiv Pty Ltd [2020] FWC 6045 (Lucisano), [22].

[25] Commonwealth Bank of Australia v Barker [2014] HCA 32, [42], [104]–[105] and [107].

[26] [2017] FCA 859.

[27] Ibid, [31].

[28] Ibid, [216].

[29] Ibid, [220].

[30] Ibid, [223].

[31] Ibid, [243].

[32] Ibid, [256].

[33] Ibid, [257].

[34] Fair Work Act 2009 (Cth), s23.

[35] Small Business Fair Dismissal Code 2009.

[36] Sharp v BCS Infrastructure Support Pty Limited [2015] FWCFB 1033, [33]; Lucisano, above note 24, [21].

[37] Lucisano, above note 24, [22].

[38] [2020] FWC 6679.

[39] Ibid, [44].

[40] Rombola, above note 3, [154].

[41] Michelle Rawson v Mudgee Golf Club Ltd [2021] FWC 1171.

[42] Ibid, [73].

[43] Ibid.


AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/journals/PrecedentAULA/2021/28.html