Australia: Employers must be very careful before dismissing an employee for misconduct – and always communicate changes in policies and procedures!

Last Updated: 17 October 2016
Article by Peter Doughman

A recent decision of a Full Bench of the NSW Industrial Relations Commission proves again that the employer must prove misconduct by the employee.

An employer has the right to instantly dismiss an employee for misconduct – this is called "summary dismissal". It is an age-old right of all employers. But no employer should ever exercise that right without the most careful prior thought – there are countless cases where what the employer regarded as "misconduct" turns out not to be so when a court looks at the facts and circumstances.

A recent decision of the Full Bench of the NSW Industrial Relations Commission not only analyses the principles relating to summary dismissal for misconduct but demonstrates yet again that employers must always be mindful of the fact that summary dismissal is reserved for the most severe case, and the employer will have to be able to prove that its actions were fully justified. It also shows that employers should ensure that if they change operational policies all employees are advised of the changes, if disobedience to the changed policy is later relied on to dismiss an employee.

Facts and circumstances

In this case the Full Bench of the Industrial Relations Commission overturned an earlier decision in which an employee's summary dismissal was considered just and reasonable, and ordered the dismissed state government employee to be paid a significant amount of compensation. The Employee had been employed as a bus mechanic by the State Transit Authority of New South Wales ('the STA') from 11 November 2005 to 15 December 2014. On 15 December 2014 the Employee was summarily dismissed for serious misconduct for failing to check the tension of wheel nuts on a bus during a mechanical service. The bus in question was subsequently involved in an 'on-road' incident where a wheel separated whilst it was in active use.

In 2012, the STA issued to its staff a written 'Work Instruction' which set out the procedure for the fitting and service of wheels across its fleet of buses. In 2014, the STA implemented the fitting of locks to the wheel nuts of the buses across the fleet, and thereafter issued a further written Work Instruction which removed the requirement to check the tension of wheel nuts whenever locks were fitted. In 2015, the STA further issued a written 'Maintenance Alert' which reinstituted the requirement to check the tension of wheel nuts regardless of whether the locks were fitted. However, the STA failed to notify the Employee (and the other mechanics at the depot where he worked) of the further procedural change occasioned by the 2015 Maintenance Alert.

During an internal investigation into the incident, the Employee admitted to not checking the tension of the wheel nuts on the bus, but claimed that he believed he was not required to do so when locks were fitted to the nuts, on the basis that he had not received the Maintenance Alert at the time of the bus service. The Employee's belief was supported by the Employee making an entry of 'N/A' on a service checklist in reference to the wheel nut tension check.

In the original proceedings, Commissioner Stanton agreed with the STA that the Employee had engaged in serious misconduct, even though the Employee's claim that he was never notified of further procedural change was not challenged. The Commissioner found that the Employee's serious misconduct justified his summary dismissal, and that the dismissal was not unreasonable or unjust. The Commissioner found that the dismissal was harsh only because the Employee did not receive payment of notice or his pro-rata long service leave following 8.5 years of continuous employment with the STA, and awarded the Employee six weeks' compensation.

The Employee appealed the decision to the Full Bench, contending that the Commissioner failed to apply to the legal principles in relation to summary dismissals, and that the Commissioner failed to take into account the failures of the STA which contributed to the 'on-road' incident.

In its decision, the Full Bench analysed the law relating to summary dismissals. It observed that where an employer seeks to summarily dismiss an employer for serious misconduct, the employer bears the onus to establish that it had the right to terminate the employee's employment in such a manner. The Full Bench found on the evidence that the Employee had been careless in his approach to servicing when faced with discrepancies between the STA's procedures and service checklists, but that he had operated under a mistaken but genuinely held belief that he did not have to check the wheel nuts – and that was principally caused by the STA's failure to communicate the policy change.

The Full Bench found that the Employee's conduct was not a wilful or deliberate act of disobedience and thus could not constitute a repudiation of his contract of employment. On this basis, the Full Bench held that the STA's decision to summarily dismiss the Employee for serious misconduct was not justified.

In considering the related question of the fairness or unfairness of the dismissal, the Full Bench observed that the Employee's supervisor had reviewed the Employee's service checklist, had failed to question the Employee's 'N/A' notation, and had signed off that the bus was fit for service. The supervisor was punished by way of a temporary suspension and a demotion in duties and pay. The Full Bench found that the relatively minor punishment imposed upon a more senior employee was disproportionate to the Employee's punishment, thus rendering the Employee's dismissal harsh and unfair.

After finding that the remedy of reinstatement was inappropriate, the Full Bench awarded the Employee 18 weeks' compensation (thereby overturning Commissioner Stanton's original award of six weeks' pay).

The decision provides a detailed summary of the evidentiary onus borne by an employer when alleging serious misconduct against, and summarily dismissing, an employee. It illustrates that a finding of serious misconduct must be supported by clear evidence of the employee's intentional repudiatory breach of his contract with the employer. The decision also illustrates that where an employer fails to notify its employees about policy changes that impact on employee's duties that failure can infect disciplinary proceedings such that any resulting decision of the employer to dismiss may be subsequently held to be wrongful and/or unfair.

Of additional interest to lawyers, the decision demonstrates that a party to proceedings unfair dismissal can sometimes successfully appeal a decision even where the earlier decision was notionally in their favour.

Carroll & O'Dea represented the Employee in both the original proceeding and the appeal.

Dissanayake v State Transit Authority [2016] NSWIRComm 10

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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